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Bankruptcy and My Income

Posted by in Bankruptcy
Dec 2019

When it comes to bankruptcy in Canada, many are unfamiliar with how surplus income affects your bankruptcy process. In general, surplus income is your monthly income during the time you are bankrupt—basically, the higher your income, the more surplus income you will have to pay.

How surplus income affects your bankruptcy process?

Many sole proprietor owners and self-employed individuals think that after filing bankruptcy in Canada, you are removed from making any payments to creditors. However, this is a misconception. Almost immediately after declaring bankruptcy, your surplus income will need to be calculated and discussed with your trustee based on a government formula.

Before filing for bankruptcy, you need to consider many things. First, let’s outline the misconceptions of declaring bankruptcy and outline the advantages if you decide to file for it.

Common Misconceptions about Bankruptcy

Your debts are piling up, and you can barely make the minimum payments. You think by filing for bankruptcy, you’ll be off the hook, right? Not necessarily.

Here are the common misconceptions debunked when you go bankrupt:

Once I file for bankruptcy, can I avoid legal action?

Yes, you can avoid legal action taken by your unsecured creditors. Once you declare bankruptcy, bankruptcy law covers you under something called an ‘automatic stay.’ The automatic stay means that creditors are no longer able to collect unpaid debts prior to you filing for bankruptcy. However, you must agree with your trustee to make surplus income payments because if you fail to do so, you remain bankrupt.

Is it cost-effective to file for bankruptcy?

Depending on how much your debts are, declaring bankruptcy might be a cheaper option because you will no longer have to pay creditors high-interest rates. Your surplus income will have a positive effect on debt recovery.

When I declare bankruptcy, will I no longer have to pay my other debts?

No. That’s not the case at all. Debts you will still owe during bankruptcy are: spousal and child support, fines that are mandated by the court, and student loans. Student loans are exempt when the individual has been out of school for more than seven years.

Now that you know which misconceptions of bankruptcy are debunked, here are five reasons why surplus income is important for debt recovery:

Surplus Income affects Length of Bankruptcy

Your surplus income is based on your monthly net income and your number of dependents; a government formula is used to see if you come under this rule.

How long will you be bankrupt?

It depends. If your net income does not meet the government limits and this is your first bankruptcy, you won’t have to make surplus income payments. If this is your case, you can expect to be discharged from bankruptcy in 9 months.

For those who are on the first bankruptcy and need to pay surplus income, you can expect the bankruptcy to last 21 months. If this is your second or third bankruptcy, you need to pay surplus income for 36 months.

Surplus Income Payments are Legally Binding

Not only does surplus income payments affect the duration of your bankruptcy, but you are legally bound to pay them according to the Bankruptcy and Insolvency Act (BIA). If you miss your payments or fail to report your monthly income, you prolong your bankruptcy process, and your debts will not be discharged.

The More You Earn, the More You Pay

During your bankruptcy process, your income might fluctuate. It’s important to understand that during this period, all sources of non-taxable and taxable income are included in your surplus income payments. Your net income is always included, along with pensions, child tax credits, and spousal and child support. If you start receiving other monies, it will increase your monthly surplus income. If your income goes down, your required payment will go down.

Go to Meditation if You Can’t make Surplus Income Payments

If you started making your surplus income payments to your trustee, but cannot make them during the middle of your bankruptcy process, you can request for surplus income mediation. During the mediation, an extension of time to make the required surplus income payments will be decided between you and the trustee.

Opting to mediation is better than avoiding payments altogether, as not making the payments results in staying bankrupt.

Regular Income Reporting is Mandatory

Along with making your surplus income payments regularly, it’s mandatory to report your monthly income or any changes to your financial situation to your trustee. Also,if you change your phone number, move houses, leave the country, take on a new job or lose a job, you must report this information to your trustee.

Good communication with your trustee and making your surplus income payments will help the bankruptcy process proceed smoothly.

As you can see, filing for bankruptcy doesn’t let you off the hook completely. You must take into account that you may have surplus income payments.

If you are a small business owner in Toronto, the GTA, or Southern Ontario looking to file bankruptcy, these payments determine how long you will be bankrupt. But don’t worry, we’re here to help.

To learn more about why surplus income payments are important for debt recovery, call Kevin Thatcher & Associates at 1-866-702-9801 or contact us here.

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What Are Surplus Income Payments?

Posted by in Bankruptcy
Dec 2019

When self-employed and sole proprietor owners get overwhelmed with debt, many file for bankruptcy to gain a fresh start. However, after you have filed for bankruptcy, you might have to make monthly payments known as surplus income payments.

What are surplus income payments?

It’s important to know when you declare bankruptcy what your income is and if it will change in the near future. If you are working during your bankruptcy process, you may have to make surplus income payments.

But how will surplus income affect you? Here are the ten most common questions answered regarding surplus income and surplus income payments:

1. What is the definition of surplus income?

After you declare bankruptcy, the Office of the Superintendent of Bankruptcy has a formula that must be used to calculate the amount of your monthly payment based on your current income, family size, and financial situation. If you do not fall under these rules you just pay the basic fee.

