How Do I Avoid Bankruptcy Court and What is it?

Bankruptcies come in many shapes and sizes, and each unique case brings something different to our understanding of how Canadian bankruptcy laws work. Bankruptcy court can be a standard occurrence or an opportunity to challenge the system and push for necessary reforms.

You likely didn’t click on this article to learn about challenging the bankruptcy system, you want to know that if you were to file personal bankruptcy – you wouldn’t have to go to court. We can promise you that you have very little to be concerned about, bankruptcy court is the exception for most bankrupts, not the norm.

bankruptcy court

What Is Bankruptcy Court?

In Canada we have a separate court system for addressing bankruptcy issues. If you are currently bankrupt and know that a court hearing will be held to apply for your bankruptcy discharge, you can rest assured that you won’t be bumping into any criminals at your hearing.

Most bankruptcy courts will schedule similar hearings on the same day. If you are in court because a creditor has opposed your discharge, other opposition hearings may be scheduled too. If you are attending because your Trustee is seeking an absolute order of discharge for you, there will likely be other bankrupts in court for the same reason on the same day.

Bankruptcy court is presided over by a specialized bankruptcy judge who is well-versed in the Canadian Bankruptcy and Insolvency Act. Your Licensed Insolvency Trustee will attend the hearing with you and you won’t have to face the court alone.

Does Every Bankruptcy Go To Court?

Not all bankruptcies end with a court hearing. In fact, the majority of bankruptcies do not see the inside of a courtroom. Most bankruptcies end with what is called an automatic discharge, a final document is issued confirming all debt included in the bankruptcy is officially “discharged” and must be written off by your creditors.

To obtain an automatic discharge a bankrupt must complete a set of duties to the satisfaction of the trustee. In this regard your trustee is an officer of the court who is responsible for ensuring every duty in the act is complete before issuing an automatic discharge. Your trustee must oppose your discharge if he or she cannot justify to the court that all duties have been completed during the initial bankruptcy period. Here are the general duties required of a bankrupt person:

  • Make all required payments to the estate
  • Attend two mandatory counseling sessions
  • Submit monthly income and expense reports, with paystubs and receipts for specific expenses
  • Report all assets to the trustee and provide any/all requested documentation to help value them
  • Stay in contact with your trustee and keep your contact information up to date
  • Provide information required to file your pre-bankruptcy and post-bankruptcy tax returns
Other Reasons For A Court Hearing

Not completing duties during the first 9 months of bankruptcy is a common reason for a hearing. Some bankruptcies go to court because a creditor chooses to oppose their discharge. Some may have been bankrupt more than twice in the past.

Any creditor can oppose a bankruptcy discharge if they have reasonable grounds and take on the legal expense. Here are a few common reasons that creditors may oppose your bankruptcy discharge:

  • High tax debt to Canada Revenue Agency. If you owe more than $200,000 and this represents at least 75% of your debt, CRA may request court.
  • Professional Student Loans. If you have borrowed money for professional studies such as to attend law school or medical school, some banks may choose to oppose.
  • Proof of fraudulent activity: when fraud is a concern for a creditor they may choose to ask the court to allow their debt to stand outside of your bankruptcy, making their debt remain collectible even after your discharge.
Getting Help

Even if you think court may be a possibility in your bankruptcy and need debt help please call 310-4321. A Spergel expert can review your circumstances and determine if there will be a risk of a bankruptcy court hearing. An alternative solution such as a consumer proposal may be a better. If not, we will help you through your bankruptcy and any court hearing(s) you may face. You owe it to yourself to become debt free, whatever it takes.

