New Additions To The Bankruptcy Law In Canada

During the month of September in 2009 the Canadian federal government adjusted the bankruptcy law in Canada and made bankruptcy much more expensive for Canadians. A test for income determined the amount payable in bankruptcy stages and was a requirement to determine the length of time personal bankruptcy will last.

Under old rules anyone claiming bankruptcy was required to prove income to trustees every month, by submitting pay stub copies. If income exceeded set amounts, the bankruptcy claimant needed to pay penalties of half the amount they exceeded limits with.

Those rules do still exist with additions. If bankruptcy income exceeds $200 over limits every month, the period of bankruptcy gets extended for one more year, and the surplus income payments continue for an extra year.

If an individual who is single without dependents and unusual expenses and they are permitted to earn a total net amount $1,870 every month and $2,470 is earned on the monthly basis, it comprises of an amount that is has exceeded the limit by $600. A penalty of surplus income of $300 is charged per month.

If there is a surplus of $200 per month, bankruptcy lasts for a further twenty-one months, whereas bankruptcy without surplus income amounts that can last for just nine months. A penalty of $300 is payable for twenty-one months in total that equals to double the rate of the old rules. A bankruptcy trustee that is knowledgeable needs to be consulted prior to bankruptcy being filed, in order to a detailed estimate of through potential income surplus.

Another method that can be used in filing for a state of bankruptcy is a consumer proposal instead which serves as an alternative for bankruptcy filing. The settlements are negotiated upon between debtors and creditors. The consumer proposal consists of a level of monthly payments that are made by debtors for a five year period that gets distributed to all creditors. Creditors can reject or accept he consumer proposal in a period of forty five days. They are prevented from taking any further legal action on proposal acceptance. The debtor is the returned to an insolvency state if the creditor rejects the proposal.

This proposal can made by debtors with debts that do not exceeds $250,000. If debts exceed the $250,000 mark, the proposal has to be filed under Division one of the act of bankruptcy law in Canada . A Proposal Administrator will be required. This new law is totally applicable to all clients since then.

New Dimensions To Bankruptcy Law In Canada

During September in 2009 the federal government of Canada made changes to the bankruptcy law in Canada and bankruptcy became much more expensive in Canada, A test of income evaluation determined the amount that was payable in bankruptcy stages and also constituted a requirement to determine the length of time personal bankruptcy will last.

A requirement under old rules for claimants of bankruptcy was that they had to prove income to trustees each month by handing in pay subs. In a case where income exceeded amounts that were set up, the exceeded amount needed penalty paid up.

These rules still continue to exist but with added conditions. If the income exceeds the $200 mark bankruptcy is extended for a further year with a continuance of penalty payments.

If bankruptcy is declared by a single person with no dependents and without unusual expenses and they are allowed an earning of a net amount tolling to $1870 each month and they exceed the earning to $2470 monthly, this amounts to a surplus of $600 The penalty that has to be paid is amount of $300 with every salary. A surplus amounting to $200 or above will result in an extension of the period of bankruptcy for another twenty one months.

The $300 penalty is due for 21 months in contrast to if there was no surplus the bankruptcy period will last for a total of nine months. A bankruptcy trustee has to be consulted before there is a filing of bankruptcy to analyze estimates of income surplus possibilities.

A consumer proposal serves as an alternative method to filing for bankruptcy. The settlement has to be negotiated between the debtor and the creditor. This consumer proposal consists of a monthly amounts made by debtors to creditors for a total of five years. These payments are distributed to creditors. Creditors have a choice to either accept or to reject the consumer proposal. They have 45 days to make the choice of the acceptance or rejection. After accepting it they are no longer allowed to take further legal action against the debtor. If they reject the consumer proposal, the debtor has to remain in the insolvent state and has to declare bankruptcy. The consumer proposal is only possible in a case where the $250000 limit is not exceeded.

If it is exceeded the filing for a consumer proposal has to be done through a bankruptcy law in Canada act with a proposal administrator that is assigned to the case.

The Bankruptcy Law In Canada

The Canadian federal government made adjustments to the bankruptcy law in Canada in 2009 in September. Bankruptcy for Canadian just became much more expensive. There is an income test determination of payable amounts for bankruptcy and this is a requirement that determine how long the bankruptcy will last for.

The old rules required that those claiming bankruptcy prove their income to trustees each month through submission of their pay stubs. If the income exceeded amounts that were set, the claimant of bankruptcy has to pay penalties of fifty percent of the income amount that was exceeded.

The rules apply with more conditions attached to them. In instances where income is exceeded by the $200 limit bankruptcy is extended for an extra full year and penalty payments continue.

If a bankruptcy claimant who is single, has no dependents or any unusual expenses is allowed to earn $1870 per month and there is an earning of $2470 the limit has exceeded with an amount of $600.The penalty that is payable of this id 300$ per month.

A surplus of $200 will result in an extension of a further 21 months. With the surplus income bankruptcy extend to nine months in total. There is a penalty of $300 that is payable for a total of twenty one months. This is equal to a double the amount of the rate according to the old rules. A trustee for bankruptcy must be consulted before bankruptcy is filed to order to get a detailed estimate of possible income surpluses.

A consumer proposal can be filed which is a bankruptcy alternative. Consumer proposals are a negotiated settlement that is agreed on between creditors and debtors. This proposal consists of monthly payments by debtors for a total of five years to be distributed to creditors. Creditors have a total of forty-five days in which to reject or accept the proposal of the consumer. After the proposal has been accepted debtors allocate payments to proposal administrators every month or as per contract stipulations. Creditors are prevented from further collection or legal action. In case the proposal is not accepted, the debtor is then returned to an insolvent state and has no other alternative but declaring personal bankruptcy.

This proposal is only possible if debts do not exceed the $250000 limit. If the debt does exceed this limit the consumer proposal has to be filed under a bankruptcy law in Canada act. There will be a requirement of a proposal administrator.

Cons And Pros Of Declaring Bankruptcy

There may be cons and pros of declaring bankruptcy; but, there seems to be no abating the rise of bankruptcy filings despite the 2005 changes in the federal bankruptcy code which was supposed to put a damper on them. Filings for bankruptcy rose by almost a third in 2009 from 2008 according to the compilation of data by the National Bankruptcy Center. More of these filings were for Chapter 7 even though in 2005 the legal changes were aimed to encourage Chapter 13 filings that required debt-repayment plans. The changes were intended to make it more difficult for a Chapter 7 application. A means test was required thereafter to separate those who could repay debt from those unable to do so. Chapter 7 was not to be a recourse, if the test revealed that payment of some portion of the debt is possible after restructuring. Yet, Chapter 7 filings were up over 42 percent by November 2009; and by contrast Chapter 13 filings made up less than a third of the total filings in the same period and rose by only 12 percent.