2. What are surplus income payments?

If your income exceeds the Office of the Superintendent of Bankruptcy’s standard, you will have to make surplus income payments to your trustee. Keep in mind, the higher your income is, the higher your surplus income payments will be.

Having dependents such as children affects your surplus income payments. For example, if you have children, you would pay less surplus income payments based on the number of dependents than a couple without children earning the same income.

3. How is surplus income calculated?

First, you must submit proof of your income to your trustee every month. This includes:

  • Payment statements or stubs, RRSP and RESP contributions, spousal support, child tax benefits, and other financial obligations you need to pay. You also need to report any other sources of income you receive, such as monetary loans from family or freelance income from odd jobs.
  • Your trustee will tally your monthly amount and apply the government formula.

If your take-home income doesn’t have a surplus income, your trustee will expect you to make monthly minimum payments to cover the administrative costs of the bankruptcy (their fee).

4. How long do I have to make surplus income payments?

First-time bankruptcy individuals should expect to make surplus income payments for 21 months. For those on a second bankruptcy, payments will last for 36 months. For a third bankruptcy and any following bankruptcies, payments will last for 36 months, and the bankruptcy court may decide further payments.

5. What if I stop making my surplus income payments?

It is the trustee’s job to collect these payments on behalf of your creditors. If you stop making your monthly surplus income payments to your trustee as required, you prolong your bankruptcy process and will not get an automatic discharge. Instead, your case will be sent to the bankruptcy court. The court will then decide how much longer you will stay bankrupt and any amount to be paid.

As a general rule of thumb, if you decide to file bankruptcy, you must accept that you will have to pay your surplus income payments to get discharged.

6. How does my fluctuating income affect surplus income payments?

In the case of fluctuating income the amount of surplus income is based on an average over the required period (21 or 36 months).

7. Is surplus income calculated before or after tax is deducted?

Surplus income is calculated based on your income after tax and other basic deductions.

8. What if I don’t agree with the surplus income payment amount?

If you don’t agree with the surplus income amount required, your trustee will request mediation with the Office of the Superintendent of Bankruptcy to determine if any adjustments are possible.

9. Can I avoid making surplus income payments?

No. Once you decide to file bankruptcy, surplus income payments cannot be avoided. If you don’t think you can make monthly surplus income payments, talk to your trustee about a consumer proposal or perhaps lowering the monthly payment to the trustee but staying bankrupt longer..

10. How will my surplus income affect the bankruptcy process?

It’s essential to make your monthly surplus income payments to stay on track with the bankruptcy process. In instances when you stop making payments and don’t catch up, your trustee will notify the bankruptcy court about your missed payments. When you don’t pay, you won’t get discharged from bankruptcy.

The bankruptcy laws allow you to get control back of your finances; although you are obligated to pay surplus income payments. As you can see, if you are a sole proprietor owner or self-employed individual in Toronto, the GTA, or Southern Ontario looking to file bankruptcy, these rules on Surplus Income are something you must be aware of.

To learn more about surplus income payments or if you have any questions, call Kevin Thatcher & Associates at 1-866-702-9801 or contact us here.

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Five Effective Ways to Avoid Bankruptcy

Posted by in Bankruptcy
Nov 2019

For most small business owners and self-employed individuals, filing bankruptcy in Canada should be carefully considered.

What are the effective ways to avoid bankruptcy?

First, we’re going to outline the advantages and disadvantages of filing for bankruptcy —- you need to weigh the pros and cons of bankruptcy. Then, we will discuss five effective ways to avoid bankruptcy that you can include when making a plan of action.

Advantages of Filing for Bankruptcy

You need to weigh the pros and cons before filing for bankruptcy. This decision will depend on how much debt you are in, your income, and your living standards. Here are the advantages of filing for bankruptcy:

  • You are no longer obligated to pay most debts
  • You no longer need to make direct payments to creditors
  • Your wages will stop being garnished (does not include support payments)
  • Unsecured creditors can no longer take legal action against you to collect debts covered by the bankruptcy
  • Collection agencies and creditors will stop making harassing calls as the debt has legally been dealt with.
  • Once your bankruptcy is discharged, you can start a new financial future

Disadvantages of Filing for Bankruptcy

You should also be aware that declaring bankruptcy places you in financial restraints with these disadvantages:

  • Your bankruptcy will appear on your credit report for 6-7 years
  • You must surrender all credit cards to the trustee
  • Some assets may have to be surrendered to your trustee whose job it is to realize upon the assets for your creditors
  • You will be required to keep detailed records of your income and expenses during your bankruptcy

Many people think that filing for bankruptcy rids you of all debts. However, certain types of debt will remain. Debts you still owe after bankruptcy include:

  • Alimony
  • Car loans (if your choose to keep your car)
  • Child Support
  • Debts caused by fraudulent activity
  • Fines or penalties imposed by the court
  • Mortgage (if you choose to keep your property)
  • Student loans (if you have attended school in the last 7 years)

Now that you know the advantages and disadvantages of filing bankruptcy, here are five effective ways to avoid bankruptcy that are practical and can help your financial future.

