Posted On: July 25, 2014

If you don’t live in Egypt, being in denial is a bad thing.

Most of us carry some form of debt, whether it’s a car loan or a credit card balance that we just can’t manage to pay off this month. But when does debt load become dangerous?

Well, one sign is when you don’t want to think about it and are kept up nights with stomach-twisting anxiety. The problem scares you so much you put your head in the sand and keep spending as usual.

If you think you have a problem, you probably do. But here are 10 more telling signs that you are sinking too far into a financial morass:

1. You frequently pay bills after their due date, incurring secondary notices and penalty charges.
2. Creditors are calling about unpaid bills.
3. You regularly bounce cheques and overdraw your bank accounts, causing you embarrassment and triggering bank penalties.
4. You use one credit card to pay the balance on the other, or use it to pay other bills or to buy necessities.
5. You pay only the minimum balance on credit card bills.
6. You’ve been denied credit because your debt ratio is too high, or need a co-signor for a loan because you are too much of a risk by yourself.
7. You hit up family and friends for loans to make ends meet.
8. You don’t know how much debt you’re really in, because you’re afraid to hear the number.
9. You hide purchases and debt problems from your family, or you fight a lot with your spouse over debt issues.
10. An unexpected expense, such as a car repair, sends you into panic mode.

Of course, just not thinking about money problems, or running way from them, doesn’t work. They always manage to find you. The best way to deal with them is head on, using the advice of a trusted expert. At Richard Killen & Associates, we can lead you through the appropriate responses to your particular situation, whether it is debt consolidation, a consumer proposal or bankruptcy.

Contact us for a free consultation – it will be the most stress-relieving call you will ever make.

Posted On: June 30, 2014

Death and taxes are inevitable. For some they are the same thing.

Fear of the tax man may be justified. As a creditor he has super collection powers that ensure that most people don’t have a smile on their face when they receive a notice from the Canadian Revenue Agency (CRA).

Among the things the agency can do are charge penalties and interest on all overdue accounts, withhold child tax credits and GST credits, and garnishee your bank account and pay. Without your consent, it can register a lien against your home. And it can take actions without going through a court process, as other creditors are forced to do.

But the news is not all bleak. Some people labour under the misconception that tax debts are not included under a personal bankruptcy. They in fact are, so when you receive your bankruptcy discharge, back taxes are usually included.

This is, if you owe the government less than $200,000 in back taxes. If you owe more in personal income tax debt, representing 75% or more of your total unsecured debts, then you must appear in bankruptcy court to decide if any conditions should apply to your discharge.

If you are undergoing a bankruptcy, then some special handling of your income taxes is required. The trustee will prepare two tax for you during the course of a year. A pre-bankruptcy income tax return must be filed from January 1 to the date of bankruptcy. Then a post-bankruptcy return must be filed from this date to the end of December.

If there are any funds in a return from the post-bankruptcy filing, then they are paid to creditors. Any taxes owed prior to the bankruptcy are discharged. And if there is an amount owing the government on the post-bankruptcy tax return, then it is up to you pay it.

Negotiating the ins and outs of taxes and bankruptcy can be a tricky and delicate process. Consult an expert at Richard Killen & Associates so you can discover your options and keep the tax man off your back.

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If that comes about, one of the concerns you may have is what will happen to your retirement savings and your pension? Well, generally speaking, you have nothing to worry about. Though the legal process can get a little complicated, for the most part nothing will happen to your RRSPs, RIF, LIF, especially your government pension or company pension.

Other kinds of plans might sometimes be affected, depending on various factors. However, you don’t have to wonder or worry; you can get the facts from us, Richard Killen & Associates. That’s what we’re here for.

So call Richard Killen & Associates today for a free consultation at our office nearest you. We have offices across the GTA. 888-545-5365. Or visit us online at killen.ca. It may be the most stress-relieving call you ever make.

See also “A New Problem for the Old.”

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.

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We all know about the big buys that do damage to our bank accounts: homes, cars, vacations, etc. But equally insidious are the small regular purchases that we don’t really notice but add up over time, whether it’s expensive designer coffee or unused gym memberships. Here are five things you can do without, or with less of, to plump up the pocketbook.

1. Stop Going to Coffee Shops
Do you get a nice coffee from Starbucks or Timmy Ho’s everyday before getting down to work? You can be spending a couple of bucks a day or much more if you are getting some of the premium coffee-based drinks. For  less than you spend in a month in coffee shops you can get your own coffee machine at home (for under $20 at the low end!) and a pound of something fair trade and delicious. That way, when you treat yourself out, it is a treat and not part of the daily grind of starting your heart for work.

2. Give up Your Gym Membership
Lots of us have unused gym memberships, meaning we’re paying hefty monthly fees for no reason. So give it up. This is not to say you should give up exercise. Do more at home. Take up walking or bike riding and, if you live close enough, bike it or hoof it to work, saving  big bucks on the gas and parking of a car commute. If you like to do your aerobics or Pilates in a group, check out the local rec or community centre, where classes may be cheap or even free.

3. Stop Impulse Buying
If you’re thinking about buying something you’re not sure that you really need, make yourself wait 30 days before making the purchase. Often the impulse will pass. Or if you’re in a store shopping and see something you want to buy on the spur of the moment, circle way and wait 20 minutes before picking it up. Your consumer desire may wane. And when grocery shopping, make a list and stick to it. Yes, the tub of Häagen-Dazs may be half price but it doesn’t save you money if you weren’t planning t0 buy it in the first place.