The advantages and disadvantages of bankruptcy

The disadvantages of bankruptcy include the fact that most tax debt is not-dischargeable and neither is student loan debt. Your credit will be affected for years. It will remain on your credit report for up to ten years. You will lose your credit cards and some of your possessions. You will lose property that you own that is not exempt from sale by the bankruptcy trustee. It will be harder to file later on, if something even worse financially comes along. For instance, if you complete the bankruptcy process under Chapter 7, you cannot file for another Chapter 7 bankruptcy for six years. The six year period is counted from the date you last filed for bankruptcy. Another consideration to provide some pause is that a filing will limit the techniques you can use to get out of the financial ditch.

Amongst the benefits that come from bankruptcy there is the fact that old tax liabilities, these being those older than three years are removed. Bankruptcy will also keep your lenders from pursuing aggressive collection actions. Missed payments, repossessions and lawsuits will also hurt your credit like a filing will. It may be possible to salvage one or two credit cards, in some cases. Most state exemptions permit you to keep possessions as exempt from bankruptcy that you might consider you need. You will keep the salary you earn and the property you buy after you file. Bankruptcy helps you get a fresh start, so you can get started on rebuilding your credit. You may file for Chapter 13, if you need to seek bankruptcy again before you are entitled to file for Chapter 7. You may file for Chapter 13 repeatedly, although each filing will appear on your credit record.

Chapter 7 or Chapter 13?

Chapter 7 is more popular as it does not require repayment of a portion of their debts as wipes out many debts entirely. A Chapter 7 filing will, however, wipe out only your personal obligations. Liens recorded before the filing are not affected. After your bankruptcy, the IRS can seize property owned at the time of the filing. After-bankruptcy, the IRS tends to seize real estate and retirement accounts or pensions; and generally only when a taxpayer has made no efforts to otherwise resolve the problem.

In some situations, however, Chapter 13 is the superior alternative. Also, certain debtors cannot file for Chapter 7; but, may file for Chapter 13. Under the 2005 changes you are ineligible to file for Chapter 7 if you cannot meet new requirements under what is termed the means test. Chapter 7 is off limits if in your state of residence your current monthly income over the six months prior to your filing date is more than the median income for a household of your size. In addition, if your disposable income after the subtraction of certain expenses and monthly payments for debts you would have to repay exceeds limits set by law. In sum, if you have the means to repay some of your debt through a Chapter 13 repayment plan, you are ineligible for a Chapter 7 bankruptcy filing. The means test can get complex, so professional advice is important. You are also prohibited, if you received a Chapter 7 bankruptcy discharge within the last eight years, or if you received a Chapter 13 discharge within the last six years.

You may opt for Chapter 13 if you are behind on mortgage or car loans and seek to make up the missed payments over time. Only Chapter 13 permits making up your missed payments. If you have a tax obligation, student loan, or other debt that cannot be discharged in Chapter 7, you can under a Chapter 13 plan pay them off over time. If you have nonexempt property that you want to keep, Chapter 13 is preferable. Under Chapter 7, only exempt property is allowed to be retained. Exempt property is property protected from creditors under state or federal law. Your nonexempt property will be disposed off by a bankruptcy trustee to distribute proceeds to your creditors. In Chapter 13, you do not have to give up any property and can repay your debts out of your income. Should you have a codebtor on a personal debt, the co debtor will be left alone under a Chapter 13 filing so long as you keep up with your payments; but, under Chapter 7 your codebtor will still be liable.

If saving your home is a reason for filing for bankruptcy under Chapter 13, you might want to know that a study has found that this will be of little help in saving homes. The authors of the study found that for one-third of the filers, the money freed up is insufficient to save their homes, and many others have enough income to save their homes without choosing this drastic measure. You should seek a qualified attorney in your area that knows the bankruptcy laws and exemptions in your state to advise you and help you decide whether you should take the serious step of filing for bankruptcy. Bankruptcy should be the last recourse. A declaration of bankruptcy affects your future credit and your reputation. On the other hand, those who choose this path do it because they see this as the best alternative among poor options.

Considering Cons And Pros Of Declaring Bankruptcy

Cons And Pros Of Declaring Bankruptcy

When considering the cons and pros of declaring bankruptcy; be aware that bankruptcy filings have been rising in spite of the revisions in the federal bankruptcy code in 2005 intended to inhibit them. Majority of the filings were Chapter 7 even though 2005 revisions were to discourage them in favor of Chapter 13 filings. This is because Chapter 13 filings require debt-repayment.

Advantages and disadvantages of seeking bankruptcy

One disadvantage is that most tax debt may not be-discharged. Student loan debt may also not be discharged. Your credit is affected for years. Your bankruptcy will be on the credit report for up to a decade. Credit cards and some of possessions will be taken. It will be harder to file in future, within the prohibited period for Chapter 7 filings. There will be less flexibility in the means you can use to improve your financial condition.

A benefit is that tax liabilities more than three years old can be removed. Bankruptcy will stave off the wolves at your door. Generally, state exemptions allow possessions you think necessary to be retained. You can keep your earnings and any property purchased after a filing. You get the opportunity to get a new start to get on the route to better management of your finances. A Chapter 13 filing option remains open for those not eligible for Chapter 7. There is no prohibition on filings for Chapter 13, even if each filing appears on the credit report.

Will you choose Chapter 7 or Chapter 13?

More people choose Chapter 7 because debts can be wiped out in their entirety. This applies only to personal obligations. Any liens recorded remain. The IRS can still seize property after a bankruptcy; although it generally only takes this action after a taxpayer has made no effort to otherwise resolve the problem.

In some cases, Chapter 13 is the smarter choice. Of course, it is also an avenue for those who cannot file for Chapter 7 due to the structures of the 2005 restrictions. Those who have gone through Chapter 7 within the last eight years, or a Chapter 13 process within the last six years are also prohibited from a Chapter 7 filing.

Chapter 13 is the path to make up for missed debt payments. If you have debts that remain in Chapter 7, Chapter 13 enables you to adjust their payments to make them more manageable. If you have property that would not be exempt, Chapter 13 will save you losing that property. You can shield your codebtor, which you cannot do in a Chapter 7 application.

Keep in mind that Chapter 13 might not be much assistance in saving your home from foreclosure. The funds freed up could be insufficient to save the property. A qualified attorney should be sought if you are seriously considering the bankruptcy option.

The Cons And Pros Of Declaring Bankruptcy

The cons and pros of declaring bankruptcy seem to be considered by a rising number of people, if the rising filings is any indication. And, bankruptcy application have risen even though changes were implemented in the federal bankruptcy law to act as a breaker. Data has revealed that most filings were for Chapter 7. Yet, 2005 revisions were specifically supposed to discourage this.