1. Sell your personal assets

Selling some of your assets is a temporary solution to trimming down your debt and keeping your credit rate afloat. By informing your creditors that you are planning to sell your personal assets, they will usually give you a timeframe to pay down your debt. Keep in mind that this may result in the need for life-style changes.

The disadvantage to selling your personal assets is that you most likely need these belongings in life. You need to take a step back and evaluate how important these assets are and if you can survive life without them. It might seem like a quick fix to pay off your debts by selling your assets; however, in the long-run, it could affect your financial future. Remember, if you decide upon bankruptcy you get to keep basic clothes, furniture, and a basic vehicle.

2. Live on a budget

Next to selling some of your assets, personal budgeting can do wonders for paying off your debts. Before filing bankruptcy, you have to ask yourself, “Can I afford to repay my debts on my own?”

If you think ‘yes’ or ‘maybe,’ we advise you to create a personal budget, outlining how much your monthly income is and how much you have available to pay off your debts. Then, list down the amounts of each debt and monthly payments, and calculate how long it will take to pay them all off.

A great way to start budgeting is to write down what you spend each day; do this every day for a month. Now add up the amounts by category (auto expenses, groceries, etc.) so that you know where your money is going. Now you can set your priorities.

3. Filing a consumer proposal

When you file a consumer proposal, you need to outline the amount you owe to your creditors and offer to pay them a percentage of the amount owed based on what you can afford and offering at least what they would get in a bankruptcy. It’s also a chance for you to propose a timeline to deal with the debt at an amount you can afford.

For example, if your debt is $100,000, the consumer proposal may offer to pay 40% of that debt within five years. If the creditor agrees to the payment terms in your consumer report, it’s a legally binding contract, and you must make payments.

A great benefit of a consumer proposal is that the amount agreed to is fixed. There are not any interest charges.

You cannot file a consumer proposal on your own. Filing a consumer proposal requires the services of a Licensed Insolvency Trustee such as Kevin Thatcher & Associates Ltd.

4. Cut spending

There are two ways to fix a budget:

  1. Increase income
  2. Decrease spending

Cutting your spending goes hand in hand with personal budgeting. Being diligent in all aspects of your spending will help you save in the long run. If you want to get creative with personal budgeting and saving money, check out how to budget creatively and be debt-free.

But to save money, you must spend less money. Penny-pinching might be a tedious thing to do, but at the end of the month, it does save you dollars and cents.

5. Seek professional debt counselling

If you don’t have a lump sum of money, but feel you can pay off your debts over a period of time, debt counselling may be a good choice. During the debt counselling process, we can help you create a debt management plan where you outline a payment plan that will enable you to pay your debts in full.

Remember, before you file for bankruptcy, you can try to prevent it. You can consider:

  • Selling some of your assets
  • Living on a budget
  • Filing a consumer proposal
  • Cutting spending
  • Getting professional debt advice

To learn more about how you can avoid going into bankruptcy, call Kevin Thatcher & Associates at 1-866-702-9801 or contact us here.

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10 Questions Answered on How Bankruptcy Affects Your Business

Posted by in Bankruptcy
Nov 2019

With such a large number of start-ups and businesses in Canada, self-employed
individuals are prone to run into debt problems. When these debt problems get overwhelming, small business owners may need to file for bankruptcy to gain a fresh start.

How bankruptcy affects your business?

When an individual files for bankruptcy, this is considered personal bankruptcy. In legal terms, as a sole proprietor, the assets owned from the individual filing for a bankrupt business are not separate assets from the business.

If you are a sole proprietor owner in Canada and have to file bankruptcy for your business, here are ten common questions answered on how filing bankruptcy will affect your business.

1. Can I continue to operate my business after filing for bankruptcy?

The answer is yes. However, there are distinctions. Here are the specific distinctive factors that small business owners face.

If the small business is incorporated, then it will be the business that files bankruptcy due to it being a legal entity. Incorporated businesses have certain assets that will be sold by the Licensed Insolvency Trustee (LIT) to use the funds to pay off the creditors of the corporation. However, often there is little benefit to the corporation going bankrupt.

It’s important to understand that incorporated businesses can continue to be operated; however, the owner can face difficulties accessing business credit and unpaid suppliers may not want to work with the corporation going forward.

In the cases of a partnership or sole proprietorship, the individual(s) files for personal bankruptcy as this business is not a separate entity.

2. What happens to my assets after I file for bankruptcy as a sole proprietor?

After a small business owner files for bankruptcy, the individual might lose some of their assets. However, legally, small business owners can get a bankruptcy exemption called “Tools for the Trade.”

This exemption in Ontario covers an amount of up to $11,300. The amount of the exemption varies from each province in Canada. Be sure to check on the amount according to the province where the business is located.

3. Will I lose everything after I file for bankruptcy?

No. You will be able to keep some of your belongings, such as clothing, furniture, and a basic car. In terms of a house, depending on the circumstances, those who file for bankruptcy will be able to keep their home as they’re still responsible for paying the mortgage. However, any equity you have in the property is an asset the trustee must realize for your creditors.

