Posted On: June 23, 2014

For more than 20 years, Bill had run a successful Toronto tree care business, doing tree removals, pruning, planting and much more. His finances fell into the rhythm of the growing season. In the spring, the work would flood in and then taper off into the summer and fall.

In the winter, during his downtime, Bill would use credit cards to finance advertising, equipment purchases, insurance payments and personal expenses. He would depend on the work coming in the following spring to pay things off and get him ahead in the game.

The system  worked until a few years ago, when a perfect storm of bad luck gave his credit heart rot. First the nature of the business had changed, with the Internet killing off traditional advertising channels and flooding the market with cut-rate competition, often under-insured and without much real experience, but still appealing to the price-conscious consumer.

Then there was the economy that had taken a plunge, limiting people’s budgets for yard care. “If they only have $3,000 and have a choice between getting tree work done or going on a vacation, what do you think they are going to choose?” says Bill.

But the leaf that broke the branch was the four trips on credit that he took to Costa Rica, arranging to bring his new wife back to Canada. “I thought that I’d make up the money with the spring boom,” he says, “except that that year it didn’t come.”

Bill found himself with a maxed out line of credit and three credit cards owing about $12,000 apiece. He was finally unable to make payments that were high as $5,000 a month. “I felt real shame,” he recalls. “Once I had walked around with a thousand bucks in my pocket and now I didn’t have enough money to buy food for my wife and baby. That’s really scary.”

A friend suggested he go to Richard Killen & Associates, to get a free consultation so he could understand his options to deal with the crisis. “When I went in to see Richard [Killen], I felt horrible,” he says. “But by the time, I left I felt excellent. It was the best day I had in a long time.”

A large part of the Licensed Insolvency Trustee’s job was to give Bill a reality check. Still deep “in denial,” he hoped that he could find someone to give him a loan to buy his way out of the crisis. Killen pointed out that throwing more money into the pit would not solve his financial problem and would in fact make his position worse.

When people see a trustee they learn that they have options other than to simply go bankrupt. One of the most important things the trustee should do is carefully explain the consequences of the various options available. In Bill’s case;, after fully digesting what Killen explained to him, he determined that the best course of action was bankruptcy.

Bill’s main concern was that he needed to keep his business going, because like everyone else he still had to earn a living for himself and his family. As Richard explained, a bankruptcy would not deprive Bill of that right. Even in complying with the legal requirements of the bankruptcy, Bill was able to keep all his equipment, including his tree truck, and chipper – the mainstays of his business.

It came as a big surprise to Bill to find out that a bankruptcy generally allows a self employed person to retain his ability to make a living. Most people believe or have heard that if they go bankrupt they lose everything. That’s just not the case.

Today discharged from his bankruptcy, Bill is more careful about how he uses credit for his business. He tries to pay as he goes with a debit card. He and his wife have a secured credit card with a $2,000 limit, ensuring any credit used is covered by what they have in the bank. “I pay off my balance right way,” he says.

As far as his seasonal business, last winter’s ice storm has proven to be a real boon, providing all the tree debris removal business he can handle in the spring. Still, Bill is acutely aware of how quickly his fortunes can change in this line of work, like a healthy maple suddenly brought down by blight.

Asked about what he could do to protect himself from such vagaries, he smiles and says, “We could always move back to Costa Rica. Money goes a lot further there.”

Posted On: June 22, 2014

The Gail Vaz Oxlade budget calculator can be used to calculate the true cost of debt. Many people do not have a clear idea of what their debt really costs them, whether it is a credit card balance or a student loan.

Financial writer Gail Vaz-Oxlade points out in “How Much is Your Debt Costing You?” that if someone buys a $2,000 TV on credit, with an 18% interest rate, the minimum monthly payment would be about $40. Of that payment, only about $10 would go to the principle and rest would cover the interest. So if you just made minimum payments, the $2,000 TV would cost you $7,000 and would take 30 years to pay off.

To tally up the true costs of your debts, the sites for many financial institutions and credit-counselling agencies have calculators available for free use. All you need to do is to punch in your numbers and weep.

