Howard Hayes Bankruptcy Cambridge Ontario Blog

It is no secret that collection calls are annoying, frustrating and even scary.  Getting phone calls all the time from people asking for money that you cannot pay can definitely make you never want to pick up the phone again! 

Howard Hayes

A lot of people think that if they simply ignore all the calls for a while, they will eventually stop.  Unfortunately, the complete opposite can happen.  In fact with modern day technology, most collection agents now use computerized auto dialers that keep calling at set times of the day until someone in the house picks up.

I would never advise someone to ignore calls from creditors.  Not only will they not stop, but the creditors will just try harder.  They might call more often, or find different numbers to call you on such as friends/family/employer.  They’ll also send threatening notices in the mail.  Eventually, they will go to court and attempt to get a wage garnishment against you.  For a consumer debt, that means your employer must give up to 20% of your gross pay to the creditor.   Obviously, a wage garnishment is much worse than some pesky phone calls and you want to avoid this happening.

Ignoring collection calls will only make your problem worse.  The only way you can get them to stop is by one of these three options.

1. Finding some way to pay at least some of the money you owe.  You might try to make a deal with them to pay your debts in a way you can afford.
2. You can file a Consumer Proposal with a licensed trustee, or
3. File for Personal Bankruptcy which, like a Consumer Proposal will legally force them to stop all actions against you. 

If you would like to discuss any of these options for getting your creditors to stop calling, I would be happy to speak with you.  Call 519-622-3773 or send me an e-mail and we can make it possible for you to pick up the phone without fear!

How????

Normally, collection agents are hired to collect on a debt when the person you owe to realizes that you’ve not been making the monthly payments on debts.

The collection agent usually has one thing in mind – keep calling, calling, calling until the account is collected.  It can get so bad for the person who owes the money as every time the phone rings they never know if it will be someone asking for money that they simply do not have.  If this sounds like you, you may be wondering how you can stop these annoying calls?

Here’s some idea’s:

Howard Hayes

Firstly, you can try to make a deal with the creditor that you will pay-off what you owe them in a way you can afford.  This is for people who think they can pay back the entire debt but just can’t make the monthly payments that are being asked.  If they are able to make smaller monthly payments over a longer period of time, they could eventually pay back everything they owe.  Sometimes, creditors will agree to this. 

You could also try to make a lump sum deal with the collection agent themselves.  Collection agents are paid by commission based on how much money they get so, if you offer them a lump sum of what you can afford, even if it is not the full amount they might go for it since it means they will get commission right away rather than having to wait many months for it.

File a Consumer Proposal. By offering a Consumer Proposal that is filed through the office of a licenced trustee, you’ll be legally protected from collection agents calling you trying to collect on the accounts.  As soon as the collection agent is made aware of the filing of the proposal (usually within 2 to 5 days of filing) they have to cease their efforts in trying to collect.

File personal bankruptcy.  This will guarantee that these collection calls are stopped.  When you file for personal bankruptcy, all of your unsecured debts are cleared.  As with the consumer proposal above, upon filing a bankruptcy, a ‘stay of proceedings’ is sent to the creditors telling them to stop all the actions they have taken against you, including collection calls.  A stay of proceedings is federal law under the authority of the Bankruptcy & Insolvency Act, so you will have peace of mind when your phone rings knowing that it is a friendly call and not someone demanding cash.

If you would like to learn more about how to stop collection calls, send me an e-mail or call me at 519-622-3773 and I would be happy to answer any of your questions and review all of your options with you. 

Other useful ideas along with an explanation of your rights are explained in more detail in books such as “The Wolf At The Door”, written by expert and previous collection lawyer Mark Silverthorn.  Click here for more information on how to obtain your copy.

In a Bankruptcy or a Consumer Proposal you are required to complete two counseling sessions which are completed in our Cambridge office with a qualified and experienced credit counsellor.

However counselling services are also offered outside the scope of a Bankruptcy or Consumer Proposal.

