There is a common myth that you shouldn’t go see a bankruptcy trustee, like me, because the trustee “works for the creditors” (the people you owe money to).  Instead, according to the ads I hear on the radio and TV, you should go see a “debt consultant”, because they work for you.  That’s ridiculous, for two reasons.

First, the debt consultant may not be working for you.  Mostly likely they are working for themselves.  Many debt consultants charge you a fee, and then send you to see a trustee.  There is no point in paying someone a fee to refer you to a trustee.  If you want to talk to a trustee, talk to one!  You can phone my office in Cambridge at 519-622-3773 and book a free consultation.

Second, I don’t “work” for the creditors.  When you file bankruptcy in Canada I’m appointed by the court to administer your bankruptcy.  I don’t work for the creditors, and technically I don’t work for you either.  I’m the “middle man”, and my job is to make sure all parties follow the rules (both you and the creditors).

If I worked for the creditors would I be stopping garnishments as soon as you file bankruptcy or a consumer proposal?

Obviously not.

It’s a myth that a bankruptcy trustee in Canada works for the creditors.

I discussed this on a recent appearance on 570 News; here’s the video with a complete explanation:

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.

In my last post I discussed how Massive Debt Level Leads Joe Debtor to File Bankruptcy in Cambridge, and I made the point that high debt levels lead to bankruptcy.   But how many people in actually file bankruptcy in Cambridge?  The Office of the Superintendent of Bankruptcy has released the numbers, and here they are:

In 2010, 425 people went bankrupt in Cambridge, and 274 proposals were filed, for a total of 703.  That’s a decline from the 634 personal bankruptcies and 283 consumer proposals that were filed in Cambridge in 2009.  (You can see the numbers for previous years on our Cambridge Bankruptcy Statistics page).

This means that both bankruptcies and proposals decreased in 2010, and overall the personal insolvency rate decreased by 23% in Cambridge in 2010. Here’s the break-down by postal code for 2010:

The Cambridge economy improved in 2010, so fewer people declared bankruptcy.  However, there were still over 700 people just like you that had financial problems caused by job loss, marriage break-up, or other problems, and they filed bankruptcy or a consumer proposal to give them a fresh start.

I look forward to meeting with you to work out a plan to deal with your debts, so call me at (519) 622-3773 or e-mail me to arrange a free initial consultation. There is help available, so give me a call, and let’s get started.

What does the average person who files bankruptcy in Cambridge look like? We all know the stereotypes: A bankrupt person is unemployed and “down and out”, right?

Wrong.

Today we are releasing Joe Debtor, The Face of Bankruptcy, a major study exploring the profile of the typical person who files bankruptcy in Ontario. We call this person “Joe Debtor”, and what did we find he looks like?

Joe Debtor looks like you.

That’s right, Joe Debtor is very similar to the average Canadian. He has a job, and may also own a home. He is very similar to the average person. The only difference between Joe Debtor and the average Canadian is that Joe Debtor has a massive amount of debt.

The average Canadian has about $16,400 worth of consumer credit, which is all debt except for mortgages. “Joe Debtor” has almost $60,000 in consumer credit. With more than three and a half times as much debt, it’s no wonder Joe Debtor gets into financial trouble.

Since co- founding Hoyes, Michalos & Associates Inc. in 1999, I’ve met with hundreds of people in my Cambridge Ontario consumer proposal and bankruptcy office, so I understand what it’s like to live in Cambridge and have debt. How are residents of Cambridge different than the average person who files a consumer proposal or bankruptcy in Ontario?

Cambridge residents are very similar, but they have a slightly lower level of debt.

“Joe Debtor” owes just under $60,000 in consumer credit; the average Cambridge debtor owes $49,500 (not including mortgages).

“Joe Debtor” owes $24,390 in credit cards (as you can see in the infographic); the average Cambridge resident owes $19,368 on credit cards, slightly lower than the provincial average.

For debtors with a house mortgage, the Ontario average is $210,000; in Cambridge the average mortgage balance when filing is $205,200, which is very close to the Ontario average.

So what did we learn from our study? Debt is very dangerous. To find out if you may have a debt problem, ask yourself these questions:

1 Do I have debts, not including my mortgage, of more than $16,000? If yes, you have more debt than the average Canadian. If your debt is close to, or higher than $50,000, you owe more than the average resident of Cambridge that filed a consumer proposal or bankruptcy with me in the last two years. That’s a warning sign.

2 Do I have a pile of unopened mail sitting on my desk or kitchen table right now? Is it un-opened because I know it’s bills I can’t pay? If yes, you probably have a debt problem.

3 Do I take a cash advance from one credit card to make the minimum payment on another credit card? If yes, you are not reducing your debt, and you probably have a debt problem. The average insolvent resident of Cambridge owes almost $20,000 on credit cards. If you owe near that amount, and you are having trouble making your payments, you have a debt problem.

