Debt Settlement Companies have entered the Canadian Market in a big way with big advertising budgets. Have you heard or seen their ads? “We can reduce your debts by 70% without impacting your credit rating?”  Sound to good to be true?   The Ontario Government has just issued an alert for folks thinking of dealing with these companies – have a look at the link below and if you have questions or want to here about other options please give us a call at 310-PLAN or 1-866-747-0660.

http://www.sse.gov.on.ca/mcs/en/Pages/alert_debt_settlement.aspx

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Today’s the day!

The Governemnt has just announced the new Income Guidelines used to calcluate Surplus Income in a Bankruptcy.

Why is this good news you ask ? Because they have gone up!

Not alot – let’s not get carried away- but every dollar counts each month when we do that calculation .  Ted wrote this artical earlier today .

http://bankruptcy-canada.com/surplus-income-and-bankruptcy-in-canada/

Have a look and if you have questions give us a call at 310-PLAN (7526) or 1-866-747-0660. We’re waiting to speak to you!

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Last Thursday the Province of Manitoba amended their “Consumer Protection Act” to include regulations around Debt Settlement Agencies. We have begun to hear a lot about these agencies  here in Ontario and have been working with clients who fell prey to their sales tactics.  I have included the entire article below for you . With enough complaints, perhaps Ontario will follow Manitoba’s lead…

February 2, 2012

REGULATIONS PROTECT AGAINST UNFAIR DEBT SETTLEMENT FEES: RONDEAU

Debt-settlement Agencies Must Now Be Licensed

Amendments to the Consumer Protection Act regulation have been made to protect Manitoba consumers by banning upfront charges, setting maximum fees and requiring debt-settlement agencies to become licensed, Healthy Living, Seniors and Consumer Affairs Minister Jim Rondeau announced today.

“We want to be sure that people already struggling with debt don’t find themselves paying large fees upfront with no guarantee the service will actually reduce their debt,” said Rondeau.  “Some consumers have found themselves worse off than before signing up for debt settlement.”

Under the debt-settlement model, consumers may be told to stop paying their creditors and put money aside in a separate account.  When the account accumulates a large enough balance, the agency will then attempt to persuade the creditors to accept a smaller payment than what is owed.  Debt-settlement agencies have claimed to reduce debt by a significant amount but there is no guarantee the creditor will take anything less than full payment, said Rondeau.

Under the new regulation, which comes into effect on Feb. 15, consumers can only be charged a fee if the creditor and debtor reach an agreement on reduced repayment.  The debt-settlement agency’s fee will be limited to a maximum of 10 per cent of the debt owed.  The new rules are based on Alberta laws that have been effective in addressing the need for consumer protection in debt settlement, the minister said.

Manitoba is committed to working to promote improved financial literacy through education and outreach initiatives, he added.  A variety of financial literacy education options are supported by the province including asset-building programs, financial management workshops and training, new elements of the high school curriculum and information resources.  Information on Manitoba’s financial literacy resources can be found at www.gov.mb.ca/finance/literacy/index.html.

For more help finding financial counselling and support to manage debt, contact the Manitoba Consumer Protection Office by email at consumers@gov.mb.ca or by phone at 204-945-3800 or 1?800-782-0067 (toll-free).

Improving options for debt management is a part of Let’s Make a Better Deal, Manitoba’s five-year plan for consumer protection.

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Trust your instincts on telephone pitches

Christmas cheer, menorahs, sneezes, coughs and …. concerning calls? Apparently it is the season.

Within several weeks I have seen multiple clients losing thousands of dollars to “so called” debt counselling companies. Their creditors were never contacted. Some of these companies are not always acting in your best interest.

Ironically, I too, was personally contacted by a “debt settlement” agency and another company misrepresenting themselves as Microsoft, wanting access to my computer to “fix a virus.” Yes Virginia, there is karma.

They called someone who writes money management articles and manages a debt counselling unit at a long-standing, accredited agency. So I decided to play along (my friends tell me that I am very good at playing dumb).

I was given three options presented in a highly biased manner. I was encouraged to open up a new bank account and begin depositing funds.

What I know from my experience working in the debt counselling arena, is frequently the first several thousand dollars deposited are applied entirely to their fees, not your creditors (assuming your creditors are even contacted).

