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

In my last post I discussed the dangers of paying only the minimum payment on credit card debt.  As promised, below I’ve listed some practical suggestions you can implement to avoid issues with credit card debt:

• Pay credit card balances in full every month to avoid interest charges.
• Make the payment prior to the deadline to avoid additional penalties or interest rate increases.
• One credit card is enough.  No one needs three, four, five credit cards.
• Avoid cash advances since there is no grace period - the interest starts accruing right from the day you obtain the advance.
• Use credit cards for convenience only, not everyday purchases.
• Switch to a lower interest credit card or line of credit and cancel/destroy the higher interest rate card.
• Take the card out of your wallet and stop using it until the balance is paid in full.  
• Try to look at the bigger picture and shed the instant gratification culture in which we live.  Ultimately any debt makes you vulnerable if you get sick, lose your job, separate, or experience other “life events” which is why it’s important to examine the type of items you are putting on a credit card and ask yourself if, in the long run, the purchase is worth risking your financial well being.  Save up for the purchase instead.  
• If you must carry a balance pay at least 3x the minimum payment required and make it your purpose to put every spare dollar on the card to pay it off.

In a perfect world we would all adhere to the above strategies but do you actually know anyone who lives in a perfect world?  Well, certainly you are not alone.  Canadians are at record levels of indebtedness and one in three Canadians are unable to pay their credit card balances in full each month.  Some households are simply overstretched and their credit card debt has become an unmanageable burden.  If you’re struggling with debt you may wish to contact us to discuss some of the options I will be writing about in my next blog that can eliminate credit card debt.

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 Card Debt

If you have ever researched the impact of making only the minimum payment on your credit card, you were probably shocked to learn how long it will take to pay off the balance.  If you haven’t read all the fine print on your credit card statement, let me spell it out in a basic example:

If you owe $1,000 on a credit card that charges 18% interest:

Your Minimum monthly payment =                            $25
Total Interest Charged =                                         15
Amount of your payment applied to Balance $10

Your outstanding balance is now $990.00.  

60% of the $25 payment you made went to interest.

By continuing to make only the minimum payment (which will change every month) it will take almost 13 years to pay off the initial balance and you will have paid over $1100.00 in interest.   Your purchase has cost twice the original price. 

And consider this for added shock value: many department store credit cards charge 28% interest which means, using the above example, it will take more than 55 years to pay off  the debt and you will have paid about 10x more than the original purchase!  That’s like paying $20 for a cup of coffee.  If I told you to set fire to your money you would think I was crazy but in effect that’s what you’re doing every time you make only the minimum payment.

Now that you’ve picked your jaw up off the floor here’s the bottom line:  Credit Card companies are not in business to be your friend.  They are in the business of making money and you’re basically giving them license to take your money if you’re making only the minimum payment.   Since credit cards are the most expensive form of borrowing, the best strategy is to take steps before credit card debt becomes a problem.

In my next blog, I’ll give some practical suggestions you can implement to avoid issues with credit card debt.

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

What Assets Can I Keep in a Personal Bankruptcy?

One of the most common concerns of  someone contemplating personal bankruptcy is whether they will lose their car, their house or other items they may need or have worked hard to obtain.

It may be comforting to know that the Bankruptcy and Insolvency Act permits someone who files for bankruptcy to keep assets that would be exempt from seizure under provincial laws.   If an asset is exempt, it can’t be seized to pay your creditors.  The purpose of these exemptions is to allow you to maintain a reasonable, but frugal, standard of living so you can move forward while you are in bankruptcy.  The exemptions vary from province to province.  

In Ontario, the most common items you will be able to keep are as follows*:

• Household Furniture & Equipment not exceeding a combined value of $11,300
• Personal possessions (clothing, jewellery, etc.)  not exceeding a combined value of $5650
• A motor vehicle, or equity in a motor vehicle,  not exceeding $5650
• Tools of your trade not exceeding a combined value of 11,300
• Cash Surrender value of Life Insurance policies wherein the designated beneficiary is a spouse, child, grandchild or parent.
• Most Pension Plans
• Most Locked-In RRSP’s associated with a life insurance company wherein the designated beneficiary falls within a certain class

In addition to the exemptions allowed by the province of Ontario, the Bankruptcy and Insolvency Act allows you to keep*:

• RRSP’s held with an institution that is not an insurance company with the exception of any contributions made within the last year.  This exemption applies to all provinces only if you are bankrupt.

Although the exemptions are generous, often you may have an asset that does not fall within the exemptions or is worth more than the exemption limits.  In this situation, you will either lose or have to pay for that asset.   Let me give a few examples:

Scenario One - Will I lose my Car if I go Bankrupt?

