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.

A report issued today by the Certified General Accountants Association of Canada called Where Is the Money Now: The State of Canadian Household Debt as Conditions for Economic Recovery Emerge finds that household debt in Canada reached $1.41 trillion in December 2009, or $41,740 on average per Canadian. That personal debt level means that Canadians, including residents of Cambridge, have the most per capita debt of all advanced countries.

I was interviewed today on 570 News, and I made the following comments:

To start, I agree with the findings in the study. I meet with Cambridge residents each week, and there is no doubt we are carrying more debt than ever, and certainly more debt than when I opened our Cambridge Ontario bankruptcy office back in 1999.

I also commented that it’s not just the level of debt that’s a problem. The real problem is the carrying cost of our debt. Here’s what I mean: You might have a $1 million mortgage, but if the interest rate is low, and you have a great job making lots of money, making your mortgage payment may not be a problem. However, if you have a $100,000 mortgage with a high interest rate, and you lose your job, you may have trouble making your mortgage payment. It’s not the size of the debt that matters; it’s whether or not you can carry the debt.

Most of the people I meet with here in Cambridge are worried about two potential risks:

First, they worry about interest rates increasing. Mortgage interest rates, which have been very low for the last few years, are now starting to increase. That can be a huge problem if you have a variable rate mortgage, because if rates go up, your monthly payment increases.

The second worry is income. Ask yourself this question: if I lose my job, or if my hours get cut back at work, could I still make the payments on my credit cards, bank loans, and my mortgage? For the last few months the people I’ve met in Cambridge have told me things are going reasonably well. Toyota employees are back to full shifts, and the construction industry has picked up. But will it last?

Construction workers tell me they are worried about interest rates increasing, which will reduce demand for homes. I’m also hearing that people are worried about the HST that comes into effect on July 1; higher taxes generally are not good for the economy.

I concluded the interview with the following advice:

If you are living paycheque to paycheque, and you worry about losing your job, and you have a lot of debt, the time to take action is now. Start cutting your expenses, and use the extra money to pay down your debt. If that’s not enough to solve your problems, get help. Talk to a credit counsellor (Mosaic Counselling in Cambridge and Kitchener is a not for profit agency that can help with budgeting and debt management plans), or consider filing a consumer proposal or even personal bankruptcy.

Want to find out more? Please call my office in Cambridge at 519-622-3773 or 310-PLAN, and Howard, Gaye, Danielle or I would be pleased to answer your questions over the phone, or book a time when you can meet with me personally to review your options. There are options for dealing with debt, so call or e-mail me today for a fresh start.

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 310-PLAN, 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.

Doug Hoyes, Cambridge Bankruptcy Trustee

I had an interesting meeting with a man this week in my Cambridge office. As with everyone I meet, we talked about his options for dealing with his debts, including a consumer proposal or a personal bankruptcy. In his case, due to his reduced income and some health factors, he decided that filing personal bankruptcy was his best option. At end of our conversation, I asked him why he chose today to make an appointment to meet me; why not last week, or last month?

He said that he had been struggling to pay his debts for a long time, and he finally got to the point where he couldn’t take it any more, and he wanted a fresh start. I told him that I’m not surprised; most people I meet with are "at the end of their rope", and want a fresh start.

But then he said something even more interesting: he said that he had decided he wanted a fresh start, not just dealing with his debts, but in many other aspects of his life as well. He gave me two examples: he wants to quit smoking, and lose some weight.

Earlier in our conversation we had reviewed his budget, and it was obvious that his two-pack-a-day smoking habit was costing him a lot of money. He new it was bad for his health, and his wife had been after him to quite for quite a while, and know that he added up what smoking was costing him every month, he knew that now was the time to quit. He was spending about $400 per month on smokes, so quitting will help his health, and significantly improve his monthly cash flow.

He also said he wanted to lose some weight and start eating better. Less trips to the fast food store will help his budget, and going for a walk every night will help his overall health.