Some advantages and disadvantages

A disadvantage is that tax debt discharge may not be an option. Student loan debt is also off the table. The fact that credit is impacted for years after can be off putting. Your credit report will reflect your bankruptcy for 10 years. Your credit cards will become history and some of your possessions can be disposed off to pay off your creditors. Filing in future could be a problem. There will be less flexibility in means available to you to improve your financial condition thereafter.

Tax liabilities that exceed three years may be removed. Harassing creditors will be kept at bay. You may not be required to dispose off your possession, should state exemptions cover them. Your income and any property purchased post filing is retained. You may really need the fresh start bankruptcy affords you. The Chapter 13 recourse is open to those not eligible for Chapter 7.

Deciding between Chapter 7 and Chapter 13

The more common choice is Chapter 7 as debts are wiped out in this process. Bear in mind, only personal obligations are removed. Recorded liens are not discharged. The IRS may still take property following bankruptcy; although generally only if a taxpayer has made no real effort to resolve the problem.

Chapter 13 is the better alternative sometimes. Needless to say, it is also only route for those ineligible for Chapter 7. Debtors who have already gone through Chapter 7 in the last eight years, or Chapter 13 in the last six years are ineligible for a Chapter 7 filing.

If you seek to pay missed debt payments, Chapter 13 is the choice for you. If your debts cannot be discharged under Chapter 7, Chapter 13 will allow you to adjust your payments and make them more manageable for you. Property not subject to exemption you wish to retain requires a Chapter 13 recourse. Should there be a codebtor you seek to protect, you will not be able to do this under Chapter 7.

Bear in mind Chapter 13 might not serve as an adequate aid in saving you from foreclosure. Funds freed in this process may not be sufficient in some cases to save the property. Please seek a qualified attorney for any serious consideration of bankruptcy.

The result: rising levels of consumer debt and declining household savings rates. But in 2008, this culture was hit hard by economic reality. As a result of the credit crisis and ensuing economic recession, savings rates rebounded. For those who had been living beyond their means for years, it suddenly got a lot harder to make ends meet. And, although the government tends to encourage spending during economic downturn and statistics may lead us to think that overspending is normal, it is often a risky choice.

Here we’ll take a look at the most common financial mistakes that often lead people to major economic hardship. Even if you’re already facing financial difficulties, steering clear of these mistakes could be the key to survival.

Mistake No. 1: Excessive/Frivolous Spending

Great fortunes are often lost one dollar at time. It may not seem like a big deal when you pick up that double-mocha cappuccino, stop for a pack of cigarettes, have dinner out or order that pay-per-view movie, but every little item adds up. Just $25 per week spent on dining out costs you $1,300 per year, which could go toward an extra mortgage payment or a number of extra car payments. If you’re enduring financial hardship, avoiding this mistake really matters – after all, if you’re only a few dollars away from foreclosure or bankruptcy, every dollar will count more than ever.

Mistake No. 2: Never-Ending Payments

Ask yourself if you really need items that keep you paying for every month, year after year. Things like pay television, subscription radio and video games, mobile phones and pagers can force you to pay unceasingly but leave you owning nothing. When money is tight, or you just want to save more, creating a leaner lifestyle can go a long way to fattening your savings and cushioning your from financial hardship.

Mistake No. 3: Living on Borrowed Money

Using credit cards to buy essentials has become somewhat normal. But even if an ever-increasing number of consumers are willing to pay double-digit interest rates on gasoline, groceries and a host of other items that are gone long before the bill is paid in full, don’t be one of them. Credit card interest rates make the price of the charged items a great deal more expensive. Depending on credit also makes it more likely that you’ll spend more than you earn.

Mistake No. 4: Buying a New Car

Millions of new cars are sold each year, although few buyers can afford to pay for them in cash. However, the inability to pay cash for a new car means an inability to afford the car. After all, being able to afford the payment is not the same as being able to afford the car. Furthermore, by borrowing money to buy a car, the consumer pays interest on a depreciating asset, which amplifies the difference between the value of the car and the price paid for it. Worse yet, many people trade in their cars every two or three years, and lose money on every trade.

If you need to buy a car and/or borrow money to do so, consider buying one that uses less gas and costs less to insure and maintain. Cars are expensive. You might need one, but if you’re buying more car than you need, you’re burning through money that could have been saved or used to pay off debt.

Mistake No. 5: Buying Too Much House

When it comes to buying a house, bigger is also not necessarily better. Unless you have a large family, choosing a 6,000-square-foot home will only mean more expensive taxes, maintenance and utilities. Do you really want to put such a significant, long-term dent in your monthly budget?

Mistake No. 6: Treating Your Home Equity Like a Piggy Bank

Your home is your castle. Refinancing and taking cash out on it means giving away ownership to someone else. It also costs you thousands of dollars in interest and fees. Smart homeowners want to build equity, not make payments in perpetuity. In addition, you’ll end up paying way more for your home than it’s worth, which virtually ensures that you won’t come out on top when you decide to sell.

Mistake No. 7: Living Paycheck to Paycheck

The cumulative result of overspending puts people into a precarious position – one in which they need every dime they earn and one missed paycheck would be disastrous. This is not the position you want to find yourself in when an economic recession hits. If this happens, you’ll have very few options. Everyone has a choice in how they live, so it’s just a matter of making savings a priority.

Mistake No. 8: Making A Payment Vs. Affording A Purchase

To steer yourself away from the dangers of overspending, start by monitoring the little expenses that add up quickly, then move on to monitoring the big expenses. Think carefully before adding new debts to your list of payments, and keep in mind that being able to make a payment isn’t the same as being able to afford the purchase. Finally, make saving some of what you earn a monthly priority.

Toronto Bankruptcy

Personal debt  and bankruptcy is on the rise in Canada. Here’s a brief overview of the personal bankruptcy process.

Between 1990 and 2006 business bankruptcies declined by 42 per cent – but consumer, or personal, bankruptcies increased by 85 per cent, according to Industry Canada statistics. And with Canadian household debt loads continuing to rise, it’s likely that individuals will continue to have to file for personal bankruptcy. Here’s an overview of the process and some things to consider.

Insolvency

When someone is unable to meet his or her payments on debts (known as debt obligations), that person is considered to be insolvent. The insolvency process is a legal proceeding that is dealt with under the provisions of the Bankruptcy and Insolvency Act.

You are considered to be insolvent when:
• you do not currently have an un-discharged bankruptcy
• you owe at least a $1000.00; and you are unable to meet your regular payments as they become due, or you would not be able to pay all of your debts if all of your assets were sold

At that point there are really two options:

• Bankruptcy: under the guidance of a trustee, most of the assets of that individual will be liquidated to sold the debt
• Proposal: where the individual makes an offer to debtors to settle the debt. (Companies have a third option, receivership, but this is rare for individuals.) To make a proposal the individual’s unsecured debts must total under $75,000.

A licensed professional can advise you on whether a proposal or a bankruptcy best fits your situation. Once you have determined that a bankruptcy is appropriate you will need to find a licensed trustee.