Three years ago Mr. Smith obtained a loan from the bank to buy a car.  For protection against default, the bank put a lien on the car.   Today, the vehicle is worth $8000 but Mr. Smith still owes $12,000 to the bank.  Since the car is worth less than what is owing, Mr. Smith should be able to keep his car as long as he continues to make the monthly payment to the bank. 

Scenario Two:

Mr. Smith owns a vehicle outright.  It’s worth $8000 but the exemption that is allowed for a motor vehicle in Ontario is only $5650.  The value of his car exceeds the exemption by $2350 (i.e. $8000 - $5650).   In order to keep the vehicle, Mr. Smith will have to pay the $2350 into his bankruptcy, usually by making a monthly payment over the duration of the process of bankruptcy. 

Scenario Three:

Mrs. Smith owns a boat worth $2000.  There are no liens on the boat.  Since a boat does not fall into any category of exemptions, if Mrs. Smith wishes to keep it, she will have to pay the $2000 that it’s worth into her bankruptcy.  If she can’t afford to make the payment or if she has no desire to keep the boat, the trustee will sell it to someone else.

Scenario Four - Will I lose my House if I go Bankrupt?

Mr. Jones has a house worth $250,000 but there is still $260,000 owing on the mortgage(the real estate market in his area has recently declined).  Since his house is worth less than what is owing, Mr. Jones can keep his house as long as he continues to pay the mortgage company.

Scenario Five:

Mr. Jones has a house worth $250,000 but there is still $240,000 owing on the mortgage.  On paper, his house is worth $10,000 more than what is owing.  If Mr. Jones wants to keep his house, he will have to continue to make the mortgage payment to the mortgage company and also pay the equity ($10,000) into his bankruptcy.  The trustee will likely allow for some negotiation on the amount to be paid since if the house was actually sold there would be some selling costs.

The provincial exemptions in Ontario and the examples above clearly debunk the myth that you will “lose everything” if you find yourself facing a bankruptcy.  Please keep in mind; however, that it’s always best to speak to a licensed Trustee in Bankruptcy to get answers about your specific situation.

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

*Please note this is a simplified list of exemptions and is not inclusive. 

Avoid Being Overextended on Credit

I’m not so naive think that the majority of us will go through life without debt.  Nor have I personally been privileged or frugal enough to live debt free.  So assuming one is fortunate enough to avoid a crisis like job loss or health issues, how much can one really afford to borrow?

 The answer to that question will vary depending on whether you’re the lender or the borrower.  Among other tools, lenders use a Total Debt Service Ratio to calculate how much they are willing to lend.  To calculate your ratio, add up how much you pay per month for your rent or mortgage, property taxes, heating costs, loan payments, car loan payments and minimum credit card payments.  The total should be no more than 40% of your gross monthly income.

If a lender turns you down because your debt service ratio is too high then put on the brakes – it’s time to pay down your existing debt before you borrow more money.  Also, keep in mind that the 40% ratio is the maximum guideline and is almost always more than most of us can comfortably manage.  In addition, the Total Debt Service Ratio considers only rent or mortgage, property taxes, heat and minimum monthly debt payments.  We all know that this does not reflect the true reality of our expenses.  If you want to sit and stare at the four walls of your empty, unfurnished new house, or never be able to put gas in your new car, order a pizza, or take a family vacation then maybe the 40% maximum is for you.  If; however, you want to take a different path then you must ask, “Does this fit comfortably into my budget?”

To calculate whether or not borrowing money fits into your budget you must first determine your true cost of living.  Incorporate the cost of your groceries, daycare, gas, car insurance, phone, cable and all of your other regular monthly bills.  Moreover, factor in “irregular expenses”, that is, expenses that happen maybe once a year or once every few months for example:

Medical and dental expenses
Clothing
Sports Programs
Christmas & Birthdays
Back to school items
Car Repairs
Vacations
Vet Bills

Calculating irregular expenses can be complex and it won’t be perfect since life will throw curve balls, but estimating something is better than pretending these expenses don’t exist.  Once you estimate how much your irregular expenses cost in the year, divide that amount by 12 and add it to your regular, ongoing monthly expenses to arrive at your true cost of living.  This will help you more accurately calculate how much debt you can comfortably service.

And speaking of those curve balls, it’s also important to ask yourself:

Is my job stable?
How is my health?
Do we plan on expanding our family?
Will I still be able to save for retirement?
Will I still be able to afford this if interest rates go up?
Will this debt impair my ability to borrow or save for something that is more important to me?

In addition to the above, don’t forget the basics like calculating the true cost of borrowing by considering the interest rate, additional fees and length of time to pay it off.