4. Which debts are eliminated by filing for bankruptcy?

After filing for bankruptcy, most debts can be eliminated, including:

  • Credit cards
  • Lines of credit
  • Unsecured debts
  • Income tax debts
  • Payday loans

5. Which debts will I still owe after filing for bankruptcy?

Debts you still owe are:

  • Alimony
  • Car loans (If you choose to keep the car)
  • Child support
  • Court fines or penalties
  • Employment Insurance Overpayments
  • Mortgage (If you choose to keep the property)
  • Secured Lines of Credit
  • Student loans, if the business owner has not been out of school for more than seven years.

6. How is income determined after filing for bankruptcy?

Almost all money you receive is considered income. Your monthly income is compared to Federal Income Standards and if you are over their ‘line’, Surplus Income rules apply based on a government formula to determine your monthly payment.

7. Will it be difficult to get credit afterwards?

Yes, those who file for bankruptcy will face difficulties accessing future credit. Upon filing for bankruptcy, all credit cards must be surrendered to each credit card company; this includes those with zero balance. Credit card accounts will be frozen and be named creditors in bankruptcy.

Bankruptcy can stay on your credit report for seven years. However, once the bankruptcy is over and you’re discharged, getting a secured credit card will usually result in creditors working with you after using the card for a year.

8. Can I include tax debt when I file for bankruptcy?

One of the largest amounts in debt owed for small business owners is income tax. Tax debt can be listed in your bankruptcy. However, the exceptions include if the Canada Revenue Agency (CRA) has set a property lien before the business owner filed bankruptcy. This should be looked at as if Canada Revenue Agency has a mortgage on your house. A title search of the ownership would show if CRA has such a lien.

9. How long does the bankruptcy process take?

Each individual’s case is different. Two distinctions determine the length of the sole proprietor owner’s bankruptcy process.

If it’s your first time filing for bankruptcy and you have surplus income, it typically lasts more than nine months. Having surplus income adds more time to the bankruptcy process. It typically takes 21 months to be discharged from bankruptcy for first-time filings.

A small business owner who files for bankruptcy for the first time without any surplus income can expect a nine-month process.

If this is the second time filing for bankruptcy, the usual time is 24 months to get discharged without surplus income or 36 months with surplus income.

10. What are my bankruptcy options?

Besides filing for bankruptcy, another option is to file a consumer proposal. Filing a consumer proposal lets the sole proprietor owner keep their assets, including those that are needed for continuing to operate the business. It allows for negotiating a deal with the creditors to repay a portion of the amount owed. The monthly payments are usually spread over a five year period (60 months).

For example, an unsecured debt under $250,000 that has been agreed to pay within five years. The total offer is based on what assets are worth along with surplus income payments.

To learn more about how bankruptcy affects your business, call Kevin Thatcher & Associates at 1-866-702-9801 or contact us here.

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How Bankruptcy Affects Student Loans

Posted by in Bankruptcy
Oct 2019

With what many would consider being unfair changes to the student loan process in Ontario, more students will be faced with the challenges of financing their education. Whether you had benefited from student loans prior to the amendments made to the student loan program or are looking at your current financial situation as a student today, student loan repayment is something you will eventually have to face. Paying back student loans can be a challenge, especially if you are trying to establish a career living in an expensive area like the GTA. If you are facing financial hardship due to your student loans, you might be looking for assistance to help reduce your debt burdens. Here, we explore the impact that bankruptcy has on student loans, as well as your options before bankruptcy is necessary.

How Bankruptcy Affects Student Loans

Consider Your Payments

If you have found you aren’t able to meet your required payments each month, look at your budget to determine how much you think you can afford to pay. Don’t worry if it turns out that you can’t afford to pay anything! Once you have an idea, you will be in a better position to speak to your creditors, whether it is the government or a bank that provided your student loan. You can explain your situation and see if you can come up with a more manageable repayment plan.

Government Repayment Assistance

If your loan was through the government, you might be surprised to hear that they tend to be far more forgiving when it comes to loan repayment options.

The government views getting back any amount of money from student loans preferable to having to write them off altogether. Therefore, they are happy to discuss your options. They even have a repayment assistance department for this sole purpose. They have flexible terms and even offer support to students in need. However, it is also important to be realistic and know when you may need more help than their repayment assistance can provide.

Repayment assistance can be a real lifesaver for you if you are struggling financially. In Ontario, the Ontario Student Assistance Program (OSAP), will allow for reduced payments. In some cases, they will even completely defer payments for as long as six months when necessary. In certain scenarios you aren’t charged interest during this period as well.

Your best first optionis to call OSAP to make arrangements, as the online process does not allow you to enter all the personal details of your situation. Speaking with a live person makes it easier to review your issues and come up with a solution that is a little more customized.

They will review your monthly income, your necessary expenses, and discuss possible payment terms that are realistic based on your overall financial situation.