More Money, Fewer Expenses – How to Become Debt Free

During Janet and Bill’s debt free journey, they thought they had tried everything. Both had found ways to add extra money to their budget. Janet was selling products during her spare time and Bill had taken a second job. The couple had plenty of money, and plenty of debt.
Cutting costs where they could and saving money helped, but it didn’t make them debt free – they had too much to repay. One day Bill confided in a friend who told him about the time that a Consumer Proposal helped him become debt free…

Debt Free

Increase Your Income, Reduce Your Expenses

The first thing many people do when debt becomes unmanageable, is look for income outside of their regular pay cheque or cut costs. While both higher earnings and lower costs are good things, there is only so much you can do to have an impact on your debts. The amount of debt that you owe will ultimately determine what you should do to free yourself from it.

Asking for a raise, cashing out investments, or refinancing a home can all help to repay your debt(s). The smaller the debt load, the easier it will be to repay. You may need help negotiating larger debts. Where an investment is involved, it may not make sense to take on a tax debt or pay a penalty if the total debt load exceeds your available cash out value.

Cutting costs can be much easier and is a good idea for anyone struggling with debt. First create a monthly budget and be honest with yourself. Include everything you spend money on.  If you’re not sure, take a week and track your purchases via your bank account or by keeping notes on what you buy and spend money on. Once you have a good idea of where your money goes look for ways to adjust what you spend. Here are a few common examples of things we overspend on without noticing.

Common Household Expenses

  • Cable television
  • Hydro/Electricity
  • Coffee Shops
  • Groceries
  • Car Insurance
  • Cell Phone

All of these things can be potentially adjusted or changed. For example, if you are not watching all of the channels included in your cable television package, it might be time to get rid of it. Cable can cost upwards of $60.00 per month – cutting this cost could save you $720 a year or more. Other providers such as cellular service, internet and insurance, may be able to make account changes that will save you money. Contact your service providers if you haven’t made any changes to your service agreement recently. You may find that a new package or savings initiative can be applied to your account.

How you spend money on things like groceries, coffee shops and electricity are all things you may be able to change to add money to your budget by adjusting your habits. If you frequent coffee shops, even though you spend pocket change every visit, it will add up. For example, one $2 order daily, every 5 day work week for a year would add up to $480. If you clip coupons, shop for the best deals and take an organized list to the store with you, you can save money on your grocery bills. Saving on your hydro bill is as easy as keeping a tighter watch on your habits and sticking to using major appliances during off-peak rate times.

Meet With a Trustee

All of the cost-cutting measures in the world may not solve your problem if you have a lot of debt. While it’s a great idea to increase household income and cut expenses, if you’re still not debt free, you may need help.

Just like Janet and Bill, eventually you may find that your efforts to increase your income and cut costs are not having much of an impact on your debt(s). A consumer proposal may be the answer and it may be time to meet with a Licensed Insolvency Trustee. A proposal will help you negotiate and use your available income to offer a reasonable deal to your creditors.

With the changes you’ve already made to your income and spending habits, your proposal payment should be easy to manage. To find out more about consumer proposals call a Spergel trustee and book a free consultation to learn more, 310-4321.

Understanding Preferential Payments & Why It Isn’t Ok to Pay Overdraft to Keep your Bank Account

Going bankrupt is not without a few sacrifices.

At Spergel we meet people every day who are reluctant to switch banks for varying reasons. Many are afraid of giving up overdraft protection (and other banking privileges) during the bankruptcy process. However, this is a temporary change that we advise you to make in order to protect your income. We understand it’s not easy to open a new bank account and leave an established account behind.

Overdraft repayment risks

Making calls to move payroll deposits and automatic bill payments from your old bank to the new one can be a pain. Because of the headache factor, some people ignore the advice to leave their old bank account behind and pay off overdraft to avoid listing it as a debt. Here is what you should know about preferential payments and why it’s not ok to repay a significant overdraft (or any debt)  right before filing bankruptcy.

What is a Preference?

Paying off an account in full prior to bankruptcy fulfills a commitment to one creditor over the others. Essentially this is “preferring” to pay one debt over the rest of your debt.

Using the bank account example, paying off a $1500 overdraft just to keep an account open may or raise a few eyebrows. Using a credit card from another bank to pay off the overdraft right before filing could definitely get some unwanted attention.

