Howard Hayes - Client Services - Hoyes Michalos & Associates Inc

If a lender’s efforts to recover a debt are not successful, they often hire a third party collection agency to try to recover their money.

A piece of advice we always give our clients is not to ignore the collection calls.  It will likely only make things worse.  Even if you have little or no money and know that you’re not going to be able to meet the demands of the collection agents, ignoring them will only leave them guessing as to why you’re not making payments and they’ll continue to call.   

Here are three options to stop collectors from calling:

1. Negotiate with them and work out a plan. Some collection agents are better than others.  Not all of them, but some collection agents are slowly realizing that it may benefit everyone to work out a reasonable plan with you rather than coercing you into unrealistic repayment plans.
2. You can file a Consumer Proposal with a licensed trustee, or
3. File for Personal Bankruptcy which, like a Consumer Proposal will legally protect you and force them to stop all collection actions against you. 

Collectors are often on  commission  (they get paid more if they can collect more money from you) so one incentive they have to call as often as they do and make demands is that by collecting money from you they are increasing the size of their own pay cheque.

In Ontario, collectors are obligate to stick to very specific rules when it comes to collecting debts, however based on what many of our clients tell us.  It’s also apparent that not every collection agent sticks to these rules.

• You’re entitled to be notified in writing first, that your account has been assigned to them for collection.
• If calling you, the collector must clearly identify themselves, who they work for, and amount owing.
• They cannot make calls that may be considered harassing to you and your family.
• They cannot give you false or misleading information
• When collecting a debt, they can only call other people to confirm phone number and address.
• They must have written permission from the original creditor to take any legal action to collect a debt from you.

A full list of regulations can be found on the Ontario Government website.

The most important factors to remember if collection agents are calling you are that you have rights and most importantly, you have options.

At Hoyes Michalos & Associates Inc, we’re happy to provide you with the advice you need to deal with collection agents that call and to help you with ways to bring your debts under control.  We can discuss your options either on the phone or we can arrange to meet with you in our office for a no charge consultation.   Contact us by sending an email with any questions you may have or call me at 310-PLAN or our local number (519) 622 3773.

Howard Hayes

Most Ontarians have tried their luck at winning the jackpot, as the prize amounts are enough to change anyone’s life dramatically in an instant.  Having said that, my own personal winnings to date amount to about $20.

During a Bankruptcy, lottery winnings are considered a “Windfall”.  A Windfall is defined as “A sudden, unexpected piece of good fortune or personal gain”.   Windfalls are considered an asset of the estate and should be turned over to the trustee for distribution to your creditors during the period of your bankruptcy. 

A windfall may not just be lottery winnings; an inheritance is another example of a windfall along with valuable gifts received and certain types of insurance/compensation payouts.

If you’re bankrupt and you receive a windfall, you won’t necessarily lose the entire windfall.  If you receive a windfall you’ll want to talk to the trustee about your options.  It would be a nice problem to have if it happens to you!

One option would be to simply surrender the funds to the trustee.  The trustee will arrange to pay the creditor’s claims and then will apply to the court for your discharge from the bankruptcy.  The trustee will be allowed a fee and then, if the court agrees, the surplus funds remaining will be returned to you. The bankruptcy however, will still remain on your record.

Another option would be to discuss with the trustee the option of offering the creditors a proposal.   With the approval of the creditors and the court, the bankruptcy would be annulled and off your record and the creditors would receive the funds much earlier.

Clearly, none of us have a crystal ball and can predict if we will ever win the lottery, but if you know there may be a chance that you will be receiving an inheritance in the near future or other form of windfall, it’s important to remember in a consumer proposal, the trustee does not have control over your assets, therefore if you receive a windfall, the asset remains yours and you would be in a position to decide what to do with the windfall. 

If your original proposal is accepted by the creditors, they cannot later demand repayment of the full original debts, because of your good fortune.   It is important however to disclose an expected windfall to the creditors at the start of the process if you are aware of it.

If you find yourself in a financial crisis and are considering a Bankruptcy or Consumer Proposal and know there is a possibility of an inheritance or other windfall sometime in the near future, give our office a call to discuss your options.  As well as helping you to establish a plan to get your financials back on track, when you meet with us here at Hoyes Michalos & Associates Inc , we’ll discuss implications of questions such as this so that you’re fully informed and can make the best decisions possible for you and your circumstances.

Howard Hayes

But what happens if payments to your provider get behind?  Can Cell Phone Bills be included in Bankruptcies & Consumer Proposals?

This question is one of the most common questions that we come across from people we meet with in our Cambridge Office.

The simple answer is yes.  However, you must be willing to cease usage of the service prior to filing the Bankruptcy or Consumer Proposal.   If you continue to use the service after filing a Consumer Proposal or a Bankruptcy or make a payment to the provider after the date of filing, you will then re-confirm your contact with the provider and they will continue to hold you responsible for the debt.  