Furthermore, many major banks and creditors often refuse to work with many of these debt settlement companies. They will only work with accredited not-for-profit credit counselling agencies or licensed trustees. In addition, the information I was provided on credit rating implications was incorrect.

Most surprising and highly disturbing was how convincing, composed and polished these calls sounded. I can see how someone could get entangled. So how does one know?

Companies focusing on your best interest do not phone you and ask for bank account information or request access to your computer.

Be suspicious of anybody initiating contact and requesting personal access or information. Bricks and mortar can also be a cue.

A long-standing physical presence in a community warrants more confidence than a call centre that can be quickly established and dismantled. Contacting a government agency such as the Ministry of Consumer Services can help in determining services that will work in your best interest. And most of all, trust your instinct.

What we think of as our sixth sense is often an accumulation of experiences that our subconscious has processed. Pay attention to it.

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Yesterday I received this month’s coupon booklet in my mailbox – I usually leaf through it quickly just see if there are any great deals to be found and low and behold, on page 5, there’s an ad promising to reduce my debt by up to 75%! What a great deal.

Or is it?

The ad is for a company called 4Pillars Personal Debt Restucturing and it reads pretty well – reduce your debt, protect your assets, avoid bankruptcy, low payments and 0% interest. I think the “The Procedure” that the ad is selling you (that they don’t mention by name) is something called a consumer proposal.

What the ad doesn’t tell you is that 4Pillars is not licenced by the government to file consumer proposals. To file a consumer proposal you MUST deal directly with a trustee in bankruptcy.

So what’s their angle? They offer a “free no obligation consultation” so presumably they’ll tell you right away that to file a consumer proposal you need to see as trustee and send you on your way. (That’s what they do with people that need to file bankruptcy, or so I have been told by people that have contacted them).

Nope. After your first free session you’ll sign an agreement and pay them a fee. These fees run into the hundreds and even thousands of dollars. Only after you’ve paid your fee will you be sent to a trustee to actually deal with your debts.

So what’s wrong with that?

Well, you can save the fee by speaking directly to a trustee. There are no upfront fees.

It’s your choice, but before you sign any deal, before you pay 4Pillars any fees, give us a call. We’ll review your situation and your options for free. If after you’ve spoken to us you still think 4Pillars is the way to go then go back to them. It will cost you a few minutes of your time to talk to us, but it will save you hundreds or even thousands of dollars in useless fees…

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Our last couple of posting were all about how to save for next Christmas. Of course you may not be able to do that if you are bogged down with thousands of dollars in debt. If that’s the case then it may be time for you to look at filing a consumer proposal.

A consumer proposal is a legal procedure whereby you repay a portion of what you owe. The idea is simple, if you can’t afford to repay everything that you owe, maybe you can afford to pay back part of it.

When you file a consumer proposal creditor calls will stop. If a debt has gone to collections, even if they’ve taken legal action against you, when you file a consumer proposal the calls will stop.

When you file a consumer proposal interest charges will stop. How many times have you said to yourself, “all I am doing every month is paying the interest – the debt never goes down!” When you file a consumer proposal every payment goes towards the debt – there are no new interest charges.

When you file a consumer proposal you will be encouraged to save. The last two articles were about saving for next Christmas instead of relying on credit. If your excuse for not saving has been that you’ve got too much debt a consumer proposal will solve that problem and deal with the debt. You will be able to save.

Does all of this sound too good to be true? Well, it is true – it’s the law. The biggest down-side to a consumer proposal is that you will not qualify for any new credit while you are in the proposal and for two or three years afterwards. How many times have you said to yourself, “I’d stop using my credit cards if I had any money left over after paying the bills each month, but I never do because the bills are too high…”

One word of warning – be careful who you deal with. Consumer proposals may only be filed by licenced trustees in bankruptcy. There are dozens of scam artists (most call themselves debt consultants or credit counsellors) that will offer to reduce your debt by up to 70%. They do so by charging you a fee and then referring you to a licenced trustee to file a consumer proposal. Save yourself the fee and call us directly.

If you’ve got more debt than you can deal with then a consumer proposal may be right for you. Give us a call to learn more.

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The last posting we made suggested that in order to avoid having Christmas bills next year, you should try and save money each month this year. It’s a great idea, but we didn’t tell you how to do it. Well, that’s what this posting is all about.

