Today I’m going to let you in on a secret: there’s an easy way to budget.

Are you surprised?  Are you one of those people who believe that budgeting is very complicated?  If you are, you’re not alone.

Most people I meet with here in my Cambridge bankruptcy office, when I ask them what they spend each month, have trouble telling me exact numbers.  They know what they spend on rent or mortgage payments, but beyond that, the numbers are a little fuzzy.  Why?  Because they don’t have a household budget.  When I ask them why they don’t have a budget, they tell me:

• it’s too hard to budget
• it takes too much time
• they don’t know how to work a spreadsheet
• their spouse pays all of the bills

Those are all valid reasons, but if you don’t know where your money goes, how can you make a plan to get out of debt?  So today I’ll tell you the secret to budgeting the easy way:

Don’t budget.

Simple as that.  Don’t budget.  Instead, pay your bills as often as you get paid.  If you get paid every week, split your hydro, gas, cable, phone and other bills into weekly amounts, and pay one quarter of your bill each week, on payday, through internet banking.

To learn more, you can read my report on The Secret to Making a Budget, or you can watch these two short videos for all of the details.

The Secret to Budgeting, Part 1:

The Secret to Budgeting, Part 2:

If you have so much debt that budgeting won’t help, give my office a call in Cambridge at 519-622-3773, or e-mail me, and we’ll discuss all of your debt management options.

There is a common perception that there’s really no difference between a consumer proposal and filing personal bankruptcy, and in some respects that’s true.  Both consumer proposals and bankruptcy:

• stop wage garnishments;
• stop collection calls;
• deal with your debts, and
• give you a fresh start.

On your credit report perfect credit is an “R1″, a consumer proposal is an “R7″, and a personal bankruptcy is an “R9″, so from a credit report point of view a consumer proposal is a bit better, but they aren’t significantly different.  So why would someone choose to file a consumer proposal instead of a bankruptcy?

The number one reason for filing a consumer proposal is certainty.  Once your proposal is accepted by your creditors, you know exactly what you are required to pay.  You keep your assets, including your tax refund, so you know exactly what deal you have made to deal with your debts.

With a bankruptcy the amount you pay can change with your income.  If your surplus income increases, you pay more, and your bankruptcy could be extended for a year.  What you thought would be a simple 9 month bankruptcy with small payments could become a 21 month bankruptcy with higher payments if your income increases.If you have relatively low income and you don’t expect it to increase, and if you don’t own any assets or expect a tax refund, bankruptcy may still be a viable option.  However, if there’s a chance your income may increase, or you may be getting a tax refund, a consumer proposal may be worth considering.

More importantly, if you want to know exactly what you will be required to pay each month a consumer proposal is often the best solution.For more information, here’s my video on what bankruptcy is, recorded live at 570News:

Here’s another live segment where Ted Michalos and I discuss the differences between a consumer proposal and bankruptcy:

So yes, there is a difference between a consumer proposal and a bankruptcy: certainty.  If you want to know what you will be paying each month, a consumer proposal may be the correct option for you.

NOTE: This post was originally published on September 27, 2011. Updated information was added on February 1, 2012 as noted below (updates appear in italics).

Who are these Cambridge Debt Solutions guys? That’s a question I’ve heard a lot lately from people meeting with me in my Cambridge bankruptcy and consumer proposal office. They advertise a lot on the radio, so I decided to check them out.

I started with a visit to the Cambridge Life Solutions website. I clicked on their Better Business Bureau link and it says that “this business is not BBB accredited”, which seemed strange to me (why would you put a link on your website if it doesn’t go anywhere?).

February 1, 2012 update: according to the Cambridge Life Solutions website, in a post dated January 3, 2012, “Cambridge Life Solutions is proud to announce that the BBB has given us an “A-” rating. Cambridge Life Solutions is very confident upon accreditation that our rating may become an “A+”.”

(For the record, here’s the link to the Hoyes Michalos Cambridge Office listing at the Better Business Bureau; we are rated A+).