Credit Counselling Canada,  the national association of non-profit credit counselling and government agencies, offers links to a variety of calculators. They include ones designed to help you to get a clear picture of your debt situation,  change your spending patterns for your home budget,  determine repayment strategies for your loans and lines of credit, track your weekly expenses and show you how to reach your savings goal. Its SMART (Specific, Measurable, Attainable, Relevant, Time-Bound) Worksheet can aid you in setting financial goals and putting them in action.

Most banks offer calculators to help you figure the cost of loans before you sign on the dotted line. Typical is TD Canada Trust’s Debt Repayment Calculator. Select your type of debt, the amount of the loan and interest rate, and then you’ll get back the numbers for how much you’ll pay in total, over what period of time. If the numbers for your debts become oppressive, TD also offers a Debt Consolidation Loan Calculator, showing how you can ease your situation by consolidating all your debts into a single loan, with one monthly payment that is probably lower than what you are paying overall now.

Students about to enter university or college, and their parents, should point their browsers to the Government of Canada’s CanLearn Loan Repayment Estimator. Enter your settings and it will help you estimate the monthly payments you’ll need to make to repay your Canada Student Loan or other government student loans. Simply enter the total amount of your loan(s), select the interest rate and grace period options, and decide on the number of monthly payments that you would like to make.  You can also compare repayment options. The trick is to pay off the student loan before you hit retirement age.

Just dial 1-888-545-5365 and we can start talking about how you can improve your financial situation.

If you are in debt and have questions about the Gail Vaz Oxlade budget calculator, we would be happy to help you find a proper solution to your problem.

Posted On: June 20, 2014

Hi. I’m Richard Killen, from Richard Killen & Associates. When you fall behind in your debt payments and creditors and agencies start calling, simply answering the phone can be an ordeal, especially if it’s never happened to you before.

As a Licensed Insolvency Trustee, I see people in this kind of situation every day. The good news is that we at Richard Killen can actually help you with this problem.

The Bankruptcy & Insolvency Act immediately puts a stop to collection calls, lawsuits, even garnishees, and you don’t even have to go bankrupt. But only a trustee like Richard Killen & Associates can provide this for you.

So call Richard Killen & Associates today for a free, no commitment consultation at our office nearest you. We have offices across the GTA. Call 888-545-5365. Or visit us online at killen.ca. It may be the most stress-relieving call you ever make.

Posted On: June 18, 2014

“I thought the process was going to be hideous, humiliating and shameful,” Karen recalls of her bankruptcy more than a decade ago. “I was terrified when I went to see Richard Killen. I was in tears as I walked into his office.”

Karen’s story of battling debt is a familiar one. She had decided to make a brave midlife career change from working as a bartender. Finding employment in a Toronto health food store, she made the decision to go back to school to get certified as holistic nutritionist.

In classes for two years and working for close to minimum wage, she had to get student loans to make ends meet. And when this money fell short, she dipped into a line of credit.

“I found myself in about $30,000 of debt,” says Karen. “Things had gotten out of hand. I was scared and didn’t know what to do. But I talked to a friend who had gone through a similar crisis and he suggested I go to see Richard at Richard Killen & Associates.”

Karen was quickly reassured in her first meeting with Richard. “I sat down in the chair and he just made me laugh – in a nice way. He was just very kind to me. He assured me that this kind of thing happens to people and it doesn’t mean that they are bad or that they have to go through a humiliating experience.”

Killen points out that making mistakes simply qualifies all of us for membership in the human race. “We all make mistakes – every day,” he says from his Toronto office. “It’s what we do about them that defines who we are. This is something we forget when we are swamped by the problems.”

Killen then outlined her options, helping Karen to realize that not only could she survive but successfully manage the bankruptcy process. Most importantly, he made her realize that the choices were hers – nobody else’s. “He never left me hanging. If I called he was always available,” she says. “I always knew how I was doing during the nine months of the bankruptcy process.”

Karen was fortunate to able clear away her student loans along with her other debts when she received her bankruptcy discharge. “Student loans are different from regular debts such as credit cards,” explains Killen. “They are not given for normal profit-making reasons. They are meant to help us improve our future life by improving our education, so it’s understandable that they should be given special status under the law. A person has to make a reasonable effort to pay them back. However, sometimes no matter how hard a person tries they just can’t do it. If after seven years a person still can’t pay then the student loans qualify to be treated like any commercial debt. This is what happened with Karen”

Within a year of going bankrupt, Karen hit her new career path with full force. She managed a series of health food stores, worked in an holistic apothecary and had clients on the side for her holistic nutrition counselling.