The risk? Your creditors may find out about the preference payment and contact your Trustee.

How can you avoid falling into a preference situation?

Leading up to the decision to file bankruptcy, don’t make financial moves that could be preferential. Your creditors review recent account history and activity once notified of your bankruptcy. Some may also review the last credit report and loan application history on file. Since you must honestly disclose your existing debts, assets and income when applying for a loan or credit card, they may have a pretty clear picture of how much you should realistically owe and to whom.

Your creditors can go back a full year to look at account history to confirm that the information included on your bankruptcy documents are matching up to their records. When a bank or credit card company finds a discrepancy or something strange in your recent history they will typically write to your Trustee and ask for an investigation into your conduct.

What happens if a creditor finds out about a preference and complains?  

Your Trustee will investigate your conduct by speaking with you and informing you of the questions that have been asked. You will work with your Trustee to provide an honest response to the enquiry. Once your response has been received, the creditor will review and decide if there is any further course of action.

What can a creditor do about a preference?

A creditor has to right to pursue an unfair preferential payment. Fund transfers that could have been shared amongst all creditors may be reviewed and reversed. A creditor in receipt of a preference payment could be asked to return funds.  After which, a distribution to everyone you owe is made. A common outcome when a preference is made close to the beginning or shortly after bankruptcy. When the preference is older, you may be asked to pay more to make it right with your creditors. A preference can complicate and lengthen the bankruptcy process in some cases.

For example, using one card to pay off another card. Your previously “paid” debt will be reversed and included in bankruptcy. After the payment has been reversed, debt owed to the advancing creditor will decrease.

If you want to be sure that you won’t run into problems like this, contact Spergel today. Call 310-4321 to discuss your debts and develop a plan that will lead you to debt freedom without any trouble.

5 Questions You Should Ask About Consumer Proposals

Is a Consumer Proposal the same as a Consolidation Loan?

Bankruptcy may get a bad rap for being a strict process, but at least it has a rap to speak of. Bankruptcy’s not-so-distant cousin, the consumer proposal, often isn’t spoken of at all.

Consumer Proposal Questions

A consumer proposal may actually help you avoid bankruptcy. We recommend familiarizing yourself with the consumer proposal process. It is also a good idea to review this option with a licensed insolvency trustee. In the meantime, here are 5 questions you should ask about consumer proposals.

1. Is Your Budget a Good Consumer Proposal Fit?

If you are considering a consumer proposal, your budget is a good place to start. How much do you think you can afford to spend on debt repayment each month? Review your income and expenses with a Licensed Insolvency Trustee. Make adjustments to your expenses if you need to and see if it is possible to free up enough money to offer a regular payment towards a consumer proposal. If you think you will be able to afford to offer a deal to your creditors, a proposal may be the right debt solution for you.

2. Is a Consumer Proposal Better Than Bankruptcy?

Consumer proposals are not “better” than bankruptcy, they are just different. For example, bankruptcy is much stricter than a proposal and requires regular reporting of your income and expenses. The proposal process is subject to fewer rules and conditions. However, consumer proposals generally take much longer to complete and cost more than bankruptcy. A consumer proposal is a little “better” with regard to your credit score. Bankruptcy scores an “R9” on Equifax and Transunion reports and this is the end of the rating scale. A consumer proposal is an “R7” rating and or a bit of an improvement in exchange for the effort of repaying a portion of what you owe..

3. Will Your Creditors Accept a Deal?

Creditors have 45 days to vote on a consumer proposal and during this time they can accept, counter offer or reject your deal. We review who you owe money to and have experience with how these creditors generally vote in most cases. Every dollar owed to a creditor is equivalent to one vote in your proposal. If a creditor has more than half of the dollars owed – the “votes” – it is important to pay attention to how they vote. A creditor with the majority of votes may be in control of whether or not your proposal is accepted. Many proposals are accepted as filed or negotiated via counter offers. If you are not comfortable with a counter offer you are welcome to respond to it with your own counter offer and try to come to a mutual agreement.