Some companies that provide cell phone services may also cancel other ‘bundled’ services you have with them such as Internet, Cable.  A bundled account is typically one account; therefore if you include one service from the bundle into a Bankruptcy or a Consumer Proposal, they may exercise the right to cancel all your bundled services on that account.

Additionally, if you have a cell phone that is currently in good standing, but you get behind during the course of a Bankruptcy or Consumer Proposal, you will be unable to include this debt in the proceedings at a later stage.  

When you meet with one of our professional staff here at Hoyes Michalos & Associates, we’ll review your monthly budget with you before you file a Bankruptcy or a Consumer Proposal to help you make the decision as to whether or not continuing with a service such as a cell phone contract is feasible.  It’s often the case that if you bring your debts under control through filing a Consumer Proposal or Bankruptcy that this will free up money within your budget to allow you to continue with a cell phone service as normal.  You may also consider even needing a landline – perhaps just having a cell phone negates the need to have two different numbers to be available on.

If these are decisions you may be facing or if you’re seeking help with budgeting and dealing with debts, then send me an email or give our office a call at (519) 622 3773 or 310-PLAN and let’s get started.

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!

Danielle Ratford

Today’s post will look at 5 reasons why filing a Consumer Proposal may be a better option for you than filing for Personal Bankruptcy. 

 If you compare Bankruptcies and Consumer Proposals side by side, what stands out the most is Consumer Proposals are easier, less “complicated” if you will.

Here are the top 5 reasons why:

• 1  -  In a consumer proposal you still have control of your assets.

In a Bankruptcy you “assign” your assets to the trustee.  In a proposal, you remain in control.  You are still able to manage, and make withdrawals from your investments if you so chose.

You lose this right in a bankruptcy and you could even lose the asset all together.  Recent contributions to RRSP’s will be seized by the trustee and any investments such as RESP’s, Canada Savings Bonds, Stocks and Shares can be collapsed and the proceeds distributed to your creditors.

•  2  -  With a Consumer Proposal all the work is done at the beginning.

It’s less complicated than a bankruptcy. Your regular monthly income and expenses are only assessed once by a trustee and creditors when you file a consumer proposal. 

While Bankrupt you are required to submit detailed Income and Expense statements for the duration of the bankruptcy, which will include supplying copies of pay stubs or bank statements to verify income received.

• 3  -  Your monthly payment will remain the same.

It’s easier to budget knowing exactly what you’re required to pay to the trustee each month.  Where-as in a bankruptcy you might not know from one month to the next exactly what you have to pay, in a proposal it would be easier to plan ahead with a budget knowing you’re payments to the trustee won’t change.   If your income increases during the proposal, specific rules prevent creditors from requesting more money at a later date during the proposal if you’re fortunate enough to be making more money.

During a bankruptcy, the more money you make, the more you’ll have to pay.  Your monthly payments will vary depending on your family income.

The Government sets out thresholds for bankrupts depending on your family size. For example under current guidelines, a family of four’s threshold is $3501(net). If your household income exceeds this amount you are required to pay to the trustee half of the amount you’re over the limit by.  If your household income averages to be more than $200 over the limit, your bankruptcy will be extended, which will result in more fees and possibly more income reporting.

• 4  -  You keep your GST and Income Tax refunds

Many people look forward to receiving, or rely on receiving their quarterly GST cheques as well as a tax refunds during tax time. In a Consumer Proposal you keep your money.  Unless you owed CRA money at the time of filing the proposal, the government will still send you your GST or tax refunds that you would normally acquire. However in a Bankruptcy you will lose your GST and Tax refund during the course of the bankruptcy.

• 5  -  You get the same legal protection and benefits

As a consumer proposal is filed through a licensed trustee and is governed under the same federal legislation as a bankruptcy, you receive the same legal protection from your creditors that you’d receive in a bankruptcy, without having to file bankruptcy.  

A 1^st time bankruptcy remains on your credit score at an R9 rating for up to 7 years after you’ve been discharged from the bankruptcy.  It typically takes between 9 to 21 months to be discharged from a 1^st bankruptcy, so you could be looking at 9 years altogether. 

A Consumer Proposal is better on your credit rating.  It remains on your credit at an R7 rating for three years after you’ve made the last payment.  A proposal can be run over a maximum 5 years, but there is no penalty to you if you choose to pay off your proposal quicker than your original term, so if you have your proposal paid off in 3 years it will be there for 6 years altogether.

If you’d like to discuss a Consumer Proposal with me in more detail, use the form provided and let me know your questions or call me on (519) 622 3773.

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.

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.

Does this sound like you?

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.