I told him I was proud of him. It’s a difficult decision to decide to make changes, but as he said, "in for a penny, in for a pound." He decided that dealing with his debt while not dealing with smoking or unhealthy eating didn’t make sense. He wants a fresh start, and that’s what he will get.

Don’t misunderstand what I’m saying: I don’t give advice on healthy lifestyles; I’m no expert in that. My job is to help you deal with financial problems. But, I agreed with his approach: if I’m going to fix it, let’s fix everything.

Are you looking for a fresh start? Start by making a budget to see where you are spending money, and you may decide to quit smoking or cut other expenses as well. Either way, once your budget is done, give my office a call in Cambridge at 519-622-3773 or 310-PLAN (no area code required), or e-mail me to set up a no charge initial consultation, and let’s get started.

On Saturday January 17 Ted Michalos and I appeared 570 News to talk about how to deal with credit card debt. Our Cambridge office gets a lot of phone calls after the Christmas season from people with more credit card debt than they can deal with, so I always welcome the opportunity to go on the radio and answer questions about how to deal with credit card debt.

On the show I was asked how to deal with credit cards and other debts. The advice I gave on the show was the same as the advice I give when I met with people privately in my Cambridge office.

First, you must make a list of all of your debts, and prepare a simple monthly budget. By making a list of everything you spend each month, it’s easier to see what expenses can be chopped, which is the first step to getting back on track financially. For many people cutting expenses is enough to free up cash so that they can pay their debts on their own. If you can’t cut enough expenses to increase your cash flow to pay off your debts, the next possible solution is credit counselling.

With credit counselling a not-for-profit credit counsellor creates a debt management plan where you repay all of your debts, at a reduced or zero interest rate.

Of course one option is to file personal bankruptcy. However most people I meet with in Cambridge want to explore all options before considering bankruptcy, so I always mention filing a consumer proposal, which is often the best strategy for dealing with credit card debt. A consumer proposal is a deal, or a settlement, that is negotiated with your creditors. If you have $50,000 in debt, it may be possible to negotiate a settlement where the creditors accept 50 cents on the dollar, or $25,000, over up to a five year period. For example, a proposal of $500 per month for 50 months would be accepted in most cases by the creditors. In some cases it’s possible to get proposals accepted for 30 cents on the dollar, or even lower, depending on your monthly income.

As I said on the show, there are options, so to find out what option is best for you, give us a call at 310-PLAN (310-7526), no area code required, or e-mail me to schedule a free initial consultation.

My advice on the show was the same as the advice I give to Cambridge residents every day: First, reduce your debt, and second, have a plan to deal with your debt.

I talked on the show about consumer proposals and personal bankruptcy. Proposals and bankruptcy are not your only options; you may be able to deal with your problems on your own, or with the help of a credit counsellor. Regardless of the possible solutions, I emphasized on the show that you need a plan NOW. Even if you are already drowning in debt, it is still possible to make a plan to deal with your debts.

Please give my office in Cambridge a call at 519-622-3773, or 310-PLAN, or e-mail me, and together we will explore your options and make a plan to deal with your debts.

Today Ted Michalos and I appeared live for an hour long call in show on 570 News. We discussed a very timely topic: How to Survive the Economic Crisis. I expressed the opinion that the world has changed. Today it’s much harder to lease a car or get a mortgage. Even worse, if you already have debt, you probably are not getting the overtime or bonuses at work you were getting a year or two ago, and that makes it even harder to service your debt.

I gave some tips on How To Reduce Your Debt, and I explained that debt is dangerous in tough economic times. If you get laid off or have your hours cut back at work, Employment Insurance will probably be enough to cover your rent and help you buy groceries, but it won’t be enough to cover payments on credit cards and bank loans. That’s why it’s important to reduce debt now, before your financial situation gets worse.

But what do you do if your situation is already bad? I’ve met with a number of Cambridge residents over the last few weeks who have more debt than they can handle, and don’t know what to do. They don’t qualify for a debt consolidation loan, and they can’t afford credit counselling. That leaves two final options: a consumer proposal or personal bankruptcy.