Bankruptcy Trustees

Trustees are chosen by the person filing for bankruptcy and paid by the bankrupt and the assets from the estate. These fees will depend on the individual’s debt situation, but are set under the Bankruptcy and Insolvency Act. However, it’s important to understand that a trustee’s first responsibility is to represent the creditors.

The trustee’s duties are to:
• Review your situation and inform you as to the alternatives available;
• Administer the proposal – that is, to sell any assets you have that are not exempt and to distribute the cash to creditors
• Administer the estate and file the paperwork from the beginning to the end according to the Bankruptcy and Insolvency Act.

A trustee is also an officer of the court, and is generally an accountant. Once chosen, a trustee cannot be discharged (or ‘fired’) without approval from the Court.

If your case is particularly complex or you have concerns, you may want to consult an insolvency lawyer as well. The Office of the Superintendent of Bankruptcy Canada regulates licensed trustees, and provides an online database of trustees.

Once you have a trustee, you have certain obligations that you must fulfill.

Your obligations

Once you enter into the process of bankruptcy you must disclose all your financial information to the trustee: income, expenses, debts, and assets, along with information about any property you have sold in the last year. You will have to turn your credit cards over to the trustee. You must stay in touch with the trustee during the process and advise them of any address or telephone number changes.

You may have to attend an examination before the Official Receiver. This examination takes place under oath and is designed to discover the cause or causes of your bankruptcy, look at any property recently sold, and the status of current assets. Your conduct is also examined.

You may also have to attend a meeting of your creditors, if one is requested. This is to confirm the appointment of the trustee, give creditors information about the bankruptcy, and to appoint inspectors to oversee the process.

And you will have to attend at least two counseling sessions that discuss issues around personal finance and bankruptcy.

Which debts are covered by bankruptcy? What do I keep?
Debts that are not secured, such as credit card debt, and in many cases debts to the Canada Revenue Agency (taxes) are dealt with through bankruptcy. Debts to family must be included in the bankruptcy process – you cannot continue to repay family members the full amount of a loan while settling with other creditors for less.

Secured loans, such as mortgages and car loans are not covered by bankruptcy. However your trustee may be able to help you in surrendering those assets and receiving a receipt.

Other debt not covered by bankruptcy includes:
• student loans, if it is less than 10 years since your schooling finished
• fine or penalty imposed by the Court
• alimony
• liability for dividend to an undisclosed creditor
• debt obtained by fraud
• liability for support or maintenance of spouse or child under an agreement or Court Order

Which assets remain yours (or are exempt from the bankruptcy) depends on your province.

Once you file for bankruptcy most wage assignments and garnishments will stop. The trustee will review your income and expenses and compare these to guidelines set out by the Superintendent of Bankruptcy. If you are considered to have extra income it may be assigned to your creditors.

Assets that you acquire during the bankruptcy period – for example, if you were to inherit property – become a part of the bankruptcy.

Discharge of bankruptcy
For first-time personal bankruptcies the bankruptcy is automatically discharged after nine months. There are however, several kinds of discharge:

Absolute discharge: You are no longer responsible for unsecured debts incurred prior to bankruptcy except for those which were not included (such as child support payments).

Conditional discharge: You may have to make payments to your creditors through the trustee for a specified period. You will not receive an absolute discharge until that period is over (and all payments have been made).

Discharge refused: The Court may refuse a discharge in unusual circumstances, such as:

• your assets are less than 50 per cent of the amount owed
• you continued to obtain credit while unable to pay your existing creditors
• you contributed to bankruptcy by extravagant living or gambling
• you failed to perform any duty imposed by the Bankruptcy and Insolvency Act

Once your bankruptcy is discharged it will take six years for it to be removed from your credit report.

For more information:
http://strategis.ic.gc.ca/epic/site/bsf-osb.nsf/en/h_br01545e.html

At first glance, this may seem a pointless topic for an article. Who would want, after all, to declare bankruptcy? Most Americans are well aware of the far-reaching financial consequences of bankruptcy protection. Bankruptcy can immediately and significantly lower FICO scores, darken credit reports for up to a decade and, depending upon the situation, forever prevent you from some sorts of financing or employment. In the more popular games bankruptcy means, simply, that you lose the game. Even as a form of speech – being morally or spiritually ‘bankrupt’ – the notion’s hardly complimentary.

Nevertheless, as spiraling bills force more and more borrowers to sadly ponder what would’ve been once unthinkable, many consumers are forced to consider bankruptcy as a final alternative to seemingly insurmountable debt-loads. And, because bankruptcy’s so well-known as a final resort, a good number don’t bother to investigate the actual truths of bankruptcy (particularly after the restriction-tightening recent legislation) before succumbing to the inevitable.

More than ever before, this is a shame. Bankruptcies are no longer a guarantee of debt liquidation, the negative impacts can well beyond credit score repercussions, and, especially now, other bankruptcy alternatives may serve the average consumer better as they seek debt relief. Even on a Chapter 7 bankruptcy – and even though Chapter 7 notation would appear on your credit report for seven to ten years following – it’s possible that not all debt would be eliminated. In other words, the unlucky filer could yet adopt all the corrosive drawbacks of bankruptcy without the expected benefits. Considering this, it’s more important than ever for all borrowers even beginning to think about bankruptcy to closely analyze all aspects of the new legislation.

First of all, it’s no longer wholly the consumer’s decision on which sort of bankruptcy to file. As most past debtors attempted the Chapter 7 (which did, whatever the negative effects upon credit, liquidate most outstanding bills), this should be the most striking difference for average borrowers. Under current legislation, the courts must subject your income from six-to-nine-months ago to what’s become known as ‘the means test’. This test compares past income (no grace given if, say, the borrower has since changed jobs) with the average income from the state and then subtracts arbitrarily decided living expenses. Even avoiding the obvious regional and career differences (with housing prices in Fresno rather less expensive than those in Southern California, say, or the vehicle needs of a contractor more expansive than secretary), this allows a court trustee or their assistant to, upon their whim, change every bit of your life. Families have been forced to move or pull children out of private schools with little warning. Allowing the government free rein to budget and plan your family’s future carries obvious risks.

In previous years, of course, whomever went bankrupt would have to face the threat of their property and possessions being taken by the court and sold off to pay the creditors – every once in a while the news would cover an auction of celebrity memorabilia essentially being run by the IRS, for example – but ordinary debtors rarely had to worry about the loss of household items since their collected value, after depreciation, simply wasn’t worth enough for the government to bother with. Now, however, the tax laws insist all possessions (hobby equipment, children’s toys, family heirlooms) be listed according to their replacement cost: sentimental value, as you’d expect, not to be considered.