A couple of years ago, she decided to make another major life change – less a career shift than giving herself space to understand and act upon her priorities, truly achieving that elusive work-life balance. She returned to the support network of friends and family in small-town Nova Scotia. And while she considers her next move, she is doing part-time work and volunteering in the kitchen of a Buddhist centre, practising meditation and finding a measure of serenity in the combination.

“The great thing is,” says Karen, “if I hadn’t gone through the bankruptcy process I wouldn’t be where I am today. It’s given me the space to get on with my life. As hard and distasteful it was to contemplate beforehand, it turned out to be one of the best things I could have done.”

Posted On: June 16, 2014

One of the options in dealing with a debt crisis is an informal arrangement. This is essentially reorganizing the debts that you have with the creditors you owe the money to.

We’re not talking here about a consolidation loan. That’s different because you end up with only one creditor if can consolidate your debts. An informal arrangement involves renegotiating the debts you have with the creditors themselves. You still end up with the same creditors, but your payment obligations have been reduced. For instance, you could extend a term on a loan or change a credit card debt into a loan.

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No one wants to go bankrupt. It is the last resort when faced with insurmountable financial problems. But even if your payments are in arrears and you are getting collection calls, there are other options besides a bankruptcy, which we at Richard Killen & Associates are glad to explain. These include:

Getting a Consolidation Loan
If you can qualify for a consolidation loan, you can bundle all your debts into a single package and make a  monthly payment that will probably be lower than what you are faced with right now with all the individual payments. You can usually reduce interest and stretch out your repayment period. The trick is qualifying for the loan if your credit rating has taken a beating because of your financial difficulties. To get approved, you may need collateral, or a co-signor or guarantor – not always easy to find.

Making an Informal Arrangement

You can, perhaps, negotiate with creditors to reduce monthly payments. Or you might be able to get them to accept less than the full amount owed, if you have a lump sum payment you can make. In either case, you should use the services of a licensed trustee, lawyer, accountant or reputable credit counselling agency to do this, and beware of the many unscrupulous sorts out there poised to take advantage of your situation. Other pitfalls of this method include: the high degree of difficulty in conducting negotiations; creditors who can still sue you; no protection from garnishees; it doesn’t stop interest accumulation; and it needs to be accepted by all creditors before it can be effective.

Offering a Consumer Proposal
A consumer proposal is a legally binding agreement between you and your unsecured creditors to settle all your unsecured debts. It is filed with the government and managed by a licensed trustee, such as Richard Killen & Associates, under the supervision of the court. You will probably wind up paying back only a portion of what you owe – for instance 10, 20, or 30 per cent – and so get the debt relief you need without going bankrupt.

How this differ from the  two options above? The three main advantages are:

1. You don’t have to negotiate with each creditor separately.
2. You only need a simple majority of the debts to be in favour, not all of them, to get it accepted.
3. The creditors have to listen  to you. If they ignore your offer they will be stuck with it, so you will have their attention.

In other words, you will be negotiating a settlement of all you unsecured debts from a position of more-or-less equality with your creditors. We usually don’t think of ourselves as being in that position with the banks and credit card companies, do we?

A proposal also stops all interest charges, halts lawsuits and garnishees, and does not require direct individual negotiations (the trustee handles this for you).

Everyone’s situation is different. To decide what is the best method of dealing with your debt problems, you need expert advice. At Richard Killen & Associates we offer a free assessment consultation, so you will have a clear picture of what your options are.

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Debt collectors can be, uh, zealous in their pursuit of money owed. Stories of daily phone calls, threats, bothering friends and relatives, and late-night contacts abound. In some cases debt collectors have aggressively pursued ridiculously small amounts of money, and even gone after people who owe nothing at all.

The point is, there are limits to what these agencies can do to collect cash. In Ontario, the Collections Agencies Act lays out the boundaries that, when crossed, constitute illegal harassment.

For example, a debt collector can’t make any calls to a debtor until six days after mailing written notice with the name of the creditor, balance owing on the debt and the identity of the collection agency.

They are also not allowed to make calls on statutory holidays, on Sundays, except between the hours of 1 and 5 p.m., or on any other day of the week between the hours of 9 p.m. and 7 a.m. And they cannot contact the person more than three times in a seven-day period.