Student Line of Credit

If your loans came from a bank, you are going to have fewer options. Banks are not as forgiving, as they are all about the bottom line. However, these types of debts are dischargeable in a bankruptcy or a consumer proposal as the funds did not come from Student Loans. They don’t offer a formal repayment assistance program like the government but you can still gain from a conversation with your bank. When you are strapped for cash, even though paying more interest is never a good idea, if you can negotiate a longer payment plan, you can reduce the amount owed each month. You can hope to improve your financial situation over time and increase your monthly payments. You will then end up paying less interest. This way, you have better cash flow and can have a more manageable monthly budget that also reduces stress! Be honest and provide a new monthly payment you can afford and, hopefully, they will work with you to help make your repayment schedule work.

Consumer Proposal

If you don’t have any luck with settling your debt issues, speak to our team at Kevin Thatcher & Associates. As Licensed Insolvency Trustees, we can discuss the possibility of a consumer proposal.

A consumer proposal is a negotiation process to reduce debt. We try to propose a repayment plan on your behalf that will significantly reduce your debt. Student loans are unique as they will only be completely wiped out if you have been out of school for more then 7 years however at the very least they can buy you time and get your life and income on track.

If you do file a consumer proposal, it will show up on your credit record. This will be a negative mark that will impact your ability to get any further loans, including a mortgage or auto loan however if you are dealing with an unmanageable debt situation your credit is already being effected.

A consumer proposal stays on your record for three years following the completion of your proposal. That means you could have the mark on your record for up to eight years. You can take steps to get your credit score back up to good standing by ensuring all payments for s your rent, utility bills, and cell phone bills are paid in full and on time each month.


Last, but not least, your final option is bankruptcy. We consider this to be the last resort, however, it can wipe your debt clean, allowing you to start to rebuild your finances. For Student Loans it is important to understand that the debt is only wiped out if you have been out of school for more than 7 years. If you have not been out of school for that period of time then a bankruptcy can provide relief from required payments, garnishees, and harassment but the debt will survive. A trustee can explore this with you and what your options will be to deal with the debt if it is not wiped out.

After 10 Years

For OSAP loans, if you remain in debt beyond 10 years of completing your studies, you can review your situation with the government again. They call this “stage two” of debt repayment. Depending on your finances, they may negotiate the best terms to help you pay off the principal (your loan balance sans interest). You pay what you can afford, and they handle the rest. When you are truly strapped, they will forgive the debt but this is not a guarantee

As you can see, although student loans can create unmanageable debt situations, you always have options. We can help you find the best solution, so you can focus on your career and rebuilding your financial stability.

At Kevin Thatcher & Associates, we offer consumer proposal services and bankruptcy student loans that Ontario clients need to get their finances back on track. Contact us here for more information.

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Six Ways to Track Your Expenses

Posted by in Money Management
Oct 2019

The secret to financial stability is being wise with your money. Many people give money management very little thought. They spend based on what they consider to be safe and find out too late they are in debt over their heads. Money management is more important than ever as the cost of living continues to rise. Learning to spend less than you earn each month can make a world of difference to your credit rating, financial health, and peace of mind. To enjoy financial “well-being”, it takes some artful budgeting to ensure your spending habits are aligned with your earnings. You can, therefore, avoid the need for bankruptcy counselling.

Six Ways to Track Your Expenses

Here, we explore six ways to track your expenses, so you always remain ahead of the game and can meet your long-term financial goals.

1. Keep debit records

Debit makes it more difficult to track your spending. When you use cash in hand for purchases, you have something tangible you can count and see disappear. However, with debit, it just takes a swipe and barely a glance at the money you are withdrawing from your account, which makes spending far too easy. In order to get a better handle on your spending, you should keep records of every penny. A good way to do this is to always ask for a receipt. It’s a pain to carry them around, but you can place them in an envelope or folder at the end of the day at home. You can then add them up at the end of the month.

If you don’t like this idea, you can also review your withdrawals and transaction in your bank account online. You will begin to see how often you are using your debit card and determine if your spending is out of hand.

2. Review your credit statements

As with your debit spending, keeping an eye on your credit spending is very important. First, you should never blindly pay off credit. Look for discrepancies due to the threat of fraudulent spending. Second, make sure you understand your balance, watch for how close you are getting to your limit, and see if you can make payments higher than the required monthly payment. This helps to keep your debt ratio down. Again, look for big spending to determine where you might need to cut back. The less you are spending on your credit cards, and the lower your balance, the less you have to spend!

3. Address overspending

As you do your monthly account reviews, look for overspending. An easy way to do this is to set up categories of spending so you can look for opportunities to cut back. This would include your necessities such as rent or mortgage, utilities, food, transportation, etc. You can then add other categories such as:

  • Entertainment like dining out, movies, concerts, bars, etc.
  • Fitness such as gym memberships.
  • Wardrobe.
  • Personal care such as hair appointments, nail salons, and massages.
  • Health care such as chiropractors, prescriptions, dentist appointments, etc.

With your categories set, you can take note of the money you have to spend each month and look for areas where you can save money. Categories such as entertainment or wardrobe can be easy to cut back on. Often, your grocery bill can be a bit of a surprise, especially if you tend to shop several times each week, instead of one big shop once a week. You can set a budget for areas where you are overspending, and when you reach your limit, stop spending in this category.