More worrisome, any significant investments (aside from custodial trusts or tax-deferred retirement plans like Individual Retirement Accounts) could be liquidated. Second homes and second vehicles are also fair game. Depending upon your specific state’s exemptions, even your residence or primary vehicle could also be forced towards auction. Essentially, the exemptions protect some degree of equity for the home, but, if the borrower had paid down too much of the mortgage balance, the courts could insist the home be sold with all excess equity given over to creditors. It’s imperative that every homeowner even considering bankruptcy search out his or her state’s specific protections and talk to a bankruptcy attorney about the potential fall-out.

There’s another even more significant reason to ensure you’ve a well-trained attorney with whom you feel comfortable. It’s considerably easier under the 2005 act for both creditors to sue for fraudulent bankruptcy filings and for the government to initiate criminal proceedings. Obviously, there should be safeguards in place to prevent the genuinely mercenary from taking advantage of bankruptcy protection, but gray areas within the law can also unnecessarily vilify even those honest borrowers that underestimated a motorcycle’s worth or forgot about accounts they hadn’t touched for a decade.

Again, obviously, for many consumers – those without investments or significant equity in their homes or vehicles; those willing to forego all accumulated possessions; those that wouldn’t mind the government planning their family’s budget for half a decade; those that can’t imagine needing credit reports or FICO scores again – personal bankruptcies can still be of some use. Even for those desperate souls, though, we still urge the consultation, whatever the cost, with top bankruptcy attorneys. For all others, it almost always makes sense these days to do whatever possible to avoid bankruptcy altogether – especially as other alternatives, such as debt settlement, have become increasingly popular. It was always meant as the final option, but, after the recent legislation, that can be all too true.

North Americans are a collection of spenders who must learn the hard way to practice what our grandparents have always known: A penny saved is a penny earned.

Consider that about 43% of North Americans spend more than they earn, according to estimates from the federal government, and the average household carries some $8,000 to $10,000 in credit-card debt.

To make matters worse, the average North American no longer saves money. That’s tumbled from a 10.8% average savings rate in 1984 into negative territory today. It’s no wonder that many of us have been living way above our means for some time.

But that is getting harder and harder to do. Available credit for people to finance their lifestyles has shrunk if not dried up altogether and many North Americans are standing by in shock watching their mortgage payments surge while the value of their 401(k)s / RRSP’s drop.

It’s clear we need to start spending less and saving more. That may sound easier said than it’s done. The key is to be aware of your where your money is going and take steps to stop the leaks.

Here are five simple tips that could save you hundreds of dollars a month:

1. Cash back at the pump

In the past five months gasoline prices have dropped 56%, from an average price of $4.11 to $1.80 a gallon or 72 cents a litre. Somehow, households found the money to pay the higher price and survive so now people should take that excess money they are saving and bank it.

Jean Chatzky, author and personal finance expert suggests using the money you were spending on gasoline to build up that rainy day fund or to pay some your holiday expenses instead of racking up more debt.

2. Dinner Savings

Another great way North Americans can cut costs each month is to eat at home, says Jonathan and David Murray, twin brothers who are financial advisers.

According to a recent Zagat survey, North Americans will spend an average of $34 this year every time they go out to eat dinner, that’s for one dinner, drink and gratuity; $76.00 if they live in one of the 20 most expensive cities. If a couple does that four times in a month the expense is close to $300 in low-cost areas and $600 in higher-cost regions, and if you have more than one drink or are treating family or friends, costs can add up quickly.

Plan a dinner or party at home and ask guests to bring a dish. If you’re big on getting together with friends, family and work associates, this could save you hundreds of dollars a month.

3. Renegotiate Household Bills

You may not be able to negotiate with the gas company or the electric company, but you can with credit cards, cable and phone services, among others. Do the homework and find out what competing cable companies, for example, are offering and ask your provider to renegotiate your bill. You may have to get through to a manager but Chatzky said she recently did this and got her monthly bill reduced by $50.

4. Smart shopping

Retailers are poised to have one of the worst holiday shopping seasons in decades and are offering deep discounts to move merchandise. But smart shoppers can save even more money by hunting down coupons. Before ordering online or going to a store, go to sites like Couponcabin.com and Ultimatecoupons.com or Google the name of a store and often you’ll get a coupon code to enter at checkout. You can save 10% to 20% or more on the total order or maybe get free shipping.

There are also coupons to print out and take to the store for deeper discounts. And don’t be afraid to pit one retailer against another by asking for a price match on sale items.

5. Keep the receipt

It is important to hang on to all your store receipts and keep track of sales. Savvy shoppers can possibly save even more on purchases by checking back to see if the retailers lower prices even further. If that happens within two weeks of your purchase, most stores will credit you the difference.

We hope that you can layer into your shopping habits the following tips as a means to start saving money fast and easy.

Toronto Bankruptcy Trustees

The closest many people get to budgeting is depositing their paychecks into their checking accounts and buying everything with an ATM card until the money’s gone.

While there are certain advantages to this method, such as not incurring credit card debt, there are also major disadvantages, such as not quite knowing where all that money’s going and not contributing enough to your savings because there’s never anything left over.

Even though budgeting is a wonderful tool for managing your finances, many people think it’s not for them. The logic they use, however, is often flawed. Below is a list of 10 budget myths that stop people from saving as much as they could – and should. Do any of these budgeting myths apply to you?

1. I don’t need to budget.
The truth is, almost everyone, even those with large paychecks and plenty of money in the bank, can benefit from budgeting. Keeping track of your monthly income and expenses allows you to make sure your hard-earned money is being put to its highest and best purpose. For example, if you knew how much money you were spending on restaurant meals every month, you might decide that you’d rather be putting that money toward something else, like a nicer vacation.

2. I’m not good at math so I can’t manage my money.
Thanks to budgeting software, you don’t have to be good at math, you simply have to be able to follow instructions. Many of these programs are free and can be safely downloaded without fear of viruses or spyware from CNET’s download.com. If you know how to use spreadsheet software, you can even make your own budget. It’s as simple as creating one column for your income, another column for your expenses and keeping a running tab on the difference between the two.

3. My job is secure.
No one’s job is truly secure. If you work for a corporation, downsizing or losing your job to overseas workers is always a looming possibility. If you work for a small company, these concerns may not apply, but if the owner died suddenly, the company might die with the owner. You should always be prepared for a job loss by having at least three months’ worth of living expenses in the bank. It’s a lot easier to accumulate this money if you know how much money you’re bringing in and laying out each month.

4. Government-sponsored unemployment pay will tide me over if I lose my job.
Unemployment benefits are not a sure thing. Let’s say a bad situation at work leaves you with no choice but to quit your job. Because you weren’t laid off, leaving your job will be considered voluntary and it’s very unlikely you’ll receive any benefits. It won’t help if you decide to remedy this problem by getting yourself fired, as those who are let go for bad behavior are also very unlikely to receive unemployment assistance. On top of that, getting fired will make it harder for you to get a new job.