I’m not trying to be an alarmist by posing these questions.  Financial maturity means making financial decisions with your eyes wide open.  You must consider all the factors to limit your risk and hopefully maintain financial stability.  This exercise may prove to be overwhelming and disheartening because you may discover a need to make changes to your budget or that you have to delay or modify your goal.  Even though it can be scary, consider the alternative.  The alternative is to make the really big financial decisions in life by looking at only half the picture.  The alternative is to let a ratio that can’t possibly factor in human nature or what is important to you and your family calculate how much you can afford!  The financial decision you make in a few minutes can affect the next 5-25 years of your life so isn’t it worth spending some time to do the math?

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

What is Personal Bankruptcy?

Over the years, I have met with many people who are struggling to pay their debts.  Their financial difficulty is usually a result of a combination of factors: Some things beyond their control and maybe some things they could have done better.  Some people may fall at either end of the spectrum but most fall somewhere in the middle.  No matter what the cause, there is usually a common theme.  The people are honest, hardworking individuals who would pay their creditors if they could.  They hang on for as long as possible, sometimes prolonging the inevitable,  hoping life will turn around and give them the opportunity to pay their debts.  If you’re faced with this situation, you may wonder what options are available to regain control.

Bankruptcy is a legal process under the Bankruptcy and Insolvency Act and is one of the many options available to provide you with a fresh start.  The side effects of financial difficulty aren’t minor and filing for bankruptcy is not an easy decision.  It may help to remember that your situation is temporary and that, with help, you can start over.   That’s where a licensed Trustee in Bankruptcy comes in.  A trustee will give advice on all of your options and will make you aware of your rights and responsibilities under the Bankruptcy and Insolvency Act as well as the rights of your creditors.  If Bankruptcy is not an option for you, the trustee will tell you outright, suggest an alternative or refer you to another credible professional.

Who can file a bankruptcy?

You are eligible to file for bankruptcy if you owe at least $1,000.00 and are insolvent, meaning you are unable to pay your debts as they become due and if your property is sold it would not be sufficient to pay your creditors.   One of the objectives of the Bankruptcy and Insolvency Act is to provide you with relief from the burden of your debts, so that means once a bankruptcy is filed, the trustee will notify your creditors and most action and garnishment against you will stop.  The creditors can’t call or collect from you.   Bankruptcy however, will not protect you from the collection of certain debts such as child support, alimony, some student loans, and traffic tickets.

What happens to my stuff?

When you file for bankruptcy you assign your assets to the trustee and cease to be able to deal with your own property.   The trustee must decide if you have any assets that can be sold and the proceeds distributed to your creditors.   This may imply that you lose everything you own but that is simply not true.  There are many assets, such as your basic household goods, most pension plans, tools of trade and a vehicle up to a certain value, for example, that are exempt from seizure by the trustee for your creditors.  These exemptions differ from province to province.  If you have an asset that is not exempt from seizure, you may have the option of purchasing it back from your own bankrupt estate.  You would simply pay the value of the nonexempt asset into your bankruptcy by making a monthly payment and you get to keep it rather than the trustee selling it to someone else.  So it’s not all doom and gloom - even if you have an asset that isn’t exempt, you have the opportunity to keep it as long as you pay for it.  Also, if there is no value to an asset beyond what is owing for it for example, your house, you may continue to pay the mortgage company and remain in your home.   In future posts we will write in greater detail about how assets are handled.


What do I have to do in a Bankruptcy?

During a bankruptcy you are obligated to perform certain duties, including but not limited to: making disclosure of all your assets and liabilities, turning over all credit cards, attending for two counselling sessions, submitting monthly statements of income and expense and usually making a monthly payment out of which your trustee will take a fee and distribute the balance to your creditors.

How long will I be bankrupt?

Typically, if you’ve never been bankrupt before,  the process is either 9 or 21 months depending on your level of income.  If you’ve been bankrupt once before it is either a 24 or 36-month proceeding.  At the end, if no party objects, you are entitled to receive an Automatic Discharge which legally extinguishes your personal liability for the debts incurred prior to your date of bankruptcy and will allow you to once again acquire assets.  As previously stated, some debts, such as child support, alimony or some student loans for example, survive bankruptcy and you will be required to pay those debts.

What do I do Now?

