Will your trustee be there tomorrow? This sounds like a stupid question, but we were just contacted by a national accounting firm and asked if we’d like to purchase their personal bankruptcy practice as they no longer think it is compatible with their other lines of business. That’s not surprising. Big accounting firms do big audits for big corporations. They aren’t set up to meet with individuals in financial trouble.

Something similar happened about twelve years ago when another national firm made the same decision. One day they were accepting new clients. The next day they were closed for business.

Industry scuttlebutt says that it is only a matter of time until all of the national firms make the same decision. After all there only are 2 or 3 left. Accountants that are dealing with multi-national companies and huge corporations aren’t all that interested in helping the average Joe deal with his debts. Well, if that’s the case then they should get on with it.

Doug Hoyes and I left a national accounting firm to set up our firm because we didn’t feel the big firm we were with was really interested in helping Joe out. We thought we could do it better.

Our firm has grown to be the fourth largest provider of personal insolvency services in Canada, numbers 1, 2 and 3 are all national firms – I suppose we’ll be third thanks to these guys closing. We’ve grown by adding new trustees and new offices. Each of our trustees sees only people in 1 or 2 locations and these offices are located in the communities where they live. I have lived in Guelph for most of my life. We don’t have people driving all over the province to meet with you in a donut shop. We know you want to see the same people when you come in, you want to know who you can call and who will sort out your problems.

If you are experiencing financial difficulties give us a call at (519) 823-0330 or e-mail me – we can walk your through your options over the phone or book you a face to face consultation with one of our professionals. We can explain how a consumer proposal can help you avoid bankruptcy. Either way there is no charge for the session and most people find it helpful.

We’re in this for the long run – it is all that we do and we’ll be here tomorrow.

There is an automatic feature of bankruptcy law in Canada that puts in place something called a “Stay of Proceedings” immediately upon a person filing an assignment in bankruptcy or a consumer proposal. This isn’t something you have to ask the Court to do for you;  it is literally an automatic feature of the law.

The way it works is simple: once you file either for bankruptcy or a consumer proposal your trustee will send a legal notice (the actual Stay of Proceedings) to any person or business currently engaged in legal action against you. It doesn’t matter if you have only just received the Court papers informing you of the lawsuit, or if the creditor has already been to Court and has an Order to garnishee you wages. The Stay is automatic and stops the process immediately. If someone tries to start a legal action after you have filed, the Stay stops them. If you receive notice of the action you inform your trustee and they will send out the Stay to stop things from progressing.

The Stay is also sent to the Court that is handling the legal action and if the creditor has already obtained a Judgment against you, a copy is sent to your employer as well to stop the garnishee. Your trustee has to send a copy to employer in order to stop the garnishee.  The Stay provides your employer with the legal obligation to stop taking money from your pay cheque; without the Stay the garnishee will continue.

That leads us to the most common difficulty with the Stay of Proceedings; many (most) payroll people have never seen this type of document before so it is not uncommon for them to become confused and ask for confirmation from the creditor that the garnishee must stop. It doesn’t happen a lot, but there are times when a trustee must threaten legal action against an employer (or a creditor) for failing to abide by a Stay of Proceedings. If this happens to you, keep in mind that the problem isn’t because of what your trustee is doing, rather it is because someone at your work place is unfamiliar with bankruptcy law.

And now for the no side:

The Stay of Proceedings is only effective against debts that are dischargeable (can be eliminated) by bankruptcy law. Things like child support, spousal support, restitution orders, repayment of debts based on fraud or misrepresentation and some others are not stopped. To see a complete list of these debts, take a look at Section 178 of the Bankruptcy and Insolvency Act of Canada.

Further the automatic staying provisions of bankruptcy law can be lifted. Your creditors have the right to apply to the Court and ask that they be allowed to continue a specific legal action against you if they can demonstrate to the Court that there are reasonable grounds to do so. A good example of this might be a debt that was incurred as a result of fraud or misrepresentation. Let’s say you applied to the bank for a loan to buy a car and instead you took the money to a casino (or took a trip or gave it to your sister). This sounds like a case where the bank might argue that you misrepresented your intentions and therefore the bank might apply to the Court for permission to sue you even though you have filed for bankruptcy.

Further, if someone has started a large civil suit against you and you think that you may file for bankruptcy to stop them, well, you need to think again. If someone really wants their day in Court and they are willing to pay for it, then after you file for bankruptcy they may apply to the Court to have the Stay lifted. The application takes the form of hearing so that you can present your arguments for not allowing the stay to be lifted. If you don’t attend the hearing (and that usually means hiring a lawyer to assist you; this is not something your trustee can do) the Court may simply allow the Stay to be lifted then you are back where you started.