Then I looked at their Debt Options page. They listed lots of options, like doing nothing or getting a debt consolidation loan, but they didn’t mention filing a consumer proposal. I found it strange that they wouldn’t list one of the most powerful options open to consumers today.

(For the record, here’s the link to the Hoyes Michalos main website where we list debt management options).

I kept digging, and arrived at their FAQ page.

One of the questions is “Can my creditors pursue litigation against me?”, and the answer is, in a debt settlement, “yes”.

(For the record, if you file bankruptcy or a consumer proposal you get legal protection, so your unsecured creditors, like credit cards, bank loans, and income taxes cannot sue you).

Another one of the questions is “will creditors keep calling me?”. They answer that:

Once a creditor has been notified by Cambridge that we have been given permission to communicate with them and see the limited power of attorney we have to communicate and arrange settlements on behalf of your enrolled debts only they will be notified to only contact you via mail. The law clearly defines this in The Business Practises & Consumer Protection Act, Section 116, Subsections 4(a)(i) and 4 (a)(ii)

I’ve been in this business for about 25 years, but I had never heard of the “Business Practises & Consumer Protection Act”, so I googled it, and discovered that this is legislation in British Columbia. It doesn’t apply in Ontario, and certainly not in Cambridge, Ontario.

Strange that a company advertising as “Cambridge” is not in Cambridge, Ontario, or even in Ontario. Sure enough, on the Contact Us page they list an office at 1100 – 1200 West 73rd Ave., Vancouver, British Columbia. Obviously that’s not in Ontario. In fact, it’s hard to see how big the office is, because it appears that that office is an “Execushare” type office, where anyone can rent a room. There’s nothing wrong with that; many new businesses rent smaller space to start; it’s just surprising that they can have lots of staff in a small office like that.

Even stranger, when they issued a press release in July they listed their address as Cambridge Life Solutions, 2416 Main Street, Suite 398 Vancouver, British Columbia, which, according to Google Maps, is a post office box!

View Larger Map

Again, it’s not illegal to use a post office box as your main mailing address, but it is strange. It makes me wonder where all of their staff are? They do list a “U.S. Enrollment Centre”, so perhaps all of their staff are in California?

(For the record, at Hoyes Michalos I have about 60 people working for me; that’s how many people it takes to talk to creditors and negotiate settlements in consumer proposals, and to give us the staff to meet with people in person across Ontario).

Fortunately they do list an Ontario address, at 1 Yonge Street in Toronto. I know the building well; it happens to be the Toronto Star building.

I asked one of my Toronto office team members to pay them a visit. Here’s the picture they took of the office directory on September 1, 2011:

1 Yonge Street, 18th Floor, Office Directory

Here’s a close up of the “C’s”, with Cambridge nowhere to be found.

Cambridge Directory - Close Up View

Surprisingly, Cambridge Life Solution’s name doesn’t appear anywhere on the directory. The 18th floor is another Executive Office arrangement, where many businesses can rent rooms or offices and share a receptionist. When we asked the receptionist if they were in, she said “no” without even looking at a schedule, which leads me to believe that they are very rarely ever there.

Cambridge Life Solutions Directory Listing - February 1, 2012

UPDATE: I am posting this update on February 1, 2012.  We paid another visit to 1 Yonge Street in Toronto, and the directory sign now does contain Cambridge Life Solutions’ name.  

When we asked the receptionist if we could talk to someone from Cambridge Life Solutions she said “of course”, and a pleasant gentleman by the name of Philip M. Allopenna introduced himself.  According to his business card he is the Branch Manager for Ontario.

I am therefore happy to report that in fact since my previous investigation Cambridge Life Solutions now has an office that is staffed with people here in Ontario.

I was still curious as to what exactly Cambridge Life Solutions does, so I went back to the internet, and went to the Ontario government’s Ministry of Consumer Services website, and on the Consumer Protection Branch page I did a search for Cambridge Life Solutions and I discovered that Cambridge Life Solutions Negotiation Services, is actually CLS Negotiation Services Inc., and they are actually a collection agency!

