New Year’s Debt Resolution  

January is the time most of us consider implementing changes in our lives.  The resolutions are usually along the lines of :

“I will eat healthier and get more exercise.”
“I will quit smoking.”
“I will give up coffee” - (Ha - um NEVER!)
“I will go visit _______________ more often.”
“I will get my finances in order.”

I’ve had one or two of these on my list at some point in my life.  Yet, I once recall reading a Globe and Mail article that suggested most of us will have broken our New Year’s resolution within three weeks.   This news is discouraging to say the least.  I found myself reflecting on why our resolutions are doomed to fail.  Why is it that our intentions are good but the motivation then fizzles out?

Possible reasons floating around in my (cynical) head included:

We are creatures of habit and humans can’t change.
We are lazy and have no willpower.
We are slaves to instant gratification.

Upon deeper reflection, and maybe some would suggest I am simply trying to find a more palatable excuse, I think the explanation is twofold:  Firstly, most of us set expectations that are simply impossible to achieve.  Secondly, we have no plan in place to achieve our goal.

Take finances -   If  your resolution is to “be out of debt by the end of the year” yet you owe $90,000, make $30,000.00 a year and have no assets,  you are clearly setting yourself up to fail.

It’s always best to take a step by step approach to achieving your goal. The first step is to educate yourself about your finances.  How much do you make?  How much do you owe and to whom?  What kind of interest rates are you paying?  What are your assets worth?  How exactly do you spend your money?

So now what?  What’s step two?  Sometimes the answer is obvious but sometimes you may find that you just can’t find a solution.  Rather than spinning your wheels and beating yourself up, it may be best to talk to your banker, a credit counsellor or a Trustee who can advise you of your options and help you with a plan that is realistic and attainable.  Otherwise, you may just end up making the same resolution next January.


By:  Brenda D.  Owens, Trustee in Bankruptcy

Brenda works for James R. Yanch, Trustee in Bankruptcy
215 Simcoe St. N.
Oshawa, Ontario
L1G 4T1
905-721-7506
www.jamesryanch.com

Credit After Bankruptcy

One common misconception about bankruptcy is that you will be unable to get credit for 6-7 years. The fact is, you do not have to wait 6-7 years before you can get credit again. The 6-7 years is simply referring to the length of time the information relating to your bankruptcy will stay on your credit report. Most people are able to re-establish credit within a year or two after they have finished their bankruptcy.

Here are some tips for re-establishing your credit after bankruptcy:

1. First and foremost you must have a sufficient and stable source of income. If you are having trouble paying for the basics then put off applying for credit until your income improves and your finances are healthier.
2. Talk to an advisor at your banking institution and explain you have been through a bankruptcy and that you have been discharged. Ask for advice on what their institution would like to see in order for them to be willing to loan money to you.
3. Save. Your bank will see that you have the discipline to consistently set money aside. Secondly, you can invest your savings in a GIC to use as a form of collateral. Then, you can apply for a small loan or secured credit card. Your bank may be more willing to loan money to you if you can provide an asset as security.
4. Apply for a secured credit card. It’s important not to confuse a secured credit card with a pre-paid credit card. Do your research to ensure that the card you are applying for actually reports to the credit bureaus, otherwise it will not help you re-establish your credit rating. Credit cards are usually the most expensive form of debt so use the card but pay the balance in full and on time. One credit card with a low limit is enough. Having 3, 4, or 5 credit cards - even if they have a zero balance, will impact your ability to borrow for things like a car or a house in the future.
5. Make all payments on time - your rent, your cell phone, utilities, car loan, .... everything!
6. Do not overdraw your bank account or write cheques that go NSF.

Just like when you first started your credit life, it will take a little pre-planning, time and saving for you to get credit again but it IS possible.


By:  Brenda D.  Owens, Trustee in Bankruptcy

Brenda works for James R. Yanch, Trustee in Bankruptcy
215 Simcoe St. N.
Oshawa, Ontario
L1G 4T1
905-721-7506
www.jamesryanch.com

How to File a Bankruptcy In Ontario

In Canada, a consumer proposal or bankruptcy can be filed only through a licensed trustee in bankruptcy.   The first step is to meet with a trustee in bankruptcy  for an assessment of your financial situation.  It’s helpful to the trustee if you come prepared with the details of who you owe and how much as well as  the details of your assets and your current family income.  Based on your individual situation, the trustee will explain the options that are available to you to resolve your financial difficulty.  He or she will explain the merits and consequences of each option available and discuss your responsibilities.  If you choose to file a bankruptcy, the trustee will prepare legal documents for signature, file them with the Superintendent of Bankruptcy and notify your creditors.  Once you are bankrupt most action against you by your creditors stop.  You will; however, continue to pay certain debts like child support or your mortgage and car loans if you want to continue to keep those assets.