4. How Long Will a Consumer Proposal Take?

The maximum payment arrangement allowed under the Bankruptcy and Insolvency Act is 5 years (60 months). Creditors cannot ask you to extend your offer beyond this timeframe. Your creditors cannot You always have the option of accelerating payments and paying off the proposal early if you can afford to.

5. Why Choose a Consumer Proposal Instead of a Bankruptcy?

The most common reasons for selecting a consumer proposal instead of a bankruptcy are assets, income and current employment or past history. While your assets vest with your LIT during a bankruptcy, they are of no consideration in a consumer proposal. In a bankruptcy, if you earn more money it is likely that you will pay more for your bankruptcy. Once the voting period ends the amount you pay is fixed. You can earn extra income and not be subjected to any penalties. Some employment situations will mean that you cannot be bankrupt but you can file a consumer proposal.

If you’ve been bankrupt before, a proposal may be a better solution. The bankruptcy itself will be longer (expect a term of 24 months – 36 months if your income is good). Your credit report will display the information for a longer time. A penalty of 14 years of reporting will apply. Conversely, a consumer proposal will disappear from your report approximately 3 years after you make your final proposal payment.

If you think that a consumer proposal may be the right direction for your path to debt freedom, we can help. Call a Spergel LIT today, 310-4321 and review your potential offers for affordability. Give us a time with your budget and we’ll help you decide if a consumer proposal will work for you.

Survival Tips for the Self-Employed: How to Avoid Debt Problems

Being Your Own Boss 101 – Here’s What You Need to Know to Avoid Debt Problems

Ask anyone who operates as their own boss and you’ll likely hear stories of debt problems. Realistically, it costs money to make money in the world of business. Many new ventures start in the proverbial “red” with a solid plan to turn things around in the shortest possible time-frame.

Self Employed Survival Tips

A significant number of new business owners will encounter a snag or two in their business plan, some will not survive as long as others. Debt is par for the course for a new entrepreneur. Unfortunately, debt problems can occur at any time during the life cycle of a business.

When debt becomes unmanageable, some businesses can’t bounce back. The level and type of debt that business owners face can grow rapidly with interest and penalty charges. During 2017 alone there were 2,700 business bankruptcies filed in Canada.

Here are a few tips to help you avoid the serious debt problems that lead many business owners to prematurely close up shop:

Avoid Tax Debt Problems

Avoiding problems with tax debt begins with how you set up your business. Seek help from an accountant before setting up tax accounts, incorporating, or registering a partnership. Tax professionals will know what the best fit is for your operating activities and this can save you time and money in the long run with Canada Revenue Agency.

Filing your taxes and paying what you owe on time is integral to maintaining a good relationship with CRA and operating your business in a way that will not result in any tax debt surprises.

Take Advantage of Alternative Financing Options

Many business owners visit their small business representative at the bank they use to seek funding when they are short on cash. When they are turned away because they don’t meet the lending rules they give up on finding a loan or borrow from a lender with high interest rates. Securing funds via an alternative method designed just to help with business cash flow may actually help you avoid debt problems later on. Seek out a corporate financing professional for advice.

Keep Good Books & Records

Common sense dictates that you can’t really run a business effectively if you aren’t keeping good books and records. Organization will help your business account for every cent you earn and all of the dollars you spend. A good filing system will also ensure that you don’t lose any important documents or tax deduction receipts.

Review Your Finances Regularly

With the great books that you are keeping, you should be able to access information to help you stay on top of your business. A regular review of your receipts and disbursements, you can spot inefficiencies and losses before they cost you too much. Saving money and knowing where to focus your spending will help you monitor inventory, determine where to spend your marketing dollars, and much more. Wherever your business is over-spending with little return on investment will become clearer.  You may be able to improve your cash flow by tightening up and re-allocating money to a different expense.