We know you won’t like this, but we’re going to use the “B” word – we’re going to talk about budgeting.

We know, you’ve heard it all before, “just cut a little here and there and you’ll have your $100 in no time”. Believe it or not, it’s true.

The first step is to try and figure out where your money goes every month. If you don’t know how you’re spending your money then you can’t decide how to cut back. There are lots of websites that will tell you how to do this – the simplest approach is to write down every dollar (every penny!) that you spend. If you are paid weekly then I suggest you do this weekly for 3 or 4 weeks. If you are paid every two weeks then write things down for two weeks.

Once you’ve got your detailed list, go through it with a “critical eye” – did you need to spend every dollar that you spent? What part of this list can you do without? Now repeat the process. Write down everything you spend for the next week (or two) and actually cut out (don’t buy) the things you decided you can do without from your first list. Go through the new list with a “critical eye” etc., etc., etc…

In order to save money you need to get your spending to the point that it is less than your pay. Your goal is to come up with enough to save for next Christmas, but don’t stop there. If you can save even more that’s great! Use the extra savings to pay down debt (last year’s Christmas bills).

That’s all there is to this. That’s all budgeting really means.

Once you take control of your spending, you actually get control of your life. One of the worst things to worry about is money (the other is love, but we’re going to start talking about that!). None of this is easy, but it will be worth it in the end. Just take it one week at a time…

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I hate to be the bearer of bad news, but you’ve got about two weeks before the first round of “Christmas bills” start arriving in your mail box…

If you’d like to avoid this problem next year, now is the time to start planning for Christmas 2012.  I can see your eyes rolling in your head, “We just cleaned up from this Christmas and you want us to start thinking about next year?  You’re nuts!” 

Maybe, but give me a couple of minutes of your time to make a serious suggestion. 

As the Christmas bills roll in, try and figure out just how much you spent this year.  $300?  $500?  $1,000?  More?  Whatever the amount, did you pay with cash or put it on credit?  If you paid on credit, do you have a plan to pay off the debt? 

Most people over spend at Christmas – which is ok, but only if they have a plan to pay for it.

The best way to avoid Christmas bills in 2012 is to save enough money between now and then to pay cash for your gift buying this year.  Take whatever amount you spent in 2011 and divide it by 10 – that’s your monthly saving target.

If you spent $1,000 on Christmas 2011 and you want to pay cash for Christmas 2012 then you need to find a way to set aside $100 per month starting in February (and running to November) in order to have the money you need to do so. 

The hard part, the really hard part, is doing this for the first time.  If you used credit to pay for your shopping this Christmas, then you have those bills to pay off.  Finding the extra $100 (or whatever number you need) every month will be difficult.  Having the discipline not to spend your Christmas savings may be even harder, but you need to do it. 

It is like dieting (the OTHER Christmas nightmare).   Set a goal for yourself – in this case saving a set amount of money each month and stick to it. 

Happy New Year everyone – here’s hoping 2012 finds you happy, healthy and prosperous.

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Yesterday I met with a person that signed on with Cambridge Life Solutions back in the summer and was more than a little dissatisfied with what they had done for him.

This gentleman had never missed a payment on his debts which totaled $45,000.

Cambridge Life Solutions advised him to stop making all of his payments and to sign on with them for a debt settlement plan. He specifically asked if Canadian banks would deal with Cambridge Life Solutions and he was assured that they would, well that’s not quite what happened…

This gentleman told me has been paying slightly less than $700 a month to Cambridge Life Solutions since July – to date he has paid over $3,000. In September the collection agency calls started from his creditors. When he asked the representative from CIBC why they were calling he was told quite clearly that the bank does not work with or recognize Cambridge Life Solutions. So what was he paying them for?

He came to see us to file a consumer proposal. Based on his debts and his income he is going to offer to repay $15,000 of the $45,000 that he owes – 1/3 of his debt, which is pretty much the standard deal for most people. (If you file a consumer proposal you need to offer your creditors the greater of (1) what they might receive if you filed for bankruptcy; and (2) enough for them to agree which is currently 1/3 of your debt).

Needless to say, the gentleman is pleased with the proposal and “mad as hell” at Cambridge Life Solutions. I suggested he call and ask for a refund – who knows, maybe he’ll even get one…

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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 310-PLAN 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.

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