If you have never been bankrupt before and you comply with your duties, your bankruptcy will typically last for 9 or 21 months depending on your income.   If you have been bankrupt once before it is a 24 or 36 month process.   Once your bankruptcy is over you are officially discharged from your debt and free to acquire new assets and re-establish your credit without restriction.

Jim and I understand that often the first step - coming in for an assessment - is the hardest, but once you know your options you can make an informed decision about how to regain control over your finances.  If you would like to meet with us for a free consultation please call us at 905-721-7506 or visit our website at www.jamesryanch.com.

By:  Brenda D.  Owens, Trustee in Bankruptcy


Brenda works for James R. Yanch, Trustee in Bankruptcy
215 Simcoe St. N.
Oshawa, Ontario
L1G 4T1
905-721-7506

You're Not a Dentist  - Advice for the Self Employed

I don’t do my own dental work for a reason.  Actually there are several reasons but first and foremost it’s because I don’t know how.  I am not ashamed to admit that I can’t be my own dentist and I happily pay a professional to take care of my teeth because I know it will save me from future problems.  As the saying goes, an ounce of prevention is worth a pound of cure.  This analogy can be applied to the self employed and is especially true when it comes to bookkeeping and taxes.  For financial reasons, many starting their own business attempt to do their own bookkeeping and taxes without the assistance of a professional.  In effect, they are attempting to do their own dental work without the proper knowledge or experience.

The best outcome of this strategy is you will learn as you go and muddle your way through no worse for wear except perhaps the loss of your time.  The worst outcome is financial ruin.  The most likely outcome is somewhere in between.  Depending on your skills and type of business, you may need only a few pointers from an accountant or bookkeeper and a couple of  meetings per year for tax filings and reviews.  Others may need more frequent assistance.  No matter what your ability, without seeking professional advice at startup and having occasional check ups, a self employed individual may run into problems such as:

• Non-compliance with government requirements for income tax, employee source deductions, HST, WSIB etc.
• Paying higher taxes than necessary because you’re unaware of allowable deductions or tax strategies.
• Improper record keeping to support deductions.
• Inability to distinguish business and personal accounts and expenses.
• Under or overestimating capital required.
• Delays in implementing strategies to cut costs which will improve the business.
• Incurring personal liability because of the structure of the business
• Failure to keep up to date with changes to taxes and business practice.
• Incorrect pricing of products or services.

The above issues can lead to serious financial problems and in the end cost you more money than you would have spent for an accountant or bookkeeper.  When someone else is using their expertise to help you with your paperwork, tax planning and business structure, you can focus your expertise on keeping your customers happy, generating new business and making money to support your family.  So instead of wondering if you can afford to hire an accountant or bookkeeper you may want to ask, “Can I really afford not to?”

By:  Brenda D.  Owens, Trustee in Bankruptcy

Brenda works for James R. Yanch, Trustee in Bankruptcy
215 Simcoe St. N.
Oshawa, Ontario
L1G 4T1
905-721-7506
www.jamesryanch.com

Are Student Loans Discharged by a Proposal or Bankruptcy?

If you ceased to be a full or part time student seven or more years ago then your student loans will be “released” by your discharge from a proposal or bankruptcy.

If you ceased to be a full or part time student less than seven years ago, then your student loans will not be released by a proposal or bankruptcy.  While you are going through your proposal or bankruptcy; however, you are not required to make payment to your student loans (be aware that interest may still accrue).  This reprieve, coupled with relief from the burden of your other debts like credit cards, will often put you in a position to tackle your student loans once the proposal or bankruptcy is finished and your finances are healthier.

Also, if your student loans survive your bankruptcy or proposal and you are still experiencing financial difficulty, you can apply to the bankruptcy court for an order declaring your student loans discharged.  This can be done if you have ceased to be a full or part time student for five or more years.  Usually you would hire a lawyer to assist you in this process since you must satisfy the court that you have acted in good faith and also that you have and will continue to experience financial difficulty.

If you would like to know more about how student loans are affected in a proposal or bankruptcy please do not hesitate to contact us.


By:  Brenda D.  Owens, Trustee in Bankruptcy

Brenda works for James R. Yanch, Trustee in Bankruptcy
215 Simcoe St. N.
Oshawa, Ontario
L1G 4T1
905-721-7506
www.jamesryanch.com

Warnings Signs of Financial Difficulty

Chances are if you’re reading this you already know that on some level your debt has become unmanageable.  Some of the more common warning signs that you are in financial danger are:

• Making only the minimum payment due each month.
• Using one credit card to pay for another
• Using cards for basic necessities
• Using credit cards to get cash advances.
• Always being in overdraft
• Unaware of how much you owe
• You are late making your payments
• Maxed out or over your limit
• Creditors are calling you for payment or threatening to sue.
• Your wages are being garnished.
• You are falling behind on basic necessities like rent and utilities
• Getting advances on your pay cheques
• Inability to save
• Your finances are affecting your marriage and health.