So what’s the solution to a debt problem?

For many people in Cambridge the answer is a consumer proposal. You make one affordable monthly payment, and your unsecured debts are eliminated.

To find out more, call my Cambridge office at (519) 622-3773, or e-mail me, and we can chat on the phone, or arrange a time to meet, and find a solution to your debt problems. The phone call is free, and the initial consultation is free, so call today, 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.

As the co-founder of Hoyes, Michalos & Associates Inc., many people assume either I’m not a real person, or I work out of some office in Toronto, or somewhere far away. That’s not the case. Even though my firm is one of the largest in Canada, I am personally responsible for our Cambridge bankruptcy and proposal office, and I personally meet with every person that files a personal bankruptcy or consumer proposal here in Cambridge. I’ve written about this before (see: Cambridge, yes I actually work here), but just to prove it, let me tell you about our community involvement.

Hoyes Michalos Cambridge Rotary Run Team

For the last ten years we have sponsored the Cambridge Times Rotary Classic, a 2.5 km and 5 km fun run, to raise money in support of KidsAbility. I strongly believe that if you are in the community, you should support your community.

This year we decided to kick it up an notch, and actually enter a team of nine Hoyes Michalos team members from both our Kitchener and Cambridge offices. We all started and finished the 5km run, which was quite an accomplishment for some us, considering the temperature on George Street topped out at 30 degrees in the middle of the run. (That’s me in the yellow shirt).

Walter Gretzky and the Hoyes Michalos Team

After the race we were pleased to receive a trophy for the best team time, and a plaque from official race starter Walter Gretzky. The team award is given to the team with the fastest cumulative time, calculated based on your fastest three runners. Fortunately I have three fast people on the team, so we won. (My time was very slow, so fortunately they didn’t need to rely on me to win).

Doug Hoyes Finishes the Race

But yes, I did finish the race (nine minutes slower than Adam, our fastest runner, but I finished).

That’s a picture of me giving the “thumbs up” sign just before I collapsed at the finish line, gasping for air. So, if you see some guy running slowly around Cambridge, gasping for air, it might be me.

And if your debts are making you gasp for air, and you want help from a local person, feel free to e-mail me, or call our Cambridge office at (519) 622-3773, and let’s get started.

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.

In statistics just released by the Office of the Superintendent of Bankruptcy, 917 residents of Cambridge filed a consumer proposal or personal bankruptcy in 2009. That’s an increase of 33% from 2008, and is the highest number of filings on record. (More information for prior years can be found on our Cambridge Bankruptcy Statistics page).

Why are bankruptcies are up to record levels in Cambridge? There are two reasons:

First, we are in a recession. Unemployment is high, and when you are out of work it’s harder to pay your debts. I meet with many people each week who are actively looking for a job, but jobs are not easy to find at the moment.

Second, residents of Cambridge, and in fact in all of Canada, are carrying record levels of debt. Canadians have household debt of 141% of their personal disposable income, the highest level in history. This means that for every dollar a Canadian earns, they have $1.41 in debt. Two years ago Canadians carried "only" $1.28 in debt for each dollar earned. When debts are high, bankruptcy rates rise.

Interestingly, of those 917 people who filed last year in Cambridge, 634 filed bankruptcy, and 283 filed proposals. In other words 31% of Cambridge residents filed a proposal last year, the highest percentage on record.

A consumer proposal is a deal made with creditors to avoid bankruptcy. Last year in Cambridge my firm, Hoyes, Michalos & Associates, filed more about a third of all consumer proposals filed in Cambridge, making us the largest filer of consumer proposals in the area. In a typical proposal you may pay back about a third of your debt, so if you owe $50,000 on credit cards and loans, you may pay $350 per month for four years, and once the proposal is completed your remaining debts are discharged. It’s a great way to avoid bankruptcy.

So why are more residents of Cambridge filing proposals? Most people don’t want to file bankruptcy, but it is also due to the fact that government of Canada changed the bankruptcy rules on September 18, 2009 when new bankruptcy rules came into force, increasing the cost and length of a bankruptcy for bankrupts with surplus income. The debt limit for eligibility to file a consumer proposal was increased, increasing the attractiveness of a consumer proposal as a debt management option.

In other words, a bankruptcy is now more expensive for some people, making a consumer proposal an even better alternative.

What will happen in 2010? If the economy recovers, the number of bankruptcies filed in Cambridge may fall. However, if the economy recovers, it is likely that interest rates will increase, and if the cost of carrying debt goes up, more bankruptcies may result.

So what’s my advice? Excessive personal debt is a very dangerous, and unless residents of Cambridge take steps to deal with their debt, an increase in interest rates, or having hours cut back at work, will lead to a continued trend of higher personal bankruptcies.