Danielle Ratford & Glyn Bickford

Friday I sat down with Glyn Bickford a credit counsellor from Credit and Debt Services, who performs counselling for people from Cambridge who are experiencing financial difficulty.   I took this opportunity to ask her some questions related to her services and the benefits of credit counselling. Here are some highlights from our discussion.

Q: Should I meet with a credit counsellor before I meet with a Trustee In Bankruptcy?

A:  Sometimes clients will come in to see a credit counsellor before meeting with a trustee because they feel intimidated by the process, by meeting with a counsellor we can assist them and guide them in the appropriate direction for their situation. We are able to help initiate the process should they decide to file a Bankruptcy or Consumer Proposal and work closely with the trustee.

Q:  What do you feel is the biggest misconception about credit counselling?

A: Often times, people I meet with feel as if they are going to be judged with regards to the current situation they are in and can sometimes be defensive because of it. A credit counsellor is not there to judge, rather they are there to help and make the client feel comfortable discussing their situation. Also, sometimes people assume that the counselling session will take place in a group setting, which is not the case, all our sessions are completed in a one on one format.

Q: What would you say is the biggest benefit of credit counselling? 

A: Budget management is an important topic that we discuss; a budget is the foundation of financial management. Sometimes I will meet with clients who have no experience with creating a good budget, and they find this to be an extremely helpful and valuable tool.   When I meet with people during a Consumer Proposal or Bankruptcy, the service is provided at no cost to the client, so its a good opportunity to get professional advice for free.

Q: What are some topics I can expect to discuss during a session?

A: First and foremost budgeting, we will also discuss the causes of your current financial situation, and warning sings of financial difficulties going forward. We discuss what percentage of your income should be designated for certain expenses such as debt repayment, as well as ways to re-establish credit. 

Set up a meeting today with a professional that can help you.

Q: How can a credit counsellor help someone through a Bankruptcy or Consumer Proposal?

A:  Credit counsellors can help individuals through the Bankruptcy or Consumer Proposal process by assisting with money management skills for the future, as well as explaining any questions you have about the Bankruptcy or Consumer Proposal process. However one of the biggest advantages of meeting with a credit counsellor is being able to “share” the stress by discussing your feelings and talking through the process and what lead to your current situation. Clients will often leave counseling sessions feeling like they have gained a better understanding of how to manage their finances as well as a renewed sense of hope and like a weight has been lifted off their shoulders.

If you feel that meeting with a local credit counsellor such as Glyn from Credit & Debt Services will be beneficial or are simply considering your options, call us at 519 622 3773 or send us an email we would be happy to help you make a plan to deal with your finances.

Howard Hayes

In simple terms, creditors are not allowed to pursue money owing from prior to the date of the proposal.

If you don’t owe CRA anything, then yes, you keep your refund if you file a Consumer Proposal. Whereas in a bankruptcy, regardless of whether or not you owe CRA money, you’ll lose your tax refund.

This is often considered to be a good advantage to you to consider filing a Consumer Proposal rather than a bankruptcy, particularly if you normally receive a large tax refund.

If you currently owe money to CRA and you file a proposal, all taxes owing up to the end of the prior year are included in your proposal. If you file a proposal on March 24, 2010, all taxes owing up to the end of December 31, 2009 are included, since that’s the last period for which you will have filed your taxes. When you file your taxes for the 2010 year, you are required to pay whatever is owing.

If you get a refund for the 2010 tax year (which you wouldn’t file until early 2011), in theory CRA should send you the refund.

However, on occasion CRA could take the position that, since part of the refund is for the year of the proposal, they will take the refund and apply it against the previous balance owing.  

So, it maybe best to assume that you won’t get your refund for last year (if there was a prior balance owing), and it may be possible that you’d not get your refund for this year. Or you may. CRA have not held a consistent position on the matter in the past.

If this is a concern of yours, feel free to call me on (519) 622 3773 or send me an email.  We’re here to help you understand the implications of questions like this one and to give you the right information so you can decide on the best options available to deal with your debts.