Wow! Why would a company that helps you negotiate a debt settlement register themselves as a collection agency? Isn’t a collection agency someone who collects debt?

Again, maybe it’s not a big deal. At least they are registered with the government, which gives them some credibility. To find out more, I reviewed the Collection Agencies Act of Ontario, which regulates all collection agents. Paragraph 1 states that:

“collection agency” means a person other than a collector who obtains or arranges for payment of money owing to another person, or who holds out to the public as providing such a service or any person who sells or offers to sell forms or letters represented to be a collection system or scheme;

That makes sense. Anyone who “arranges for payment of money owing to another person” is a collection agency, so on that basis, Cambridge Life Solutions is a collection agency.

Section 12.2.a of the Collection Agency Regulations says:

(2) No person shall be registered as a collector unless the person,

(a) is an individual who is a Canadian citizen or has been lawfully admitted to Canada for permanent residence and who is ordinarily resident in Canada.

I have no idea how many employees they have in Canada, but you must have Canadian employees to legally negotiate debt settlements in Canada.  It appears from their website that at least some of their debt negotiation work is done from California.  That’s fine.  They have Canadian employees, so that’s perfectly legal.  Here’s my question for you:

Do you want to deal with a company in California? Or would you prefer to deal with someone local?

So, what’s my conclusion?

First, Cambridge Life Solutions has nothing to do with the city of Cambridge, Ontario.  They are not located in Cambridge, Ontario.

Second, before you hire anyone to do any work for you, check them out. Ask your friends for a referral. Check out their web site, or their Better Business Bureau listing. Find out how they are regulated.

Third, ask where their debt negotiators are located. Even if you don’t want to deal with me or my firm, there’s lots of expertise here in Cambridge, and throughout Ontario; you can find someone local.

Finally, before you hire anyone to deal with your debt problems, meet with them.  Do your research.  Talk to them on the phone.  Talk to my competitors on the phone.  Visit their websites.  But before you agree to part with your hard earned money, have a face to face meeting with your advisor.  Look them in the eye, and decide whether or not they are who you want to use to best represent your interests.

(Obviously I’m biased.  I have about 60 team members working at 20 offices across Ontario; we will meet with you in person, and we will meet with you at least twice before we will let you sign anything, or pay anything.  You alone will decide when and how we proceed.  You will get no high pressure over the phone sales tactics from any member of my team).

There are solutions to debt problems, but the best solution often involves dealing with a competent, honest professional.

Here’s a video of me, Doug Hoyes and Ted Michalos discussing Debt Consultants:

This Saturday, for the first time ever, you’ll be able to “see” me on the radio. I’ll be doing a one hour live radio show on 570 News, and the video will be broadcast live on the internet.

Doug Hoyes on 570 News

On Saturday September 24 from 1:05 pm to 2:00 pm Ted Michalos and Doug Hoyes will be appearing live on 570 News, and we’re going to spend the entire hour talking about Debt Myths.

You can participate in many ways. You can:

• Listen on the radio to 570 News;
• Listen on the internet, at 570News.com (just click the Listen Live button);
• Watch and listen to the video feed; go to 570News.com and click on the 570 News Webcast link;
• During the show you can e-mail us a question, and my office will relay it to the studio; or
• Send me a Tweet on Twitter @doughoyes and I’ll try to respond on air, time permitting.

If you want to learn more about how to deal with debt (or if you’re just curious to see what it looks like to “watch” a radio show), please join us this Saturday after the 1:00 pm news on 570 News for our inside look at Debts Myths.

Last week I met with three people in a row in my Cambridge bankruptcy and consumer proposal office, and they all asked me the same question: what will happen to my co-signer if I go bankrupt?  My answer?

It depends.

First, it depends on whether or not the loan they co-signed for continues to get paid.  For example, if your father co-signed your mortgage for you, and you are keeping your house and continuing to pay your mortgage, there generally won’t be any issues for your co-signer if you file a consumer proposal or bankruptcy.

However, if your friend or family member co-signed your line of credit, or if they had a joint credit card with you, then they have a problem.