4. Use a consistent tracking method

Whether you find that the receipt or electronic tracking system works better for you, be consistent. If you flip flop, you are more likely to miss something when you are tracking your spending. If you decide to switch methods, wait until the next month to avoid confusion.

5. Lay it out

Because your spending will appear in different forms, such as credit, debit, or line of credit, you should have one central place where you lay out all of your spending. Without this, you won’t get a true picture of your spending habits. You can choose an old-school ledger where you record things by hand, set up a spreadsheet in Excel, or choose one of the many financial tracking apps available. Be consistent in recording your spending each month to make sure you are as accurate as possible. To be even more efficient, you can set up a formula that allows you to enter your income and deduct your spending entries. You can see when you are coming dangerously close to your limit and react before you have to resort to credit!

As a side note, most banks will provide you with some sort of tracking option. For example, RBC provides a pie chart that shows you how much you are spending in each area.

6. Ask for advice

Once you see how your spending is going, set a budget to avoid future unnecessary spending. Speak to a financial counselling professional, such as a Licensed Insolvency Trustee, to ask for advice and to help you set up an effective plan. The more you owe, the more urgently you need advice. A good financial management plan will allow you to find ways to cut spending. In addition it will help by providing an effective savings plan to help grow your wealth.

By adopting these tracking methods, you will begin to gain more control over your finances. You can look for opportunities to save, pay down your debt more effectively, and perhaps most importantly, avoid unmanageable debt.

At Kevin Thatcher & Associates, we offer assistance for financial management and bankruptcy counselling that Ontario clients need to get their finances back on track. Contact us here for more information.

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5 Questions to Ask When Choosing a Bankruptcy Trustee

Posted by in Bankruptcy
Sep 2019

If you are like most people, you never thought that there may come a time when you needed to talk to someone about your financial problems. Something in your life has happened that had made what used to be manageable debts into something too much to handle for one person.

5 Questions to Ask When Choosing a Bankruptcy Trustee

Only a Licensed Insolvency Trustee can offer the support you need during this process. All bankruptcy trustees in Canada are licensed by the Federal Government. They are highly qualified to deal with your situation and know their stuff.

Your lawyer cannot file for bankruptcy on your behalf. Neither can any of the many “debt consulting” companies that have popped up in the last few years. Do not be fooled. While only a licensed trustee can provide you with protection under bankruptcy law in Canada, the good news is that you are not alone.

Technically, any Licensed Insolvency trustee in your province can help you file for bankruptcy, but should they?

All Licensed Insolvency Trustees follow the same set of Federal Laws but ultimately this is someone who you are going to spend the next 9 to 36 months with so you want to make sure you feel comfortable. If you don’t feel comfortable you can always speak with more than one trustee and then make a choice.

Also, below are a sample of five questions you could ask the trustee when you see them.

How do I know which bankruptcy trustee to choose?

Interview your prospective bankruptcy trustee by asking them the following questions:

  1. Are you licensed by the Federal Government? This is a trick question. The answer to this question should be easy: it should be yes. As stated above, all trustees in Canada must be licensed by the Federal Government. It’s important to confirm that you are dealing with a Licensed Insolvency Trustee and not an unlicensed debt consultant who advertises information about personal bankruptcy. You could be wasting time and money you don’t have by skipping this question. In fact, it might be the most important thing you ask your prospective trustee. Do not get sucked into dealing with a middleman that will eventually have to refer you to a real trustee to get the job done. Also all trustee advertising will say they are a Licensed Insolvency Trustee as this is required by law.
  2. What information should I bring to my consultation? When you have your consultation with a trustee, you want them to be able to give you specific advice on your situation right away. It is a good idea to bring information and documentation about your debts, assets, and monthly income. You want to know the information your trustee needs so they can find out the most about your situation and allow you to make the best possible decision. If you have any doubt you can always bring more information then you need and the trustee can help you sort through what is relevant.
  3. When will I meet a licensed bankruptcy trustee? Often, at the trustee’s office you will meet with a Counsellor before you meet with the trustee. They will talk with you and get all of the information so your options can be reviewed. It is important to feel comfortable that the decision you have made is the right one. A trustee will always meet with you before you complete a filing of a bankruptcy or proposal to ensure you understand your options, the option you have chosen, and your duties in the process.
  4. Once I file, who will I be dealing with at your firm? You don’t want to jump off the deep end and get stranded once your decision has been made. Will there be anyone there to support you once you have filed for bankruptcy? When you call, will you talk to a live person or an automated voice? Can you meet with your trustee to discuss your file? These are important things to know ahead of time.
  5. What assistance will you give me to get me back on track once I’m discharged? All trustee offices will provide two credit counselling sessions during your bankruptcy or consumer proposal process which can help prepare you for life once you no longer need your trustee. However, you may want to ask for extra tips on rebuilding credit in the future during these sessions.

If you are struggling with debt, contact Kevin Thatcher & Associates for a free consultation today. Don’t worry, we won’t limit you to five questions—you can ask as many as you want!