Get Help

If you’re self-employed and already struggling with debt problems, you may need to completely overhaul your personal and business finances. Sole proprietors can always file personal bankruptcy or a consumer proposal to wrap up business-related debt. Corporate business owners may have other options depending on the type of debt and amount owed. To learn more about your options please call 310-4321.

What you Should Know About Bankruptcy and the 2018 Ontario Provincial Election

Our 25th Premier, Kathleen Wynne has now served in office since 2013. By the end of the day our political landscape may look very different. If you’ve been considering, or have recently filed personal bankruptcy in Ontario – you may be wondering if a change to “the guard” in Toronto will have an impact on you.

Election Day 2018

Bankruptcy Changes are Federal Changes

The Bankruptcy and Insolvency Act of Canada (BIA) is federal legislation. However, Canadian provinces do create laws and rules that can have an impact on very specific aspects of the process. Overall, major changes to how bankruptcy works is always made at the Federal level. The outcome of today’s election will not result in major reforms to bankruptcy law.

Presently, and by extension, it is Prime Minister Trudeau and the Liberal party that always has the final word on proposed changes to the BIA. Here is a brief history of the BIA in Canada:

  • The BIA came into force on July 1, 1920
  • The first round of big changes to the BIA came in 1992, 1997, and 2005
  • Major reforms 2007-2009

The most recent BIA changes took a long time to be fully integrated. Knowing how slow changes to bankruptcy laws can be, even if our Premier could make changes at the provincial level, it is clear that the 2018 election campaign did not make any mention of reform to the BIA.

How Provinces Can Impact Bankruptcy

Canadian provinces may not be able to change the BIA itself, but sometimes our provinces take a different approach to interpreting and enacting the rules and guidelines set out by the federal government.

Assets are a good example. In Alberta the first $40,000 of equity in a bankrupt person’s principal residence is exempt from seizure in bankruptcy. Ontario’s exemption amount is $10,000 and subject to specific conditions. Tools of the trade exemptions also vary from province to province. Prince Edward Island exempts tools used in your business or trade up to a maximum of $2,000. Ontario’s maximum is set at $11,300.

While provincial asset exemptions may vary, the fundamental principles of how bankruptcy works in Canada does not.

Bankruptcy Law is Paramount

Regardless of any changes our current election may or may not bring to Ontario, bankruptcy law is always paramount. The BIA is the authority on bankruptcy, regardless of what happens at any other level of government. The law dictates that legal activity against the bankrupt must stop.

A great example is when a couple separates in Ontario and writes an agreement to “assume” joint debt. In this example bankruptcy law overtakes family law. The joint debt will go away for the bankrupt but the other joint party will still be legally responsible regardless.

Should we expect a push for change in Ontario?

Candidates in the 2018 election have not addressed bankruptcy reform, and have presented more pressing issues while campaigning. If you are recently bankrupt or considering bankruptcy give us a call at 310-4321. We will review your circumstances and offer the path that leads to debt freedom.

5 Financial Tips to Help Prepare you for Summer Vacation

Whip your Finances into Shape before School is Out

June marks the end of the school year – and with it comes the full-time need to occupy your children’s week. For parents dealing with debt, financial costs associated with camps and other activities may not be in the budget this year. No parent wants to deal with bored kids during summer break, so what can you do to make summer vacation better for your family when money is tight?

1 DIY is your friend

The internet is full of DIY projects so join the do-it-yourself revolution. Pinterest, for example, is a great source of ideas that you can easily adapt for a very low cost. Save things like egg cartons, cereal boxes and other recyclable items that can be used for crafts. Visit the dollar store for supplies like glue, popsicle sticks, paint and glitter. You may be pleasantly surprised to see how many things you can get on a very low budget.

Budget for a monthly trip to the dollar store to re-stock your craft supplies and choose projects that will engage the kids and get them outside to play.

Try something that will be both a craft and an outdoor activity like this pool noodle sail boat racing idea.