Does this sound like you?
Angie has been self employed for the past 15 years, but recently, due to an illness, she has had to close her business as she cannot afford to pay someone to take her place. Angie now owes about $50,000 on credit she used to finance the business with and does not know how to come up with the money to pay them back. What can she do?

What can you do?
Individuals in this kind of situation have a number of options. Obviously without a regular income it is difficult to save up enough money to pay back your debts. Solutions to this problem include a debt management plan, a proposal to creditors, but most likely bankruptcy.  In a bankruptcy some assets may be liquidated and the money is used to pay back your creditors. It is one of the fastest ways to get rid of debt.

If this sounds all too familiar and you’re looking for help, call our office today at 519 622 3773 or email me your question.

Howard Hayes

Yes.  A tax debt to CRA is a debt you can include into either a Personal Bankruptcy or a Consumer Proposal.

(Unfortunately, you likely not going to be able to include a tax debt into a debt management plan with a credit counsllor or debt settlement company).

With CRA debts, it’s important that if you file either a Consumer Proposal or Personal Bankruptcy, then you’d want to make sure that your tax returns are up to date.  Either use the latest software, or use a tax accountant or tax return preparation company to get your returns filed. 

In a proposal, it could be a win win situation to have your taxes up to date.  If you file and you get a refund, you’d keep the refund.  If you file the taxes and owe, you can include the debt into your proposal. 

In a bankruptcy, CRA will check to see if your returns are up to date.  If you have missing tax returns, then it could be likely that they’d consider opposing your discharge from the bankruptcy.  They may want to force the issue to have to go to court, so that you can explain why a return has not been filed. 

If you owe CRA more than $200,000 or if your tax debt represents more than 75% of your debt load, then you’ll likely have to attend court at the end of the bankruptcy to explain why before you can be discharged from the bankruptcy.

If you have tax debts and are considering your options, talk to a trustee.  A good trustee will be able to tell you exactly what you may need to do and what options are available to you. Call us at 516 622 3773 or email me your question.

Question: If I do need to declare myself bankrupt, I believe I may asked to pay some equity from my house. Would it be worth transferring the house over to my wife’s name?

Answer: Unfortunately you can’t transfer your house to your wife and then go bankrupt. When you file bankruptcy, one of the questions you must answer is “have you, in the last five years, transferred or disposed of any real estate”. In your case the answer would be yes, so if you went bankrupt you would be required to pay back the equity.

We suggest that you get a house appraisal, and a confirmation of the balance owing on your mortgage, and then make an appointment to see us (call 519-622-3773 to set up an appointment) and we can calculate the equity in the house.

If the equity is large, another option may be to file a consumer proposal.

Each week Howard Hayes and I meet with lots of people in our Cambridge bankruptcy office who ask me the same question: “Should I go bankrupt in Cambridge?”

Everyone’s situation is different, so for the answer for you, I suggest you give us a call at 519-622-3773, or send us an e-mail, so we can review your unique situation. It”s important that you don’t let the stress of collection calls and letters pressure you into a decision until you have all of the facts.

I consider personal bankruptcy to be the last option to consider when dealing with financial problems. Before considering bankruptcy, I want to explain your other options, such as cutting your expenses so you can pay your debts off by yourself, debt consolidation, or credit counselling. If one of these options works for you, great, you won’t need to go bankrupt.

If those options won’t work, the next option we consider is a consumer proposal. You can read my comments on the cost of filing a consumer proposal . In a consumer proposal we contact your creditors (credit cards, banks, the government, etc.) and work out a plan where you pay a fixed amount each month, and in exchange your debts are eliminated. This is a great option if you have a stable income each month, and can afford to make payments, but have more debt than you can handle on your own.

If you don’t have enough income to file a consumer proposal, then you may have to consider bankruptcy. Personal bankruptcy is also an option if your wages are being garnisheed by your creditors, since a bankruptcy will stop most garnishments.

To find out more, give us a call in Cambridge at 519-622-3773, or call us at 310-PLAN, or send us an e-mail, and we will set up a time to meet to review your options.