No one ever wants to file for bankruptcy but, for some, it is the last chance to regain financial control and it doesn't need to be an embarrassing prospect or the end of your financial future.  I’m not trying to imply that bankruptcy is a cure-all  but the process is available, under the law, for a reason.  It presents an opportunity to get back on your feet, to make lifestyle changes, to deal with the personal problems, marital issues or misfortunes that may have caused your bankruptcy.  It will allow you to re-establish your credit, obtain assets again and to contribute back into the economy with well functioning finances.  Sometimes you just need to be pointed 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

Take the 30-day Personal Spending Journal Challenge

Most people know how much they spend per month on items like rent, groceries, insurance, gas etc. , but do you know how much you spent last month on coffee? What about take out food?  Or lottery tickets?

We’ve all heard the standard, “if you spend $5 at the coffee shop every day for approximately 20 work days a month,  you will have spent $1200.00 in a year”.    Most of us do the obligatory head shake and for about ten seconds promise ourselves to stop spending the $5.  Usually within two days we are back to our regular daily routine.

Why is it that reading these calculations results in only a temporary change?  I would suggest that most of us need something more repetitive to really drive home the point and change our habits.  One strategy is to keep a daily spending journal for at least 30 days.  Buy a mini steno pad or download a free app and record absolutely every penny you spend.  If you go to the variety store to buy a pack of gum, write it down.  If you buy a coffee or dine out, write it down.  Entertainment, cigarettes, lottery tickets, write it all down.

I can almost see the eyes rolling back in the head, hear the collective groaning and yes, I’ve  heard and personally used some of  the excuses: I have enough to do without adding another item,  I always forget to ask for a receipt, I’m just not good at this kind of stuff, my partner handles the money, I’m stuck in my car all day, You only live once, If I can’t buy my morning coffee I’ll end up seriously harming someone!

I concede that most of us lead busy lives but often the truth is that we are reluctant to examine how we spend our money out of fear.  Fear that we may have to make some tough changes or give up something important to us.   There is an emotional component to spending, after all we are only human and once we put our spending on paper there’s no hiding from how our daily routines and habits might impact our finances and prevent us from realizing a financial goal.

Yet the cliche is true.  Awareness really is half the battle.  One study claims that the simple exercise of keeping track of every penny we spend has the effect of reducing our discretionary expenses by approximately 20% without it really even hurting, without even really trying.   That makes sense to me since when we write our purchases down on paper, the brain processes our spending in a different way.  You may recognize, that you’ve dined out twice this week, do you really need to do it a third time?  You may recognize that you regularly spend money on something out of habit, on something that really isn’t even all that important to you but would never have come to that realization without the exercise of writing it down.   Furthermore, if you’re in a situation where you make enough money to pay your bills but you always seem to come up short,  how would you possibly know where to make changes if you don’t have an accurate idea of how and where you spend your money?

 On the flip side you may come to the realization that you habitually spend money on something you’re not, at this moment, ready to give up.  That is one of the main reasons people are resistant to attempt this challenge.  They think by keeping track of their daily personal spending for 30 days a big neon sign suddenly appears above their head flashing, “Spends too much on X, Y and Z.”  But it’s not all about depriving yourself because that won’t work either.  Let me give you an example, if I decide to lose weight by eating nothing but celery, after about three days I’m going to eat a whole chocolate cake!  It doesn’t have to be an all or nothing scenario.  Many of us get into a rigid pattern of thinking along the lines of, “either I go to the coffee shop every day or I can never, ever go again”.  Let’s get real here.  We all know there are a lot of options between those two extremes.  Maybe you go to the coffee shop every other day, maybe just once a week, maybe instead of the large you buy the small.  For the record, most mornings I make my own coffee and I slurp out of that cup like it was the ichor of life but the times when I buy my coffee I try to be a bit of a drama queen about it.  I relish the aroma, I feel the warmth of the cup in my hands, I savour the flavour!   Sounds extreme, I know, but after all this exercise is about awareness, about waking up your brain to recognize that you actually are having a TREAT.  Buying a coffee or your lunch every day is not an automatic entitlement.  We are so entrenched in our daily routines that our brain has our daily purchase of coffee mixed up with breathing (although some days I would argue my morning coffee ensures others keep breathing).

Ideally each adult in the house should take this challenge and at the end of the thirty days come up with two items they are willing to reduce or eliminate from their personal spending.  In this way you’re being responsible for the contribution you’re making to the common financial goal rather than one partner telling the other “You spend too much money on X “ only to hear in response, “Well what about the money that YOU spend on Y?”  That type of conversation is the Neon Sign and while at times shame can be a motivator, you’re supposed to be on the same team, not playing defence to the “offence”.  Once you commit to the change, find a way to hold yourself accountable such as a weekly meeting with your partner or an automatic withdrawal at the bank from your chequing to your savings account in the amount you are saving from the changes to which you’ve agreed.  Then decide how you’re going to spend the savings.  If you had that $1200.00 in your pocket, at this moment, what would you do with it?


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