If a debt collector does get you on the phone, they cannot threaten you, swear at you, lie to you or harass you. They cannot seize your assets until they have won a court judgment. They can only contact your employer to get your employment information, unless your employer has guaranteed your debt or the call is about a legal action, such as garnisheeing your wages.

And they can only contact your family, friends, neighbours and acquaintances once to get your address and phone number, unless these people have guaranteed your loan or you have given permission for them to be contacted (in a contract, most likely).

Read more about your rights dealing with collection agencies here.  While it’s generally better to speak to a collection agency, rather than avoid them, to deal with the problem, you don’t have to talk to them if you don’t want to.

If they do harass you or threaten you or try to intimidate you in some way, they may be breaking law. You have the right to report them to the police or phone company, or file a complaint to the Ministry of Consumer Affairs.

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When facing financial desolation, it’s hard to think straight, you are so gripped by worry. Bankruptcy plays into many people’s doomsday scenarios, imagining that it will be the end of them financially and personally, as family relationships are ripped apart under the strain.

The truth is, bankruptcy and consumer proposals are about getting control back over your life and feeling relief as you take steps towards recovery. As soon as bankruptcy is filed, the calls from creditors begin to stop and an immediate stay of proceedings means that none of your assets can be seized, other than those signed over in security in case of default.

The immediate emotional and financial relief can relieve the enormous burden on a family and actually repair the relationships of frazzled spouses.

Here are five myths that many people hold about the bankruptcy process:

1. Everyone is going to know that I am a deadbeat.
Though bankruptcy is a public proceeding it isn’t publicized. So even though there are sections in the newspaper devoted to bankruptcy notices aimed at alerting creditors, these only involve large or corporate bankruptcies. The only way your neighbours and friends would know that you are going bankrupt is if you tell them or  they decide to go to Office of the Superintendent of Bankruptcy’s website, register as a user and pay an $8 search fee to find you.  The chances of this happening are small to none at all.

2. I will never get credit again
Again, not true. A first-time bankruptcy is usually a nine month process. When the process is finished, you are free of previous debt and financial obligations, there are many companies eager to lend you money again. Some people can even get a loan or secured credit card while they are bankrupt. If you are like most people, you can start rebuilding your credit rating right away by getting, for example, that secured credit card. You may qualify for a mortgage or car loan in a few years. Here are five ways you can rebuild your credit.

3. I will lose everything I own.
Contrary to popular belief, you don’t lose all your assets when you go bankrupt. There may be some things you will have to give up, especially if you have a lot of assets, but you will probably get to keep your furniture and personal effects, your car and your business tools.  You may not even lose your house. While a secured creditor has the right to repossess the security you gave them if you default on your contract, they can’t do this merely because you’ve gone bankrupt, as long as you have managed to keep up your payments. Another thing, if you are worried about being able to renew a mortgage don’t be. These things are usually done almost automatically and even if you are still in the bankruptcy when the renewal time comes people do not usually have a problem, especially with the banks.

4. I’ll take my spouse down with me.
Your spouse and their property should not be affected by your bankruptcy. Each person is responsible for their own debts. So if your spouse hasn’t co-signed a loan or guaranteed your debt, then they won’t be directly affected and their credit rating won’t be damaged. There may be indirect consequences, however. For example, your spouse may not qualify for a loan in future if your bankruptcy prevents you from being able to co-sign for it. But nowadays this is very, very rare. You can read more about the impact of bankruptcy on spouses here.

5. Bankruptcy will eliminate all my debts.
Hold on, cowboy. While bankruptcy will bring you considerable relief, no one can wave a magic wand and make everything go away (Although sometimes that’s what seems to happen.). Certain debts aren’t wiped out by your discharge from the bankruptcy. These include court fines, alimony, debts that were incurred fraudulently and any debts that you continued to pay after the bankruptcy started such as a mortgage, a car loans, etc. Then there are some student loans that you would be responsible for after your discharge.

All of these “myths” are misleading and can make a person shy away from seeing a trustee. Big mistake! Contact us and we will make sure you get correct information so you can determine what’s the right course for you; a bankruptcy, a proposal, or some other option. Only you can decide, so get the facts and then you’ll be able to make a good decision.