When you go bankrupt the bank can’t pursue you for the debt, but because your co-signer didn’t go bankrupt, they can go after your co-signer.

When someone tells me they had someone co-sign on one of their loans, my advice is always the same: talk to them, now.

If you decide to go bankrupt they will find out anyway (when the bank calls asking why the loan wasn’t paid), so you are better off giving them a “heads up” now, so they can prepare.  If they have good credit, they may simply ask the bank to switch the loan to their name, and they will continue paying it (which won’t harm their credit report).  If they have bad credit, they may need to consider a proposal or bankruptcy as well.

Either way, be proactive so that you can have a plan in place before you decide to go bankrupt.

As I was driving to my Cambridge bankruptcy and consumer proposal office this morning, I stopped at a red light on Main Street, and I watched as few Cambridge residents walked by, presumably on their way to work.

At 8:00 am this morning it was bitterly cold, around -20 degrees, so I was somewhat surprised to see that none of the pedestrians I saw were wearing a hat.  I don’t usually wear a hat on my way to work, but that’s because it’s only about a 15 second walk from the parking lot to the back door of our Cambridge office.  I’m not outside for long, so there is really no need for ear protection.  However, if I was walking few blocks in minus 20 degree weather, I’d wear a hat, or earmuffs, or something.

And yes, I realize we don’t like to wear hats because it messes up our hair, and it’s just one more thing for us to misplace when we get to work.  But here’s the most amazing part: most of the people I saw this morning were wearing big, warm, winter parkas, that had built in hoods!  It would have only taken a second to flip up the hood to keep their heads warm, and yet none of them did.

Did they forget that their hats were there?  Is looking good more important than preventing frostbite?  Are residents of Cambridge so tough that we don’t need hats, even on the coldest day of the year?  (And yes, the Grand River in downtown Cambridge was frozen over, again). Perhaps.

My theory is that we get into the habit of not wearing a hat, since most days we don’t need one, and we forget what to do on cold days.  Unfortunately some days you need protection.

So why am I writing about this on a blog about bankruptcy in Cambridge?  Because it’s the same with financial problems.

Many of us get into financial problems, and we struggle for so long with the collection letters and phone calls that we forget what it’s like not to have debt problems.  We don’t realize that there are solutions, and in some cases the solution may be as simple as putting on a hat, financial speaking.

What are the possible solutions?  Try our free, on-line, 10 second debt options calculator to find out more, and let’s get started.

What does it cost to file bankruptcy in Cambridge?” That’s a very common question, so I’ve written a detailed explanation in my page on the cost of bankruptcy in Cambridge, Ontario.  Here’s a quick summary: There are three “costs” to file bankruptcy:

• a base contribution;
• surplus income
• asset repurchases.

1 In all bankruptcies a base contribution to cover the administrative costs of the bankruptcy is required. This will typically be $190 per month for a minimum of nine months, but it could be a higher number if your case is complex.

2 Next, you are required to make surplus income payments based on your income each month.  This calculation is somewhat complicated, so I suggest you call the office at 519-622-3773 and book a meeting with me or one of my team, and we can do the specific calculation that will apply in your case. If you want to try the calculation on your own, you can read this description of surplus income, and then you can use this surplus income worksheet to do the calculations. (You will find that it’s easier to let us do the calculations for you).

3 Finally, if you own any assets that are not exempt and you want to keep them in a bankruptcy, you will be required to make asset repurchase payments during your bankruptcy.  For a detailed list of what you get to keep if you go bankrupt you can refer to this list of bankruptcy exemptions in Ontario. Again, this is somewhat complicated, so a personal consultation with us is the simplest way to determine if any asset repurchases will be required.

In many cases when I explain the costs of a bankruptcy the decision is often made to avoid bankruptcy by filing a consumer proposal.

To find out the costs of a bankruptcy or a consumer proposal for you, please call my office in Cambridge at (519) 622-3773 to discuss your situation over the phone , or e-mail me your questions or to set up a no-charge initial consultation.