5. It won’t happen to me.
We all think that unexpected high bills and tragedies won’t happen to us. With the number of things that can possibly go wrong in life, hoping for the best is the most logical emotional survival tactic. However, you might lose your job, be in a car accident, get cancer, or need to help a friend or family member who falls on hard times. It’s best to be prepared and hope that you’ll get to use the money for something fun one day instead.

6. I don’t want to deprive myself.
Budgeting is not synonymous with spending as little money as possible or making yourself feel guilty about every purchase. The crux of budgeting is to make sure you’re able to save a little each month, ideally at least 10% of your income, or at the very least, to make sure that you aren’t spending more than you earn. Unless you’re on a very tight budget (and we all are sometimes), you’ll still be able to buy baseball tickets and go out to eat. Tracking your expenses doesn’t change the amount of money you have available to spend every month, it just tells you where that money is going.

7. I don’t want anything big so I don’t need to save for anything big.
This one is tricky. If you don’t have any major savings goals to buy a house, a new car, or to save enough money to quit your day job and take a stab at starting your own business, it’s hard to drum up the motivation to stash away extra cash each month. However, your situation and your attitudes are likely to change over time. Perhaps you don’t want to save up for a house because you live in New York City and expect that renting will be the most affordable option for the rest of your life. But in five years, you might be sick of the Big Apple and decide to move to rural Vermont. Suddenly, buying a home becomes more affordable and you might wish you had five years’ worth of savings in the bank for a down payment.

As another example, many people thought home ownership would be forever out of reach when the housing bubble was pushing prices ever higher, so they gave up on the idea of owning a home. After the bubble burst and prices sank, however, those who previously couldn’t even afford condos sometimes had the income to afford houses. Even FHA loans require a down payment, though, so those who saved their extra money when prices were high put themselves in a great position to buy when prices dropped.

8. Any money I save would just be taken when I apply to grad school/an MBA program or when I send my kids to college.
Yes, the catch-22 of student financial aid is that the more money you have, the less financial aid you’ll be eligible for. That’s enough to make anyone wonder if it isn’t better to just spend it all and have nothing in the bank in order to qualify for the maximum amount of grants and loans.

When you apply for federal student aid such as the Stafford Loan, Perkins Loan, or Pell Grant, you will fill out the Free Application for Federal Student Aid (FAFSA). Whether you are an adult student going back to school or the parent of a student headed to college, this form does not require you to report the value of your primary residence (if you own a home) or the value of your retirement accounts. This means that if you want to save money without compromising your financial aid eligibility, you can do so by using your savings to buy a house, prepay your mortgage or contribute more money to your retirement accounts. The savings you put into these assets can still be accessed in the event of an emergency, but you won’t be penalized for them. Paying down credit card debt and auto loans can also serve as a form of saving that won’t detract from your financial aid eligibility. Just think of all that interest you won’t have to pay when your balances go down or are even paid off completely.

Another issue is that even if you employ all the legal strategies available to you to maximize your financial aid eligibility you still won’t always qualify for as much aid as you need, so it’s not a bad idea to have your own source of funds to make up for any shortfall in the aid you’re offered.

9. I don’t need to budget because I’m debt-free.
While being debt-free is unusual and commendable, it won’t pay your bills in an emergency. A zero balance is better than a negative balance, but that zero can quickly become negative if you don’t have a safety net.

10. I don’t need to budget because I always get a raise/bonus/tax refund.
It’s never a good idea to count on unpredictable sources of income. Your company may not have enough money to give you a raise, or as much of a raise as you’d hoped for, even if you’ve earned it. The same is true of bonus money. Tax refunds are more reliable, but this depends in part on how good you are at calculating your own tax liability. Some people know how to figure to the penny how much of a refund they will get (or how much they will owe) as well as how to adjust this figure through changes in payroll withholding throughout the year. Others find W-4 forms, 1040s, and tax tables incomprehensible and April is always a surprise. You might be expecting a $1,000 refund only to find that you’re getting $300 – or worse, that you owe.

Solutions
If you’re still not convinced that budgeting is for you, here’s a way to protect yourself from your own spending habits. Set up an automatic transfer from your checking account to a savings account you won’t see (i.e., a savings account at a different bank from your checking account) that is scheduled to happen right after you get paid. If you are saving for retirement, you may have the option of contributing a regular, set amount to a 401(k) or other retirement savings plan. This way, you’ll always pay yourself first, you’ll always have enough money for the transfer, and you’ll always pay yourself the same predetermined amount that you know will help you meet your goals. If you don’t think you have the discipline for budgeting, this is your best bet.

However, a better solution is to make this automatic contribution in conjunction with starting a budgeting spreadsheet or using budgeting software. This way, you won’t run into any unpleasant surprises, like your checking account balance reaching zero when your car insurance is due and you don’t get paid for another week.

Conclusion
To manage your monthly expenses, prepare for life’s unpredictable events and be able to afford more expensive purchases without going into debt, budgeting is a great idea. Keeping track of how much you earn and spend doesn’t have to be drudgery, doesn’t require you to be good at math and doesn’t mean you can’t buy the things you want. It just means that you’ll know where your money goes, you’ll have greater control over your financial situation and you’ll probably be able to sleep more soundly at night.

Budget Myths

Unfortunately, one of the factors that will prevent many people from becoming financially successful is their false beliefs about money. In fact, widespread financial myths can negatively impact both your short- and long-term net worth. Throw away these top 10 money myths, and you’ll avoid the consequences of believing them.

1. If I get a raise that bumps me into a higher tax bracket, I’ll actually take home less money.

Thankfully, this isn’t true. Moving into a higher tax bracket only increases the rate of tax paid on the last dollars you earn. Suppose you’re filing single, your old salary was $30,000 a year and your new salary is $33,000 a year. According to the IRS’s 2007 federal tax rate schedules, when your salary was $30,000, your marginal tax rate was 15%. With a salary of $33,000, your marginal tax rate is now 25%.

The key to unlocking this myth is the word “marginal”. In this scenario, your first $31,850 of income is still taxed the same way it was before you got your raise. With a $30,000 income, your take-home will be $25,891.25. If you make $33,000, you will take home $28,326.25. This is because only the extra $1,150 above $31,850 is taxed at 25% – not the whole $33,000.

2. Renting is like throwing away money.

Do you consider the money you spend on food to be thrown away? What about the money you spend on gas? Both of these expenses are for items you purchase regularly that get used up and appear to have no lasting value, but which are necessary to carry about daily activities. Rent money falls into the same category.

Even if you own a home, you still have to “throw away” money on expenses like property taxes and mortgage interest (and likely more than you were throwing away in rent). In fact, for the first five years, you are basically paying all interest on your mortgage. For example, on a 30-year, $250,000 mortgage at 7% interest, your first 60 payments would total about $100,000. Of that you “throw away” about $85,000 on interest payments.