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9 Myths About Bankruptcy Services

Posted by in Bankruptcy
Sep 2019

If you are having financial trouble, declaring bankruptcy is a solution you may want to consider before walking this path. However, many common myths circulate about bankruptcy that are simply not true. Here are nine of them.

9 Myths About Bankruptcy Services

1.Everyone will know you declared bankruptcy

It is true that bankruptcies are public information, but you would generally need to do extensive research to obtain that information. Only major bankruptcies are subject to a legal notice published in the news. More often, it is only the creditors and trustees of the client that are informed of the situation. So, more likely than not, your privacy will be observed, and you don’t have to worry about the embarrassment and fall-out of everyone knowing that you declared bankruptcy.

2.Only the financially irresponsible file for bankruptcy

It is a myth that only the financially irresponsible file for bankruptcy—it can happen to anyone! Although financial responsibility may come into play for some individuals, unplanned life events can create the need to file for bankruptcy at any time. Many such individuals who decide to make this decision have dealt with an illness, divorce, job loss, or other financially devastating situations.

3.Your property will be taken away

Another myth associated with declaring bankruptcy is that you will not be allowed to keep your home or any other property you may own. The reality is that bankruptcy allows you to save some property. What you are allowed to keep is dependent on the province in which you reside. For instance, in Ontario, you can keep up to $13,150 worth of furniture and household goods. You can also keep one free and clear vehicle up to a $6,600.00 value. There are many ways in a bankruptcy to keep some of all of your assets in a bankruptcy and your trustee can walk you through the requirements and expectations before you make your final decision.

4.Bankruptcy clears your debt

The truth is that declaring bankruptcy will clear most of your debt. Some exceptions is that it will not clear child support payments or some student loans (i.e. if you last studied less than seven years ago). This also includes court-ordered fines (such as parking tickets), or debt contacted through fraud. Also, contrary to popular belief, bankruptcy can get rid of income tax debt.

5.Bankruptcy has a permanent impact on your credit

Perhaps one of the biggest myths of bankruptcy is that it will permanently impact your credit rating. The creditor bureaus do keep the information about your bankruptcy for a time but generally that is much less time then it would have taken you to get out of the unmanageable debt that was already affecting your credit. Also, having the information in your credit history does not mean you can’t get credit it just means you have to start slow and rebuild creditor confidence.

6.Bankruptcy is the only solution to your financial difficulties

There are many ways to resolve financial difficulties and bankruptcy is just one of them. In some cases, debt consolidation or a consumer proposal can be the best option for people. A consumer proposal is an offer you can make to your creditors to reimburse part or all of your debt (depending on your situation) with no interest for a fixed time period.

It is always best to talk to a seasoned professional about your issues to see if one of these alternative solutions could solve your financial issues. Bankruptcy is a last resort, and a Licensed Insolvency Trustee can help you navigate your best options.

7.You can’t get a loan after declaring bankruptcy

If you are at the point of declaring bankruptcy (or have already done so), odds are your credit has already been badly affected. Therefore, you would have had to wait the allotted amount of time anyway before being able to obtain credit or resolve bad credit. With time and by adopting good habits (like making your payments on time), you will be able to rebuild your credit successfully.

8.You should get help from a debt management advisor before declaring bankruptcy

It is a myth that you should get help from a debt management advisor before declaring bankruptcy. You may be wasting your money for nothing. Only a Licensed Insolvency Trustee is authorized to file an assignment in bankruptcy and it is in your best interest to deal with them directly as they can inform you of all of your options. At Kevin Thatcher & Associates the first consultation is always free; after that, if you choose one of the options the trustee can administer then you will pay a fee depending on the option you choose and/or the arrangement reached between you and your creditors.

9.You could lose your job due to bankruptcy

Your financial situation should not put your job at risk but it can’t hurt to find out about the potential consequences of personal bankruptcy on your career before going ahead with your decision. However, getting out of the debt you are in is generally always better than continuing with unmanageable debt for the foreseeable future.

If you are considering bankruptcy, a proposal, or a consolidation and would like to find out more information, please contact Kevin Thatcher & Associates today to talk to one of our professionals!

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Pay off Your Debt Without Feeling Deprived

Posted by in Debt
Aug 2019

Nothing is worse than being stuck living with a strict budget. You try your best to make ends meet and, in the end, feel depressed because you aren’t able to do anything for enjoyment. Paying off debt can put a strain on your finances. It can also put a strain on your happiness. When the stress of paying off debt is getting you down, you can find ways to still enjoy life. Here are some tips to help you pay off your debt, so you don’t feel so deprived.

Pay off Your Debt Without Feeling Deprived

Declutter to Sell Stuff

It’s not just hoarders who tend to live with more stuff then they need. Your garage, basement, attic, spare bedrooms and closets can prove to be a goldmine of wealth just waiting to be found. Go through your entire home inside and out, upstairs and downstairs, to look for things you no longer need.

Look for anything from kids’ toys to exercise equipment and kitchen appliances to furniture you are bound to find plenty to sell. You can then hold a garage sale or for stuff in really good condition consider selling it on eBay or Kijiji. And don’t forget your clothes. Vintage is in and if you lost or gained weight you may have a pile of clothes in your wardrobe someone out there might love.