If you are being threatened with a wage garnishee or a lawsuit by a creditor, or if you already been sued and you need the garnishee to stop you should speak to a trustee directly. They will want to see whatever documents you have regarding the legal action so that your trustee can determine if the Stay of Proceedings will help you solve your financial problems.

What they won’t tell you is that you don’t need to be referred to a trustee – you may simply use the internet or the phone book to find the number and call a trustee directly.

What’s more, a trustee will discuss all of your options with you, including consumer proposals, bankruptcy, debt management programs and even refinancing your home. There’s no fee for this consultation and if you decide to file a consumer proposal the trustee’s fees are set out by law – there’s no up front fee or hidden costs.

There’s no polite way to say this – there is a growing industry made up of less-than honest people claiming to be “debt consultants”. They will meet with you a couple of times, sign-you up for a debt relief program, take your money, and then refer you to a trustee in bankruptcy; a trustee that would have met with you for free, if you’d gone to them first.

Here are the warning signs to watch for: if you see an ad that claims to be able to reduce your debt to something less than 100% of what you owe, that claims to be able to stop all of the interest charges and that will allow you avoid bankruptcy and the ad isn’t from a licensed trustee in bankruptcy BE CAREFUL. Certainly call them (or contact them on the web), but the first question you should be asking is “are you going to help me set up a consumer proposal?” If the answer is yes then the second question you should be asking is “why should I pay you a fee to help me when I can go see a trustee for the same advice and they won’t charge me a fee?”

Some of these consultants regularly charge in excess of $1,000 – this is money you have to pay them first before they can put their program in place (you have to pay them in full before they will refer you to a trustee).

Before you agree to pay any fees or commit to any program you should contact a licensed trustee in bankruptcy – you’ll discover that referrals are not required and that the fee the consultant wants to charge you is for something your trustee will do for free…

Every week I speak to people that have signed up for these programs and have paid some sort of fee. I have to explain to them that the consultants took advantage of them and charged a fee that they wouldn’t have had to pay had they simply called me first, so call e-mail me or call me today in Guelph at 519-823-0330, and I’ll help you set up a consumer proposal (if that’s the right solution for you) with no up front fee.

As of July 7, 2008 all of those rules still apply, but now you can keep ALL RRSPs when you file bankruptcy in Guelph, except for any money you contributed in the 12 months prior to filing bankruptcy.

This means if you have money that was deposited into your RRSP more than 12 months prior to filing for bankruptcy, that money will now remain yours if you file for bankruptcy.

A word of caution, if you have funds in an RRSP, file for bankruptcy and try to withdraw those funds during your bankruptcy, the RRSP loses its exempt status and instead of the funds being paid to you, they will be seized by your trustee. The idea is to force you to keep the money on deposit for your retirement…

If you filed for bankruptcy prior to July 7, 2008 then the new rules do not apply. Sorry, but any RRSPs you may have that are not exempt under the old rules will be seized by your trustee.

If you have questions about your situation and how your retirement funds may be affected if you file bankruptcy or a consumer proposal please give me a call. We can discuss your situation over the phone or book you an appointment with me or one of our other professionals to review your options in person.

This dramatic increase in the number of consumer proposals and bankruptcy filings in Guelph
follows four years of relatively good results, as can be seen in the chart.

The unemployment rate rose to its highest level since 1997, with 5.7% of the Guelph work force out of work in 2007. Employment levels declined and the poor labour market resulted in fewer people looking for work, driving the participation rate to a 5 year low.
If the unemployment picture remains poor, the bankruptcy rate could increase again in Guelph in 2008 as well.

Despite these high numbers, there is hope. You don’t have to become a statistic. If you are thinking about filing bankruptcy in Guelph, call my Guelph Bankruptcy Office at 519-823-0330 or e-mail me a question. I can explain why people file bankruptcy in Guelph, but more importantly I can help you review your options and decide if bankruptcy is the correct solution for you and your family.

We noted that there is going to be an automatic opposition section to the Act for persons with large tax debts. Opposition is the term that is used when an individual is required to appear in Court and explain the circumstances that caused their bankruptcy to a Registrar or Master.

Under current legislation, any creditor may request such a review. Under the new law it will be automatic for Canada Revenue. Our concern is that while the threshold for this automatic provision is $200,000 we suspect that the government will petition to have that threshold lowered in future amendments to $100,000 or even $50,000. No other creditor is being afforded this special treatment and frankly, we’re concerned where this may lead.