2 Look at your equity

If you haven’t spoken with a mortgage broker recently, or if you know your mortgage renewal is approaching, look into using some of the equity in your home to pay down your unsecured debt. If you have credit card debt and your interest payments are eating up your extra cash, you may be able to consolidate and use your home equity to catch up. Freeing yourself from debt that is weighing you down may help you find funds to take your family on a summer road trip or pay for day camps and activities that may be of interest to them.

3 Re-assess your “indoor” expenses

Spending more time outdoors means relying less on the television and internet to entertain your family. Using less hydro in the summer may be a good reason to call your utility provider and request an adjustment to your monthly bill. Most hydro companies will also come in for a free assessment of your biggest costs. You can take advantage of this help and find out what is driving your hydro costs up so that you can make adjustments and save money. Cancel cable or drop to a lower cost package.

Use the stove less. Prepare cold meals or barbeque instead. Try one of these creative cold lunch ideas and feed your family without using the oven during high-peak hydro hours.

4 Make saving for an end-of-summer event fun for everyone

If money is tight and you can only afford one “big” fun thing for everyone to do this summer, make it a family goal that everyone participates in. For example, if you would like to take the kids to Canada’s Wonderland in August. Calculate the total cost for the day including gas, food, admission, and spending money for souvenirs. Once you have a total number, create a place in the home where the entire family can see your progress towards the goal. Invite your kids to help “save” for the event. Have a garage sale, or help the kids set up a lemonade stand. Let the kids “donate” allowance money to the trip, or even offer allowance matching if you can afford it (if your son decides to put $5.00 from his allowance into the CW Jar, you would also put $5.00 in to match).

Engaging your kids in saving with you is also a great way to start teaching them about money management.

5 Get help

If you have a lot of debt and small adjustments to how you spend your money just won’t cut it, get some help. Your financial future depends a lot on the choices you make today. A consumer proposal or bankruptcy may be the fresh start that you need to get back on track with your finances.

If you would like to request a free review of your financial situation and learn more about options that can reduce your debts, professional advice is available. Call a Spergel expert today, 310-4321, and we will help alleviate your financial stress so that you can focus on planning your next summer vacation.

When Bankruptcy Ends: What’s Next? 

How to rebuild your finances after bankruptcy and what to expect.

Finding information about how to file for debt relief is easy to find. The internet is also full of information about how bankruptcy impacts your credit score. What may be a bit harder to find is information about what to expect after your bankruptcy ends.

Knowing what to expect after bankruptcy can have a big impact on your decision making process. Nine months ago in August 2017 4,945 people filed personal bankruptcy in Canada. Many of these bankrupts are receiving discharges from the process right now and they may or may not be sure what their next move should be.

After Bankruptcy – Year One

When you complete the bankruptcy process you will receive a certificate that confirms your “discharge”. Keep this document in a safe place because you may need it in the future and it will typically cost you money to replace it if you lose it. You also should keep a copy of the original documents signed with your Licensed Insolvency Trustee.

Taxes are a part of the bankruptcy process that can be confusing. It is possible to have to submit tax slips after the bankruptcy ends. You are required to send in your tax slips after you are discharged if you filed between January and April. If you filed between May and July, while you won’t be discharged until the new year, you will be discharged before the income tax deadline and required to submit tax slips after your discharge. If you waited until August or later in the year, you will not be discharged until after the tax deadline and will submit slips during your bankruptcy.

During the year after your bankruptcy the best thing you can do for yourself is save as much money as you can, spend wisely and avoid getting into any more trouble with easy lending such as payday loans.

Since you have already adjusted your budget to afford your monthly bankruptcy payment, try saving this money. Make the same monthly payment but send the money to your savings account or retirement savings plan.

Years Two – Six

Bankruptcy stays on your credit bureau report for about six years after the process is complete. During this time you can apply for new credit to help you rebuild. We recommend that you begin with a secured credit card. If you have been saving money during the year after your bankruptcy you may already have a deposit to work with. Apply for a credit card that requires you provide funds as “security”, start with a small balance card perhaps $300 or $500 and use the card regularly to make purchases. Be sure to pay the balance owing in full by the due date every month to improve your credit score and get your deposit back.