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You’ve gone through a bankruptcy and you want to get your life back to normal as fast as possible. While it won’t happen automatically and you will have to be proactive about it, you can actually take steps to start repairing your credit rating right away – as soon as you’re discharged. Here are five ways to do it:

Speak to Your Bank Manager: They are a good source of information to get you started on the road to credit repair. In most cases they are also quite supportive.

1. Start Saving: Creditors like to lend to people who don’t really need the money. So use your savings account or open one if you don’t have it. Every pay period, put in a small amount in the account, perhaps arranging for an automatic withdrawal.  Or if you were used to paying the trustee a certain amount each month during the bankruptcy process, just continue to put the same money in your savings account. By the end of the year you would have a nice balance in the account, sure to impress creditors. (This is called paying yourself.)
2. Get a Secured Credit Card: This type of credit card is secured by a deposit account that you own. So if you can scrape together, say, $500, you can use that as a deposit with the credit card company and get a $500 limit on a new credit card. You would still have to make regular payments on it every month like a regular credit card. If you keep this card in good standing it will all count towards rebuilding your credit rating.
3. Pay Your Bills on Time: Pay all your bills, including utilities and credit cards, promptly. Creditors like to get paid on time. Some people are under the misapprehension that if they carry a balance on their credit card from month to month then that will endear them to the credit card company and boost their rating. Not so. It just costs you money.
4. Get a Copy of Your Credit Report: There are two main Canadian credit bureaus, Equifax Canada and TransUnion Canada. This is where all your credit information is stored. You are entitled to get a copy of your credit report. Get it. You can see if there are any mistakes and correct them. You also have the option of putting in a short note that will be given out to anyone who collects a credit report on you.

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When it comes to marriage, a question may arise: Is a spouse responsible for credit card debt in Canada if the other spouse declares bankruptcy?

Sorry, Dear, I’m Bankrupt.

Nothing can make for a frostier breakfast conversation than revealing your financial woes have led to bankruptcy. Fueling the tension of guilt and anger is the fear one spouse filing for bankruptcy is going to drag down the other.

But if you do file for bankruptcy does this automatically affect your spouse?

The short answer is no. Each person is responsible for their debts. So if your spouse has not co-signed a loan or guaranteed your debt, then they won’t be directly affected and their credit rating won’t be damaged. There may be indirect consequences, however. For example, your spouse may not qualify for a loan in the future if your bankruptcy prevents you from being able to co-sign for it.

Don’t Give Credit Where it’s Due

But the truth is, married life can be complicated, with intertwined finances and joint ownership of assets. Take credit cards, for example. If your spouse has a joint or supplementary credit card – that is, one with their name but has the same account number as yours – then he/she would also be responsible for any debt.

On the other hand, if they have a supplementary credit card and have never used it, chances are they wouldn’t be responsible for the debt. The case could also be made that they are not saddled with the debt if they have only used the card occasionally, for small amounts.

However, if the two of you have used the cards extensively, you are both on the hook for the debt. This doesn’t change if only you go bankrupt. Things can get worse for your spouse because creditors can, and probably will, pursue them for the full amount of the money owed, and not just 50 percent. This scenario would be the same for any loan they’ve co-signed, such as a mortgage. (Though a legal case could be made that they are not responsible if they didn’t get legal counsel before co-signing the loan.)

Nothing Ruins a Good Divorce Like  . . .

The risk of being saddled with joint debt seems to increase during divorce when communication and cooperation often dwindle. Some might be under the impression that debt is divided 50-50, as assets often are. But if one spouse files for bankruptcy, the other could be left responsible for the full debt and not just half, with avid creditors giving them their undivided attention.

Time to Take Out the Saw

Another consideration when one spouse goes bankrupt and the other is spared is jointly owned assets. That Harley and sidecar you both own for summer camping trips might need to be sold to pay what you owe to creditors. Your spouse’s portion of the motorcycle would be spared but you couldn’t exactly saw the vehicle in half.

Generally speaking, jointly owned assets have to be reviewed one by one by the trustee to see how they will be treated.

In summing up, if you not sure the answer the question “Is a spouse responsible for credit card debt in Canada?” or about other assets or liabilities, all the ins and outs of the effects of bankruptcy on a spouse need to be considered and explained by a licensed trustee.