Our greatest concern with the Canada Revenue Agency is in the area of proposals to creditors. The current policy of the government is to request 100% repayment of the basic tax debt when a person files a proposal – this means that the government votes against many reasonable repayment plans.

As the law sits today, if a proposal is rejected a person is likely to become bankrupt and then be subject to the surplus income rules for a period of 9 months or longer. The new law imposes the surplus income rules for 21 to 36 months – extending the repayment and therefore rewarding the Canada Revenue Agency for rejecting the proposal.

We strongly encouraged the Senate to request the Minister of Revenue to appear and explain his agencies position in this regard.

Following our presentation the Senators present directed questions to Douglas Hoyes and I for the better part of an hour. The questions showed an excellent understanding of the issues and we were pleased with the Senators level of knowledge and interest in the subject.

We believe the experience was well worth the drive (even in a blizzard) and we are confident the Senators will put the information we provided to good use.

If you are thinking about filing bankruptcy in Guelph, you now have access to the same experts the government of Canada has called on for expert testimony. Give my Guelph Bankruptcy Office a call at 519-823-0330 or e-mail me your questions, and I will set up a meeting in our Guelph office where we can discuss your options and help you resolve your financial problems.

Last fall, the Parliament of Canada quickly passed new bankruptcy legislation with the promise that the new law would receive a detailed “second look” in the Senate. With the threat of another election, the Senate decided to pass the law quickly and it has been proclaimed, but not brought into force. Regardless, the Senate decided to conduct hearings regarding the changes with an eye towards the next round of bankruptcy reform. It was with this in mind that Doug and I traveled to Ottawa.

Anyone living in Ontario may recall that February 6 we got hit by a blizzard – all flights were cancelled and Doug and I drove to Ottawa in order to give our testimony. Not much fun, but this legislation is important enough to warrant the extra effort.

Our oral testimony focused on two things – student loans and bankruptcy in Canada and the Canada Revenue Agency.

The new law reduces the exclusion period for student loans from 10 years to 7 (5 on application to the Court). We argued that the period should be further reduced to 2 years.

For those of you unfamiliar with student loans, the current law requires a person to be “out of school” for a minimum of 10 years before their student debt may be discharged (eliminated) by bankruptcy or a proposal. The new law reduces that period to 7 years and allows individuals to apply to the Court after 5 years for special consideration.

Student loans are the only type of debt to have such a time-delayed feature and we argued that is was fundamentally unfair. We selected a 2 year period as that is the period of time that the student loan person will allow a person to defer interest and payments when they finish their studies. If a person hasn’t found gainful employment that will allow for the repayment of their student loans by that time then we suggest they may never be able to properly service the debt.

We provided an analysis of our existing clients for the last 18 months (some 3,000 individuals and families). We determined that those with student debt are likely female with a single dependent and earning 50% less than the average Canadian.

We further argued that the problem wasn’t one the Bankruptcy and Insolvency Act should be trying to solve. The government needs to determine how education will be financed and adjust the system of lending so that people don’t have to rely on the Bankruptcy and Insolvency Act to deal with their student loans.

Next week I’ll post my comments on how bankruptcy law deals with Revenue Canada and tax debts.

At the end of the day, how do you decide which professional is going to help you resolve your financial problems? Why choose Hoyes – Michalos instead of one of the other guys that are out there?

It’s really a matter of personal preference. Doug Hoyes and I founded our firm in 1999 based on the premise that people deserve to be treated the way we’d want to be treated if we were looking for help. That means:

• when you call are office you get to speak to a person, not a machine
• when you meet with one of our professionals it will either be with a licensed trustee in bankruptcy or someone with many years of experience
• we’ll review all your options including consolidation loans, credit counseling, consumer proposals and bankruptcy; and
• we’ll help you with the paperwork to get things started

Very few people set out to run into financial problems – in most cases something has happened that was beyond their control to drive them into trouble. The most common reasons we hear include lay-offs at work, downsizing to a lower paying job, a marital break-up or some other family tragedy. Every case is unique and we treat you that way.

Some other advantages of dealing with us include pre-authorized payment plans, a call centre for dealing with any problems as soon as they arise, and the ability to book an appointment to meet with your trustee whenever you feel the need during your procedure.

These are all the things that we would expect if we were looking for help and we think it’s what you expect of us too.