The best advice we can give to someone during these years is that slow and steady wins the race. Don’t rush into anything financially and remember that your credit report will show that you were bankrupt..Wait until you are sure that you are ready to apply for things like overdraft or loans, have a steady source of income and can afford to make payments to avoid paying interest.

After Bankruptcy – Year Six

Approximately six to seven years after bankruptcy you will want to pull your Equifax and Transunion reports. A quick review of these reports is important to ensure that everything looks the way it should. Your bankruptcy and the debts included in it will drop off of your report and this should happen automatically. If you notice any discrepancies you should contact the credit bureau and complete a correction form to have the issues fixed.

Remember the discharge certificate and creditor’s package we told you to keep safe? Now, after six years, it is the time to bring out these documents and double check your reports, both Equifax and Transunion.

If you are considering filing personal bankruptcy we can help you through the process and provide you with the information that you will need to help you when the process ends. Please call a Spergel Licensed Insolvency Trustee and book a FREE consultation at the office location that is most convenient for you. The path to debt freedom begins by dialing 310-4321, what happens next is up to you.

Causes of Debt:  Three Joint Debt Tales

Many couples want to know if their joint debt can be applied to just one of them to allow their partner an easier fresh start. The answer is disappointing – where there is joint debt there is also a non-transferrable joint responsibility.

The problem with joint debt is that even if one person is responsible for creating the debt; both co-signors are accountable to make payments. Even worse, an unpaid balance is subject to interest charges – regardless of who is stuck with the bill.

For this reason, it is no surprise that we meet many people who have had joint debt in the past and experienced a break up or falling out with a co-signor. Frustration, anger, sadness and bitterness are among the feelings that many people in this situation experience. You’re not alone if you have been stuck with debt because you co-signed for someone who didn’t pay. Here are three stories of how joint debt became a problem in three distinctly different scenarios:

The Retired Spender

Mr. and Mrs. Spender were recently retired when Mr. Spender decided he wanted to upscale his lifestyle with a few major purchases. Mr. Spender convinced his wife to leverage their assets to obtain loans to pay off existing credit card debts. Once the couple had paid off all of their debts Mr. Spender approached his bank to obtain a secured loan for a brand new truck and a brand new trailer to go with it. Mr. Spender planned to enjoy long camping trips with his new toys. Mrs. Spender was required to co-sign.

A few years later the couple sold their home, split up and both filed bankruptcy.

Where did things go wrong? Mr. Spender had over-financed for his fixed pension income, dipped back into credit card debt and thrown off the healthy balance of his family budget. Because of his expensive loans he created more debt, could not afford his payments and had to give up his truck and trailer. Once the items had been auctioned, Mr. and Mrs. Spender had to file bankruptcy because they could not afford the remaining debt for loans that were barely paid down by half.

The Bad Breakup

Money creates stress for many couples. When money is at the root of a bad breakup, things can get really ugly. Mrs. Heartbreak and her ex-husband were not on speaking terms. She didn’t know where he was, he hadn’t been sending her any child support and she was a struggling single mom. Mr. Heartbreak had left her with a variety of debts including past due amounts for all of her utilities and a few months of unpaid rent to catch up on. Out of nowhere the phone calls started.

First, the calls were for her ex and then they started asking for her. Mrs. Heartbreak remembered all of the papers her husband had asked her to sign, and began to suspect there may also have been some she didn’t. She eventually filed her own bankruptcy to clear away the joint debt.

The Business Partner

Couples borrowing for personal reasons don’t always face the same stakes as business partners investing borrowed capital into a new venture. Partner One considered himself an investor and relied greatly on the efforts of Partner Two to build their new restaurant. One knew the risk when he agreed to work with Two.