For many people this recession is the first time in their lives they have experienced debt problems, and they don’t know where to turn for advice. They are embarrassed to talk to friends or co-workers. Unfortunately many debtors are now turning to less than reputable debt consultants, who charge a fee and then simply refer the debtor to a bankruptcy trustee. We strongly urge everyone to investigate their advisors before paying anything. Confirm that they are licensed by the federal government, or a provincial agency. At Hoyes, Michalos & Associates we do NOT charge any up-front fees; no reputable trustee charges an up front fee. More information is available in this article on Debt Consultant Scams.

If you are treading water, trying to service your debts, please call my office in Cambridge at (519) 622-3773, or e-mail me, and I will review your situation and help you make a plan to deal with your debts; we will do our best to help you avoid becoming a Cambridge bankruptcy statistic.

Douglas Hoyes, Cambridge Bankruptcy Trustee

One of the keys to financial success is to be skeptical: don’t believe everything you read, hear or see. There is an infomercial on television where the product is only $19.99, but if you call within the next twenty minutes we’ll send you a second one absolutely free, "just pay separate shipping and handling." A free offer sounds like a great deal. But if it’s free, and if they are sending me one of the products already, why do I need to pay "separate" shipping and handling? Can’t they put both of them in the same box? How much is separate shipping and handling? $20? That doesn’t sound like such a great "free" deal.

When watching commercials, or any form of advertising, we need to be skeptical. We need to ask questions. "What is the true cost of that "free" offer?"

When a credit card company sends you a "low introductory rate" offer, be skeptical. Why are they giving you a low introductory rate? Why is it only an introductory rate? Why isn’t it a permanent rate? Obviously the answer is they want to entice you with the low rate, and then once you have signed up they will increase the rate, perhaps to a rate even higher than what you are paying now. That doesn’t seem like such a great deal after all.

What about those ads you see telling you that "we can get rid of your debt without the need to declare bankruptcy in Canada"? How can a debt consultant just get rid of your debt? If all the debt consultant will be doing is calling your creditors and asking for a deal, you can probably do that on your own.

Of course you should be skeptical of everything I say on this website. How do you know if I’m telling you the truth? How do you know if I’m making an offer that is too good to be true? Ultimately, you have to be skeptical, and decide for yourself.

I can tell you that my firm, Hoyes, Michalos & Associates Inc. has provided personal insolvency services to residents of Cambridge since 1999, and a large portion of our work comes from referrals, so we must be doing a good job. We are licensed by the federal government of Canada, and regular government audits ensure that we are following all of the rules.

But don’t take my word for it: do your own research. Ask your friends. Read my previous bankruptcy Cambridge blog posts. Read our list of Frequently Asked Bankruptcy and Proposal Questions. Watch our bankruptcy and proposal videos. Read one of the dozens of articles I have written, or watch clips from me on TV, and listen to interviews I’ve done on the radio. You can even follow me on Twitter for up to the minute information.

There are many other good bankruptcy trustees, credit counsellors, and financial advisors in Cambridge. Do your research on all of them, and then decide who has the expertise to help you deal with your financial problems. Be skeptical. Then, when you are ready, give my office in Cambridge a call at (519) 622-3773, or e-mail me, and we can arrange a no charge initial consultation to review your situation.

And when we meet, ask questions. And be skeptical.

The Office of the Superintendent of Bankruptcy released the latest round of bankruptcy numbers, and they aren’t pretty. Personal bankruptcies are way up. In the Waterloo region, which includes Cambridge, the personal bankruptcy rate was up by 55% in the last three months, as compared to the same period last year. The bad news is that that’s the highest rate of increase in Ontario.

Not surprisingly, the numbers from across Canada are dismal. There was also a massive increase in the personal bankruptcy rate throughout Canada, with bankruptcy filings up about 36% across Canada. Why is the bankruptcy rate increasing faster in Cambridge than in the rest of Canada?

That was a question I was asked today on the Gary Doyle show on 570 News (you can listen to my thoughts here). I said that I believe that other areas of Canada got hit in the recession earlier. For example, in the bankruptcy rate in Windsor was up about 44%, which is very high, but still less than our area, presumably because the automotive industry in Windsor got hit a year ago. In Cambridge, and in Waterloo Region, we have more white collar jobs, and we are closer to Toronto, so we haven’t suffered quite as much. Until now.

As I explained to Gary Doyle, the September numbers spiked upwards due to the new bankruptcy rules that made bankruptcy more expensive for some, so some people rushed to file before the new rules came into force on September 18. The main reason for the higher numbers, of course, is the fact than unemployment is high, and debt levels are high.

What does this mean to you? You are not alone. If you have more debt than you can repay, there is help available. Give my office a call in Cambridge at 519-622-3773 or 310-PLAN, or e-mail us and we will review your options and help you determine a solution. Call us today.