3. You get what you pay for.

Higher-priced items are not always higher quality. Generic drugs are medically considered to be just as effective as their name-brand counterparts. A million-dollar home that falls into foreclosure and is repurchased for only $900,000 may still have $1 million worth of value. When the price of Google’s stock drops on a random Tuesday because investors are panicking about the market in general, Google isn’t suddenly a less valuable company.

While there is sometimes a correlation between price and quality, it isn’t necessarily a perfect correlation. A $3 chocolate bar may be tastier than a $1 bar, but a $10 bar may not taste significantly different from a $3 bar. When determining an item’s value, look past its price tag and examine its true indicators of value. Does that generic aspirin stop your headache? Is that home well-maintained and located in a popular neighborhood? Then you’ll know when paying the higher price is worth it when it isn’t (and you’ll be on your way to understanding the venerable principles of value investing, too).

4. I don’t have enough money to start investing.

It’s true that some brokerage firms require you to have a minimum amount of money to invest in certain funds or even to open an account. However, if you wait until you meet one of these minimums, you may get frustrated and have a harder time reaching your goal.

These days, it’s easy to start investing with very little money thanks to the proliferation of online savings accounts. While traditional bank savings accounts generally offer interest rates so low that you’ll barely notice the interest you accrue, an online savings account will offer a more competitive rate based on how the market is currently doing. In 2007, it was common to find online banks offering 5% interest. 5% is a pretty good return on your low-risk savings account investment when you consider that stocks historically return an average of 9-10% annually. Also, some online savings accounts can be opened with as little as $1. Once you’re in a position to start investing in stocks and mutual funds, you can transfer a chunk of change out of your online savings account and into your new brokerage account.

Alternately, you could open a brokerage account with minimal funds through one of the online trading companies that have cropped up. However, this may not be the best way to start investing because of the fees you’ll pay each time you purchase or redeem shares (generally $5 – $15 per trade). While these fees have been drastically reduced from when you had to trade through human stockbroker, they can still eat into your returns.

5. Carrying a balance on my credit card will improve my credit rating.

It’s not carrying a balance and paying it off slowly that proves your credit worthiness. All this strategy will do is take money out of your pocket and give it to the credit card companies in the form of interest payments.

If you want to use a credit card as a tool to improve your credit score, all you really need to do is pay off your balance in full and on time every month. If you want to take it a step further, don’t charge more than a small percentage of your card’s limit because the amount of available credit you’ve used is another component of your credit score.

6. Home ownership is a surefire investment strategy.

Just like all other investments, home ownership involves the risk that your investment may decrease in value. While commonly cited statistics say that housing appreciates at somewhere between the rate of inflation and 5% per year, if not more, not all housing will appreciate at this rate.

In fact, it is perfectly possible for your home to lose value over the years, meaning that if you want to sell, you’ll have to take a hit. The only way you’ll avoid realizing a loss in such a situation is if you continue to own the home until you die and pass it on to your heirs.

Even in a less drastic situation, a job transfer, divorce, illness or death in the family could compel you to sell the house at a time when the market is down. And if your house appreciates wildly, that’s great, but if you don’t want to move to a completely different real estate market (another city), the profit won’t do you much good unless you downsize because you’ll have to spend it all to get into another house. Owning a home is a major responsibility and there are easier ways to invest your money, so don’t buy a home unless you are attracted to its other benefits.

7. One of the major advantages of home ownership is being able to deduct your mortgage interest.

It doesn’t really make sense to call this an advantage of home ownership because there is nothing advantageous about paying thousands of dollars in interest every year. The home mortgage interest tax deduction should only be looked at as a minor way to ease the sting of paying all that interest. You are not saving as much money as you think, and even the money you do save is just a reduction in the costs that you pay. Interest tax deductions should always be considered when filing your taxes and calculating whether you can afford the mortgage payments, but they should not be considered a reason to buy a home.

8. The stock market is tanking, so I should sell my investments and get out before things get any worse.

When the stock market goes down, you should really keep your money in. This way, you can ride out the dip and eventually sell at a profit. In fact, stock market lows are a great time to invest even more. Many seasoned investors consider a decline in the market to be a “sale” and take advantage of the opportunity to pick up some valuable investments that are only experiencing a temporary dip.

9. Income tax is illegal.

Sorry, folks. There are quite a few different arguments here, but none will hold up in court. One is that the tax code says that paying taxes is voluntary. Another is that the IRS is not an agency of the United States. The IRS considers all of these arguments to be tax evasion schemes and will punish so-called tax protesters with penalties, interest, tax liens, seizure of property, garnishment of wages – in short, whatever it takes to get tax evaders to pay the full amount due when they’re caught. Most tax protester arguments and the IRS’s rebuttals can be found on the IRS website. Don’t fall for this shenanigan - it will ultimately cost you much more than you were hoping to save by not paying your taxes.

10. I’m young — I don’t need to worry about saving for retirement yet. / I’m old — it’s too late for me to start saving for retirement.

The younger you are, the more years of compound interest you have ahead of you. Compound interest is like free money, so why not take advantage of it? Someone who starts saving and earning interest when they’re young won’t need to deposit as much money to end up with the same amount as someone who starts saving later in life, all else being equal.

That said, you shouldn’t despair if you’re older and you haven’t started saving yet. Sure, your $50,000 nest egg may not grow to as much as a 20-year-old’s by the time you need to use it, but just because you may not be able to turn it into $1 million doesn’t mean you shouldn’t try at all. Every extra dollar you invest will get you closer to your goals. Even if you’re near retirement age, you won’t need your entire nest egg the moment you hit 65. You can still sock away money now and make a considerable sum by the time you need it at 75, 85 or 95.

The Bottom Line

Just because a belief is common and widespread doesn’t mean that it’s true. So, if you hear something about money or finance, give it some thought before taking it to heart – financial myths will only stand in the way to your financial success if you believe them.

I came across this fantastic news today in the Toronto Sun newspaper that will give investors some peace of mind:

If you find yourself in financial trouble and have to declare bankruptcy, your registered retirement savings are now safe from your creditors.

Recent amendments to Canada’s Bankruptcy and Insolvency Act now rule that for bankruptcies occurring after July 7, 2008 creditors can no longer go after your Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs) or Deferred Profit Sharing Plans (DPSPs) to pay off owing debts.

In the past, only some of your investments such as certain segregated funds and pension funds were protected from creditors. Now, you don’t have to worry that all your retirement savings will be forfeited if you go bankrupt. However, to prevent intentional protection of funds, any money put into registered plans in the 12 months before a bankruptcy (or longer) may not be subject to this new rule.

Several provinces (Manitoba, Saskatchewan, P.E.I., and Newfoundland) already provide creditor protection. Those laws will remain in place and the new federal law applies everywhere else. Quebec law protects some registered retirement plans but this new law appears to cover all RRSPs in Quebec.