Many people can identify with these symptoms but are reluctant to seek help because they are embarrassed or they’re hoping things will turn around.  Sometimes just a change to how your debt is structured is enough to get your finances in order.  At other times you may need a fresh start so you can focus your resources and energy elsewhere.

If you’re wondering what you can do, my best advice is to not compound the problem by ignoring it or seeking advice from someone who is not a professional.   A consumer proposal or assignment in bankruptcy can be filed only by a licensed Trustee in Bankruptcy, so it’s important to exercise good judgement when choosing someone to talk to about remedies to financial problems.  Jim or I would be happy to help you by offering a free consultation to discuss your options.

By:  Brenda D.  Owens, Trustee in Bankruptcy


Brenda works for James R. Yanch, Trustee in Bankruptcy
215 Simcoe St. N.
Oshawa, Ontario
L1G 4T1
905-721-7506
www.jamesryanch.com

In my last two posts I’ve discussed the impact of making only the minimum payment on your credit cards and provided some suggestions to avoid issues with credit card debt before they start .  Sometimes; however, families are simply unable to manage the financial burden and may have to consider other options to find relief.  Some of these options may include:

1.  Review your budget.  Increase income, decrease expenses or do a combination of these two things.  Use the extra money to pay off your debt.

2.  Consolidation Loan.  This is achieved by obtaining a loan from a financial institution and using the funds to pay off your credit card debts.  Be sure to cancel your credit cards.  Now you have one payment, just to the bank, usually at a much lower interest rate than you were being charged on the credit cards.  This option requires that you have a good credit rating, secure employment and sufficient income.

3.  Informal Negotiation/Debt Settlement.  This option involves some form of compromise with your creditors.  The creditor may agree to reduce the interest rate, lower monthly payments or accept a  lump sum payment that is less than the full balance owing so they reduce the risk of you not paying in the future.   This type of agreement is not legally binding.  Also, be aware of debt settlement companies that charge up front fees and do not contact your creditors until you have saved up money for a settlement.  Often this takes months all the while your creditors can still call you and garnishee your wages.

4.  Credit Counselling.  This non profit agency can help you review your budget and make changes to help you pay down your debt.  They offer debt management programs where they will work with your creditors to lower interest rates and lower monthly payments.  With this option you need to have a meaningful amount of money left in your budget to offer your creditors after paying your basic necessities.  It is important to choose a credit counselling agency that is accredited by the Canadian Association of Credit Counselling Services.  A debt repayment program is not legally binding.

5.  Consumer Proposal.  If you can afford to repay a portion of what is owing to your creditors but you need more time and you need the creditors to stop adding interest this may be a good option.  Usually in a proposal you offer somewhere between 30-50% of what is owing to your unsecured creditors to satisfy the debt.  You can offer the amount in a lump sum or spread the payments out over a maximum period of five years.  The unsecured creditors vote on the terms you offer and if the majority of your creditors vote to accept the proposal it is legally binding on all parties.  With a proposal, you must have a meaningful amount of money left per month after paying your basic necessities to offer to your creditors.  You also need to be confident you can maintain the payment for the duration to which you agreed since a proposal will be deemed annulled if you miss too many payments.  Only a licensed Trustee in Bankruptcy can help you file a Consumer Proposal.

6.  Bankruptcy is a process in which you assign your assets to the trustee for the benefit of your creditors.  There are certain assets that are exempt and you are entitled to keep.  For someone who has never been bankrupt before, the process is essentially a nine or twenty-one month process which is generally shorter than a consumer proposal.  During the time you are in bankruptcy, you make a monthly payment that is usually based on your level of income.  For this reason, bankruptcy is a good option if you have insufficient or unstable income.  Unlike a proposal, the creditors do not vote on whether or not to accept your bankruptcy.  Only a licensed Trustee in Bankruptcy can help you file for bankruptcy.

If you’re not sure which option is best for you, contact us and a licensed Trustee in Bankruptcy will assist you in finding the right solution.  The trustee is required, by law, to discuss all of the options that may be relevant according to your particular situation.  If an option isn’t right for you the trustee will tell you outright and point you in the right direction.

By:  Brenda D.  Owens, Trustee in Bankruptcy


Brenda works for James R. Yanch, Trustee in Bankruptcy
215 Simcoe St. N.
Oshawa, Ontario
L1G 4T1
905-721-7506
www.jamesryanch.com