Which option is right for you? As I told the callers on the radio show, the answer for you depends on your situation: your monthly income and expenses, what you own, and who you owe. Fortunately, we can help. Give our Cambridge office a call at 519-622-3773 or 310-PLAN (that’s 310-7526, no area code required), or e-mail us to arrange for a no-charge initial consultation; we will walk you through your options, and you will then have a plan to deal with your debts, and get a fresh start.

I explained that all trustees are licensed by the federal government, so we are all required to follow the same rules. However, if you visit us in Cambridge, you will meet with two people: Howard Hayes, who manages our Cambridge office, and me, Douglas Hoyes, the trustee responsible for our Cambridge office (and the founder of Hoyes, Michalos & Associates Inc., the largest firm in Canada dealing exclusively with personal insolvency; we don’t do bankruptcies for corporations, or audits or tax work like the national accounting firms).

In other words, the difference is our people. You meet with senior, experienced people, not administrative clerks.

This man was pleased that Howard and I took the time to listen to him so we could understand his situation, and he was happy that we didn’t just talk about personal bankruptcy in Cambridge. We covered all of his options, including debt consolidation, credit counselling, and consumer proposals. With all of this information, it was easy for him to make a decision.

Whether you need a first or second opinion, please call our Cambridge office at 519-622-3773 or 310-PLAN, or e-mail us, and let’s get started on a plan to help you deal with your debts.

The worst problem I’m seeing these days is a decline in confidence. People are worried about losing their jobs, and not being able to provide for their families. In these uncertain times, my number one rule is simple:

Get out of debt.

If you can reduce or eliminate your debt, you have the flexibility to survive this economic crisis. I’ve summarized it in our article on the Five Tips to Survive the Economic Crisis.

If you can’t deal with your debt on your own, a consumer proposal or a personal bankruptcy may be necessary to eliminate your debt permanently. To learn more, call our Cambridge office at 519-622-3773 or 310-PLAN, or e-mail me, and let’s work out a plan to eliminate your debt and help you and your family survive this recession.

Ten years ago they bought a house. Like many newly married couples they used their credit cards to furnish the house, and to buy things for their growing family. Five years ago they owed $30,000 on their credit cards.

Fortunately for them, their house had increased in value, so they were able to refinance their mortgage, borrow an additional $30,000, and pay off their credit cards.

Unfortunately they continued to spend more than they were earning, and ended up with more credit card debt. Fortunately for them, two years ago their house had continued to increase in value, and they were able to refinance once again, and pay off their credit cards.

They were using their house as though it was an ATM machine, dispensing cash when they needed.

When I first met with them a few months ago, they were somewhat depressed. Over the last year their hours at work were cut back, and they were again using credit cards to survive. They approached their bank, again, and were shocked to learn that they could not borrow any more money against their house. Over the last few months their house had actually declined in value, and with their reduced incomes the bank would not lend them any more money.

What could they do? I suggested a number of options.

First, they could sell their house and rent. Their was still a small amount of equity in their house, and they could use that money to pay down some of their debt. They decided that it was best for their family to remain in their neighbourhood, and renting would cost almost as much as owning, and selling the house would not generate enough money to repay all of their debts, so they decided against selling.

Since we already knew they could not refinance, and since they did not want to go bankrupt, we decided that a consumer proposal was the correct option.

We worked out a budget so that we knew what they could afford to pay each month. We ended up filing a consumer proposal where they will be paying $400 per month for the next five years (although they can pay it off faster with no penalties if they want to). In total they will be paying $24,000, even though their total debts (not including the mortgage) were almost $50,000.

Their creditors are happy, because they know that in a bankruptcy they would only get about $10,000 from the house, and this couple is happy because they know they can afford one monthly payment of $400, and they can keep their house.

I am seeing an increasing number of people in Cambridge who have used the equity in their house to help with their debts in the past; as that becomes more difficult, a consumer proposal may be the answer. If you think a consumer proposal may work for you, please call my office in Cambridge at 519-622-3773, or e-mail me to set up a free initial consultation, and I’ll help you work out a solution that’s right for you.