In most of the cities where we operate there are other trustee firms and credit counseling agency that you can speak to. The basic service – your bankruptcy or proposal – are going to be the same regardless of which trustee you decide to use (credit counseling agencies do not provide these services, but are a good source of information about dealing with your debts). The differences will lie in how the service is provided and it’s something you need to look into yourself.

We encourage you to contact more than one trustee firm when you are trying to decide what to do and who to deal with. You should pick the person and the firm that you have the highest confidence in and that you feel most comfortable with. You might be able to tell this over the phone, or you may need to meet with more than one trustee in person – do what you have to do to make the decision that’s right for you and your family.

To meet with me, Ted Michalos, please call our office in Guelph at 519-823-0330.

You can also reach me at 310-PLAN (no area code required). If you prefer, you can also e-mail me your questions, and I will get back to you within two hours during normal business hours. If you are experiencing financial difficulties give me a call. There’s life after debt and we’d like to help to get you there…

Over the last few months I have noticed a significant increase in the number of people calling our Bankruptcy Guelph information line (519-823-0330), and now I know why.

In statistics just released by the Office of the Superintendent of Bankruptcy, the number of Guelph residents filing personal bankruptcy increased from 126 in the first half of 2006 to 161 in the first six months of 2007.

That’s a 28% increase, and that’s the largest increase of any major city in Ontario.

Ted Michalos, Trustee

Also on the increase are consumer proposals, increasing by 5% in Guelph so far this year.

While it’s impossible to precisely explain this increase, since I file more bankruptcies and consumer proposals than any other trustee in Guelph, I believe I have a good idea why we are seeing such a large increase in bankruptcies in Guelph.

I am meeting with an ever increasing number of people who have either lost their jobs or had their overtime cut back, and that creates financial pressure. Many residents of Guelph are home owners, and with the increase in interest rates over the past year that has led to higher mortgage payments, which is also a problem for many people.

My job is to explain to you your options, and help you work out a plan to deal with your debts, so please give me a call in Guelph at 519-823-0330 or e-mail me if you’d like to discuss your financial situation. I would be pleased to help you develop a plan to deal with your debts, and give you a fresh start.

Ted Michalos, Trustee

Prior to the day you sign you will have given me a lot of information about your financial affairs. The documents you will be signing are based on that information; it has simply been presented in the format required by law.

The most important document you will be required to sign is called the Statement of Affairs. This is a multi-page document that sets out the things that you own (your assets), the people that you owe (your liabilities) and general information about your household situation (your address, marital status, your number of dependents, etc).

Included in this third section are a series of questions about your financial affairs:

• have you sold any property?
• had anything seized by creditors?
• made any unusual payments towards your debts?

All of this information is provided so that your creditors can be made aware of your current financial situation and some of the events that lead to your current problems.
  In other words, the Statement of Affairs is designed to explain why you are filing a proposal or bankruptcy.

In addition to the Statement of Affairs, you are required to sign a Monthly Statement of Income and Expense – this is just a fancy title for a page that sets out how much money comes in every months and how you spend it. Once again, this information is provided to your creditors to help explain “why” you are filing your proposal or bankruptcy.

If you think about it, this is the same information that you might want to know if you were going to lend someone money; the only difference is that your creditors have already lent you the money and now they are being asked to consider your plan to sort out your finances.

There shouldn’t be any information on the Statement of Affairs or the Monthly Statement of Income and Expense that you haven’t seen before – after all, the information came from you in the first place.

There will be other forms that you will be asked to sign – each is designed with a specific purposes to help you understand what your duties and responsibilities are during your procedure. Some of the documents may appear confusing – simply take the time to ask me questions until you are comfortable with what you are signing.

The process is supposed to help you, not hurt you, and we want you to understand everything that you are required to do.

At the end of the session you will have signed quite a few pages – don’t worry, I will scan all of the documents and then return most of the originals to you. That way, you can read them over again later at your leisure, should you choose to do so.

Most people tell me they feel much better at the end of the session. They may not be happy that they had to file a proposal or bankruptcy, but they feel much better knowing exactly what they need to do in order to resolve their financial problems.

Hopefully this article will relieve some of the anxiety you may be feeling about filing your proposal or assignment in bankruptcy. Remember that it is okay to ask questions – I want you to be as comfortable as possible with your decision and the better you understand the process the more comfortable you should be.

To meet with me, Ted Michalos, please call our office in Guelph at 519-823-0330.

You can also reach me at 310-PLAN (no area code required). If you prefer, you can also e-mail me your questions, and I will get back to you within two hours during normal business hours. Please contact me today, and let’s get started.