All Canadians will benefit from this new rule change in the following ways:

– Retirement protection for small business owners:

In 2003, the Canadian Federation of Independent Business conducted a survey of members that found 91% of small business owners used RRSPs as a retirement savings vehicle. CFIB has been calling on the government to protect these retirement savings for years. Many small business owners and professionals put their personal assets at risk. The CFIB survey says only 28% of small business owners have already-protected formal pension plans. This rule will help small business owners protect one of their main retirement savings strategies while still investing other money in their business.

– Greater diversification:

As we all know, you should spread your investments around to reduce your risk. Before this amendment, if protection from bankruptcy was a concern for your retirement savings your investment choices may have been limited. Now you and your advisor can look at the universe of investments to choose what works best for your retirement portfolio.

- Potential fee savings: Bankruptcy-protected segregated funds have higher fees due to the creditor protection and other unique features. Investors can now work with their financial advisers to see if there are appropriate alternative strategies that can save them some money.

Most GTA – Greater Toronto Area -  financial advisers can help you determine if this rule change affects your personal financial planning strategies. Consult a Toronto bankruptcy expert to find out more details about how these changes could affect your situation. If you find yourself in financial difficulty consult your local non-profit credit counselling agency. Their counsellors can help you decide if bankruptcy is the right course of action for you.

Bankruptcy Toronto

I came across this very sad Toronto Sun story about an abusive collection agency that took harassment to a new level, phoning a debtors 81-year-old dad and a neighbour, telling them he owed money and he better pay up.

When the man’s 14-year-old daughter got a harassing call and was so overcome with fear she decided to offer $400 in babysitting money to help her cash-strapped dad get out of financial hot water, he cried. And called the Toronto Sun.

“I know I owe money and I’m not running away from it. But they’re harassing me, making me feel worthless. I’m not a deadbeat. I’m a hard-working family man who may lose my job,” says a sobbing 47-year-old Robert, who has worked on the line at General Motors for the past 27 years.

Robert is among a growing number of Canadians struggling to keep up with the bills, while a layoff looms.

Last week GM announced it would shut its truck assembly operation in Oshawa, putting 2,600 out of work. Robert is one of them.

With total household debt in Canada at a record $1.1 trillion and consumers owing 124% of real disposable income, many aren’t keeping their heads above water. Personal bankruptcies hit their highest level in more than four years in April.

In total, 8,035 consumers declared bankruptcy, as did 592 businesses. Some of the biggest increases were in Ontario, where the economy has been hit hard by a U.S. economic meltdown.

Up until a year ago, staying ahead of the bills wasn’t a problem for Robert, who earns a decent wage of $33 an hour. His 45-year-old wife earns $17 an hour working as a nurse in Whitby.

But this past winter Robert was laid off for 31/2 months and his wife was forced to take time off work to deal with skin cancer. After that, she had a scare with breast cancer.

Luckily Robert is not one of the cash-strapped Canadians who’ve borrowed against their home equity or opted to play the game of 0%-down mortgages or 40-year amortizations.

His $180,000 mortgage on a three-bedroom Oshawa home valued at $285,000 is in good standing. But with rising property taxes, it’s a struggle to fork out $1,700 a month on home ownership costs.

Then, there’s skyrocketing hydro bills (their home is heated by electricity), plus the rising cost of food, gas and insurance. One car now sits in the driveway of this two-vehicle family.

CREDIT CARD WOES

What got Robert in hot water was his Visa credit card. When he was out of work, he racked up debt of $4,600, and with interest and late payment penalties, the total now sits at $5,620. At first, he was able to make minimum payments, then all he could afford was partial payments. It wasn’t long before a letter arrived warning that he was in collections, and then the phone calls began.

“I tried to explain my predicament, but they were very rude. On the third call, they told me obviously I didn’t want to settle the matter and they would take other action,” he recalled.

Robert did the smart thing and visited a credit counseling agency for help. A consumer proposal was drawn up that sets out a repayment plan he can handle, while waiving interest, fees and late-payment penalties.

What he wanted to know from me was what were his rights when dealing with a harassing collection agency.

Laurie Campbell, executive director of Credit Canada, explains collection agencies have to abide by rules set out in Ontario’s Collection Agencies Act.

With the latest bankruptcy numbers indicating more and more loan defaults are on the way, she advises that consumers understand what an agency can and cannot do.

Campbell also points out it’s high-cost credit card debt that sinks families, a burden made worse by gouging interest rates that average more than 19% on standard cards, and head even higher when a payment is missed.

“It can be very stressful to manage your financial life when collection agencies start calling,” she said.

A review of Ontario’s Act reveals the collection agency dealing with Robert broke a few rules.

For starters, the Act is clear. An agency cannot contact a spouse, family or household member, relative, neighbour or acquaintance unless the person contacted guaranteed the debt. The only time they’re allowed to contact these people is to ask for an address or telephone number.

Robert is adamant. Not only did this collector call his father and a neighbour but spilled the beans that he owed money. “My father called me and said, ‘Bobby, what kind of trouble are you in?’ ” Robert recalls.

Another rule this agency broke was calling Robert at 6 p.m. on a Sunday. On Sundays or holidays, calls can only be made between 1 and 5 p.m.

And collectors can’t use “threatening, profane, intimidating or coercive language,” the act states, “or use undue, excessive or unreasonable pressure.”

According to Robert, not only was this collector intimidating but was urging him to sell his house.

Other rules include:

- A collector is only allowed to contact you six days after sending a written notice stating the name of the creditor, the balance owing, the name of the agency and its authority to demand payment.

- A collector can’t contact you if a registered letter is sent to the agency saying you dispute the debt and suggest the matter be taken to court.

- A collector can’t contact you if you sent a registered letter stating to deal solely with your lawyer.

- A collector may not contact you other than by ordinary mail more than three times in a seven-day period without your consent, once the agency has actually spoken with you.

- A collector can’t continue to contact you if you have told him you’re not the person he’s looking for, unless he takes reasonable precaution to ensure you’re that person.

- They can’t give false or misleading information.

- They can’t recommend to a creditor that a legal action be started against you without first sending you notice.

- They can’t contact your employer except on one occasion to obtain your employment information, if your employer has guaranteed the debt, if the call is in respect to a court order or wage assignment, or if you’ve provided written authorization to contact your employer.

If any of these rules have been broken, you can file a complaint with the consumer protection branch of Ontario’s government and consumer services ministry.

Meanwhile, for Robert money’s so tight, he’s considering signing up to test drugs for a pharmaceutical firm that will pay $3,600. Also, his 20th wedding anniversary is this Tuesday. Robert can’t afford much, so he asked that I print this message for his wife:

“Happy anniversary, honey. You have given me the best 20 years and the meaning of love.”

Debt Collection Toronto