The Office of the Superintendent of Bankruptcy has just released statistics indicating that the number of personal bankruptcy filings in Cambridge have dropped since last year. Here are the numbers:

In the first six months of 2010, 208 residents of Cambridge filed personal bankruptcy. An additional 144 Cambridge residents filed a consumer proposal, for total filings of 352 people between January and June of this year. If these rates remain consistent for the rest of the year, that projects to 704 Cambridge residents filing a bankruptcy or proposal this year. How does that compare to previous years?

In 2009, 634 people went bankrupt in Cambridge, and 283 proposals were filed, for a total of 917. (You can see more statistics for other years on our Cambridge bankruptcy statistics page).  That would indicate that we may see a drop of 23% in the number of insolvencies filed this year in Cambridge. Why the drop in filings? The Cambridge economy was slightly better in early 2010 than it was in early 2009. The stock market crashed in late 2008, and that eroded business confidence, leading to the decline in 2009. Today the economy is somewhat improved (as compared to 2009), with unemployment somewhat lower, and interest rates remaining stable.

Attached is a postal code map of Cambridge showing where bankruptcies occur. Not surprisingly, the largest number of personal bankruptcies are in the areas where most people live; the more industrial areas have fewer bankruptcies.

For the economy in general, a declining personal bankruptcy rate is good news. It generally means that more people are working, and therefore they are able to service their debts.

What’s ahead for the balance of 2010?

I believe we will continue to see a decline in the bankruptcy rate in Cambridge for at least the next few months. Interest rates and unemployment remain stable, so no big changes are expected. However, as we all know, that can change quickly. If interest rates begin to rise, or if the impact of the new HST begins to reduce consumer spending in Cambridge, the bankruptcy rate could edge higher towards the end of 2010.

One final comment: the good news is that a greater number of Cambridge residents are choosing to file a consumer proposal as an alternative to bankruptcy. In 2009 just under 31% of Cambridge residents filed a consumer proposal (the rest filed bankruptcy). This year that percentage has increased to 41%. That’s a big increase, and it’s good news because it means more people are choosing to negotiate a settlement with their creditors to avoid bankruptcy.

More than a third of all consumer proposals filed in Cambridge are filed by my firm, Hoyes, Michalos & Associates, so if you are interested in learning more about this increasingly popular alternative to bankruptcy, please call my Cambridge office at (519) 622-3773, or e-mail me today to arrange a no charge initial consultation.

Jonathan Chevreau wrote an interesting article in the Financial Post titled: Government gives with one hand, garnishees with other.  In the article, Mr. Chevreau tells the story of “Sam” (not his real name), a 70 year who owes a lot of money to Canada Revenue Agency (CRA) for back taxes.  CRA is “garnisheeing” all of Sam’s pension to repay his tax debt.

A week earlier Mr. Chevreau wrote an article called No immunity to bankruptcy where he quoted me as saying that between 7% and 9% of all people who go bankrupt through my firm are over 60 years of age.  That’s true, and those statistics hold true here in Cambridge as well.  More information can be found in his blog post on the number of senior citizens  filing for bankruptcy.

I was quoted in the first article as saying:

Hoyes guesses half the seniors he sees choose bankruptcy, although he lays out four less extreme options. He points out that most retirees don’t need to file for bankruptcy because the main reason for considering it is to ward off creditors that threaten to garnishee wages or seize assets. Retirees have no full-time wages, so don’t have significant wages that can be seized. Also, “it is very difficult, if not impossible, for a creditor to garnishee a pension,” Mr. Hoyes says.

I stand by that quote; it is very difficult for a normal creditor, like a credit card company, to garnishee a pension.  However, that’s not the case with CRA, as Sam discovered.

Revenue Canada does not need a court order to take part, or all, of your CPP if you owe back taxes.  They use what is called a “right of set-off”.  In simple English, it means that “if you owe us money, and we owe you money, we won’t send you any money until you pay us what we are owed.”

So what can you do if you get a pension, and you owe Canada Revenue Agency money?  As I described in the article, you have a number of options:

First, file all outstanding tax returns.  If you have not filed your taxes, CRA will not be willing to make payment arrangements with you.  All tax returns must be filed, even if you are not able to pay the full balance owing.