When Two begins defaulting on payments for business loans, credit cards, payments to suppliers and government remittances, One is not paying attention. Two eventually files bankruptcy, walks away from the restaurant and leaves a financial mess for One to clean up.

What is common about these stories is that many co-signors don’t see the problem until it is too late. Our best tip for anyone considering sharing a debt with someone else is to pay close attention. If you have a joint debt, always keep track of payments and address a missed payment right away.

Anyone who is haunted by an old joint debt, please call 310-4321 for advice. Bankruptcy and Consumer Proposal options are available when your debt becomes unmanageable. Don’t jeopardize your balanced budget to struggle with debt repayment for a mess that you didn’t create. We can help you get rid of that joint debt.

5 Garden-Inspired Budgeting Tips For Healthy Personal Finances

We refer to plant-savvy gardeners as having a “green thumb” – but maybe the same can be said for budgeting savvy people who have a knack for managing personal finances. Canadian money comes in an array of colours but the colour green is typically associated with money.

In the garden we nurture our plants and flowers so that they will grow strong and healthy. So why don’t we apply the same perspective to money management? Here are 5 gardening tips that can be just as helpful for budgeting as they are for your backyard.

1. Annual and perennial budgeting

A gardener has to know the life cycle of the plants in his/her garden. Annual plants need to be replanted each year while perennials regrow every spring. A well-balanced budget will also take into account the different types of expenses we have. Some expenses are what we call “irregular”. Irregular expenses are costs you incur periodically, and not always at the same time of year. For example, vehicle maintenance costs or repairs can occur at any time of year. A strong budget will make room for savings that can be used for surprise expenses when they pop up. Regular expenses are the ongoing monthly bills we pay for things like housing, food and transportation.

A budget-conscious person may want to add up all of their irregular expenses from the previous year and create a plan. The easiest way to include these expenses in your budget is to divide the total by 12 months or the number of pay periods you have (26 if you are paid bi-weekly, 52 if weekly) and put that amount into savings every time you get paid.

2. The power of a good foundation

Gardeners know that plants need nutrient-rich soil, sunlight and water to grow. A strong budget is based on a solid foundation too. Too much debt can make it impossible to save money and paying too much interest will eat up any extra money you may have. If you don’t have a strong foundation for your budget you will find it harder to balance your income with your expenses. If debt is a problem for you, start with that – a bankruptcy or consumer proposal may be your first step towards prosperity.

3. Sunlight versus shade

Anyone who has ever tried to create a garden will know that some plants require a lot of sunlight while others need a little shade throughout the day. When it comes to budgeting the same theory applies. Some expenses need more light than others. For example, groceries require constant, ongoing attention. We shop regularly for food and should always be looking for the best deals and value. Car insurance can reside in the shade where we only review it if we make a change to where we live, what we drive or if it is the time of year to renew our policy. Knowing which expenses to focus on and when is as important as planning where to plant the sun-loving flowers in our garden.

4. Planting seeds

Garden centers offer seeds for planting as well as trays of annual and perennial flowers already in bloom. A great budget will incorporate short-term financial goals and long-term goals that need time to grow. Planting financial seeds for the future is also an important part of a healthy budget. Some expenses should be for now and others for later. Retirement savings is a perfect example. Planting seeds now is the way to grow savings for your golden years.

5 Pulling weeds

Pulling weeds is an ongoing chore that will keep your garden healthy. A healthy budget requires a little pruning from time to time as well. Consider the warning signs of financial difficulty as financial weeds in your budget. At the first sign of financial trouble, (“living in overdraft” or over-using credit cards) pull the weeds and get back on track. When debt begins to take over your finances just like weeds overrunning a garden – get help and explore your options as soon as possible.

If you have debt or are finding it difficult to manage your day-to-day finances – get some advice. Spergel’s Licensed Insolvency Trustees have a “green thumb” when it comes to budgeting and dealing with debt. We can help you cultivate and nurture your best financial future. Please call 310-4321 today for your free consultation.