4. Save Money on Your Entertainment Media
Spending too much on your cable TV package and pay per view? Then downgrade or eliminate your service and get movies and TV shows through low-cost services like Netflix and Redbox. Or better yet read a book. Don’t buy a book but go to your library and take one out. It’s free. You can also take out movies and even put a dent in your iTunes habit by renting CDs of music that you can rip to your MP3 player (ask your kids how).

5. Check Your Phone Plan
If you have a cellphone, check your usage  to see if your plan is the most economical one for you. Also, since signing on, the phone company may have introduced lower priced plans, with unlimited Canada-wide calling for example, that they are in no hurry to tell you about. And you may be able to negotiate lower rates than the ones offered. But don’t do this at the phone company’s retail shop. They have to stick to the listed prices. Call your phone company, make noises about quitting and when they pass you on to their retention expert, swoop in and make a deal, citing the low prices to be had elsewhere (do your research). Also, if you don’t use your cellphone much, consider switching to a pay-as-you go plan. And finally, if you have both a cellphone and landline, get rid of one. Just because you grew up with a rotary phone doesn’t mean you need one now.

There are probably many other things going on in your life that drain your financial resources without giving you much (or any) value in return. Sit down and make an inventory. You’ll very likely shock yourself. Remember, you are supposed to be in charge of your life, not Starbucks.

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 17, 2014

People looking forward to retirement usually try to retire their debts first, especially their mortgages, so they can enjoy their leisure without financial worries. But a story in the Globe and Mail reveals that more and more Canadians are going into their golden years with a substantial financial burden.

“Pre-retirement Canadians in the their 50s are taking on an alarming amount of debt and are most at risk of bankruptcy,” says April Dunn, owner of the Red Door Mortgage Group in Vancouver, citing  a new study that examined about 7,000 insolvency filings. She reveals in the Globe interview that about half of all retired people in this country are carrying debt, “with many stuck managing two or more payments a month.”

Even so, not all of these people are getting into debt as a desperate measure. Some want to free resources for other uses and believe they have the wherewithal to manage their debt. Others are seeking to take advantage of historically low interest rates, or they are leveraging their property to pass money to their kids, so they can perhaps buy their own homes.

Posted On: June 16, 2014

Getting a student loan can be double-edged sword. Many kids can’t afford a higher education without one. But the downside is that a lot of students either they doctors, engineers or business students are graduating with huge debts that they many find hard and in some cases impossible to pay off.

The problem of student debt in Canada is on the rise. According to a September 2013 Globe and Mail article, accumulated student debt is now more than $15 billion nationally, and perhaps as high as $23 billion, if you take into account credit card debt, lines of credit and provincial loan programs.

The problem is worsening as government levels of funding for post-secondary education decrease and students are left with bearing more of the cost. The Globe article points out that the government share of funding has declined from 84 to 58 per cent, at the same time as tuition fees have jumped 12 to 15 per cent.

What if I simply can’t repay my student loans when the time comes?

Well, let’s hope this doesn’t happen, but if you have no other options bankruptcy may be necessary. The question then arises: “If I have a student loan, will bankruptcy take care of it for me?”

The answer is technical. When a person goes bankrupt, they are applying to the courts to simply “get rid” of their debts. It’s called getting discharged from the bankruptcy and therefore the debts. Whether your discharge would eliminate your student loans along with any other debts you had when you filed depends on time. When did you officially end your career as a full- or part-time student.

If you left school seven or more years before you filed your bankruptcy, then your student loans should be discharged. If you left school less then seven years before filing, they won’t be.

The definition of exactly when you “left school” has been the subject of at least three court cases with different results. The general and safest definition of when you left school is the last day of the month in which your class graduated. When you last physically attended classes doesn’t really matter. Finishing early or dropping out doesn’t change this date. At Richard Killen & Associates, we advise you to be as sure as you can about your school leaving date. You can usually get the correct info from the government by calling 1-888-815-4514, but some people may have to go back to their learning institution to find out.

How would all this apply to a consumer proposal?

Pretty much the same way, except you don’t actually get discharged from your debts when you do a consumer proposal. When you successfully complete your payments in a consumer proposal, you receive what’s called a Certificate of Full Performance to prove to the world that you succeeded in paying off your creditors. Since a consumer proposal captures all your unsecured creditors (and a student loan is an unsecured debt), the successful completion of the consumer proposal payments should get rid of the student loans, too, right? Yes, but only if you had been out of school seven years on the date you filed the proposal.

So what if I am in debt trouble but I haven’t yet been out of school for seven years?

Well, you still have the same legal option under the Bankruptcy and Insolvency Act: a bankruptcy or a proposal/consumer proposal. The difference is that when you get to the end of either one, your discharge or full-performance will not include the student loans. You will still need to pay them back.

But what if I’m still unable to pay the student loans?

If you were under the magic number seven when you filed, but still cannot handle the student loans after your discharge, there is another relief option. You have to wait until you have been out of school five years. Then you can apply to the bankruptcy court for an order to have your student loans covered by your bankruptcy discharge (or certificate of full-performance from the consumer proposal). You would need to hire a lawyer to get this done and it cannot be done before your bankruptcy or consumer proposal are successfully completed.

Pretty convoluted, eh? That’s why we simply say call us. At Richard Killen & Associates we can make it make sense to you in a way that will empower you to make the right decisions.

We also want to add that you can look for some student debt relief by going to the National Student Loans Service website and finding out about the Repayment Assistance Plan. Available on both Canada and Ontario portions of student loans, RAP offers both interest relief and debt reduction, which could include lowering monthly payments and extending you loan repayment period for up to 15 years.

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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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