Second, I suggest you talk to CRA.  If you owe a manageable amount of money, you may be able to make payment arrangements directly with CRA, and repay the amount owing over a reasonable period of time.

If that doesn’t work, you could attempt to get a debt consolidation loan to repay them in full.  That may only be possible if you have assets, like a house, to pledge as security, or if you have a co-signer.

Your next option would be to file a consumer proposal, where we help negotiate a settlement with CRA and all of your other unsecured creditors.  To make a proposal work you need to have enough income to make monthly payments, while still paying your monthly living expenses.

If none of those options work, the final option is personal bankruptcy.  However, as I was quoted as saying in the Financial Post, personal bankruptcy may not be the best option for you, so I suggest you call my office in Cambridge at (519) 622-3773, or e-mail me to set up a time to meet and discuss your options.

Mark Silverthorn is a former collection agency lawyer. Over the years I had literally hundreds of people arrive at my Cambridge bankruptcy office with letters from Mark Silverthorn, demanding payment of outstanding debts. I saw so many of these letters that I didn’t think Mr. Silverthorn actually existed; I assumed it was just a trade name. Then about three years ago I got a call from Mark Silverthorn himself, telling me that he had stopped working for collection agencies, and was now devoting all of his time to helping debtors deal with collection agents. Mark had switched sides!

Mark Silverthorn

Last week I attended a presentation that Mark gave to the Cambridge Self-Help Food Bank and other social agencies at the Cambridge Centre For the Arts here in Cambridge. He discussed various strategies for dealing with collection agencies. He explained that in some cases, if your debts are old, you can simply refuse to pay, and there may be very little the collection agency can do to collect. In other cases, a settlement with a collection agency may be an option, or it may be necessary to file a consumer proposal or even file a bankruptcy in Cambridge. You can read a full report on his talk in the Cambridge Times article about The Coming Debt Storm.

I was familiar with many of these strategies, since I have read his new book, The Wolf at the Door: What to Do when Collection Agencies Come Calling.

In fact, he interviewed me for the chapters on Consumer Proposals and Personal Bankruptcy, so I have spoken to Mark on many occasions. He did however make one comment that surprised me: He said that borrowers in Canada are often victimized three times.

First, borrowers often get caught in predatory lending practices, paying excessive rates of interest, or signing contracts they don’t understand. Interest rates in Canada are at historic lows, but interest rates on credit cards and finance company loans are as high as ever.

Second, if a borrower can’t pay, they are often victimized by abusive collection agency practices. Collectors call at all hours of the day and night, and often make threats to collect the money. It’s hard to deal with a collection agent if you don’t know the rules that govern them; they can intimidate, which is often unsettling.

Mark Silverthorn and Doug Hoyes

Finally, borrowers are often victimized by "helpers"; people who earn their living by "helping" people, even though they really aren’t helping them at all. You have probably seen their advertisements: "We will reduce your debts by 70% without bankruptcy; call us today!" Unfortunately most of these ads are nothing more than Debt Management Scams. These unlicensed "helpers" take your money, but they have no legal ability to actually reduce your debt. They might be able to convince your creditors to accept a deal, but more often than not the only person who profits is the helper.

Mark’s advice: if you meet with a debt management professional, ask them to explain all of your options, not just the option they are selling.

I am proud to say that whether you meet with Howard Hayes or me in our Cambridge office, we will explain all of your options. If we think a debt consolidation loan will solve your problems, that’s what we will recommend. If you need credit counselling, or a lawyer, or a tax accountant, or if you can deal with the problems on your own, we will tell you that, too. If the solution is a consumer proposal or personal bankruptcy, we will explain the advantages and disadvantages of all options, so that you can make an informed decision.

To find out more about Mark Silverthorn, you can visit his debt help web site. To find out more about your options, feel free to call my office in Cambridge at (519) 622-3773, or e-mail me, and we can arrange a no charge initial consultation.