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.

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:

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.

The Office of the Superintendent of Bankruptcy today released statistics for the number of insolvency filings in Canada in for the period ending June 30, 2011. As I often do (in my articles on past Cambridge bankruptcy statistics), I’ve analyzed the statistics for the city of Cambridge, and I present the total number of filings, by postal code, on this postal code map.

Not surprisingly, the largest residential areas also have the largest number of filings.

For the first six months of 2011, residents of Cambridge filed 161 personal bankruptcies, and 150 consumer proposals, for total filings of 311. That compares to 208 bankruptcies and 141 proposals, for a total of 349 filings for the first six months of 2010.

In percentage terms, that’s a decrease of 23% in personal bankruptcies, but an increase of 6% in consumer proposal filings. Overall, that’s a decrease of 11% in total filings.

What does this mean in Cambridge? Two items of note:

First, overall filings are down, which is good news for Cambridge residents. That indicates that the Cambridge economy was somewhat improved in 2011 as compared to 2010.

Second, the fact that bankruptcies are down but consumer proposals are up is also good news. Consumer proposals are filed by people who have an income and want to pay something towards their debts, but just can’t afford to pay the full amount owing. People who are unemployed don’t have the income to file a proposal. So, if consumer proposals are increasing, that’s generally good news for the economy.

If you are interested in statistics for the rest of Canada, you can see these links to bankruptcy Canada statistics, and Canada consumer proposals statistics.

For now, the news for Cambridge is good. Of course, only time will tell if the economy continues to improve, or if we move back into a recession.

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.

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.