Don’t Buy Stuff You Don’t Need

Before you buy anything make sure you need it. The first step is to stop looking for sales or Groupon offers. It can be tempting to buy something just because it’s such a great deal, however, this is how you probably got into debt in the first place. Stick to this strict rule and suddenly you’ll discover you have money to spend on something more worthwhile. Even if it’s just a nice dinner out.

Tackle That Grocery List

Groceries are ridiculously expensive today. First, create a weekly menu so you only buy what you need. Second, look at your local flyers and see what’s on sale. You can also base your menu on the foods that are the cheapest. Either way, your goal should be to reduce that grocery bill.

A very good tip that most people don’t realize is to avoid buying anything in bulk just because it’s on sale. Even if you think you’ll use it, massive piles of chicken in your freezer often goes unused due to freezer burn. Also, consider eating less meat. There are tons of equally delicious vegetarian options out there. Do this a few times a week and watch just how much you save.

What can you give up?

Although we are looking for ways to avoid feeling deprived, we often deprive ourselves of stuff that is important to us while still indulging in stuff we really could live without. It could be the car, the super cable package, your cell phone, or too much meat in your groceries. Exploring your options might help you find a lot more cash than you might expect.

Enjoy Small Luxuries

This is another moment for self-discovery. What are the small things that will make you happy? Is it that fancy coffee you would love to indulge in once a week? Maybe it’s a really nice dinner out once a month? It could be getting your hair done at your favourite salon. Only you know what little things will bring a little enjoyment into your life. Decide what that is and give yourself a treat now and then but make sure you have accounted for this in the budget.

Set Some Goals

Nothing is more satisfying than crossing something off a list. If you decide to set some financial goals, you are also taking control of a situation that is empowering. Start a checklist of how you want to pay off your debt. There are two ways to do this to make it easier:

  1. The snowball method

    Start with your lowest balances and pay them off one by one. The money you would have paid towards your now paid off balance then goes towards paying off your next balance and so on. This method also gives you a psychological boost as you pay off each debt. However, sometimes this can backfire if you have other cards with high-interest rates because the accumulating interest may be higher than the amounts you are giving to the smaller creditors.

  2. Starting big

    Start with the highest balance / highest interest rate (e.g. a Payday loan) and apply the same rules as option one.

This will keep you focused on your goals so instead of feeling deprived you feel the joy of achievement.

Reassess and Regroup

One thing that might be hard to believe is that once you start giving things up, you realize you never needed them at all. This means there are probably more things you can consider to help you save, depending on how much you owe.

Major debt calls for major decisions. You may realize you could be saving tons of money by selling the house and renting for a year so you can get your finances in order. This works especially if you have a lot of equity built up in your home. Can you downsize your home? Do you need all those rooms, that big backyard? Does everyone in the family need a cell phone? Keep chopping where you can and watch your money grow.

Avoid FOMO

Social media makes it nearly impossible not to feel envious of people who seem to be doing better than you. It can seem like everyone else is taking trips, eating at high-end restaurants, driving fancy cars, and living the high life. You might also have friends who want you to join them in these activities and you feel too embarrassed to say no. The truth of the matter is, you don’t have the money, so don’t let it get to you. True friends will understand.

In fact, confiding in someone about your debt could go a long way in helping you feel less trapped. You can also try to ignore social media, FOMO doesn’t have you reaching for the credit cards. Living a balanced life should be your goal with visions of better things in the future.

Paying off debt should be something that reduces stress, not causes it. These tips will help you still enjoy some treats now and then while chipping away at your debt.

For more information about living life while paying off your debt, call Kevin Thatcher at 1-866-719-8547 or contact us here.

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How to Save Money While Paying off Debt

Posted by in Debt
Aug 2019

If you are having a hard time paying down your debts and staying within your budget you might be going about things the wrong way. When it comes to your finances, you have to make every effort to focus on paying down debt while creating a small cushion for unforeseen emergencies. If you have significant debt you don’t want to save much more then for emergencies as the interest you will be earning on those savings will be much less than the interest your creditors are charging.

How to Save Money While Paying off Debt

When you do this, your finances become easier to manage as you become less dependent on credit. If you are paying down debt but have nothing saved for an emergency, things will have to change. Here are our top recommendations to get out of debt in Toronto, while still managing to save a small amount to help to weather the storm.

Why You Need Savings

Savings are important to anyone’s budget as it provides additional money to cover unexpected costs. This can include car and home repairs, unexpected medical expenses and even funds should you lose your job. Although it is hard to imagine losing your job right now, it can happen to anyone.

Set a Budget

Although you might have a budget in place, if you are facing cash flow issues it might not be tight enough. Revisit your budget to look for ways to save some money. List all of your debt, household expenses including food, entertainment, gas, insurance and anything else you can think of. Then calculate how much you receive on your paycheque to get a realistic number for your income.

Remember if you have creditors with high-interest rates you want to give them as much money as possible every month (preferably well beyond the minimum) or all the money you are paying will be going to interest and you are not actually reducing your debt load. Focus on getting rid of those debts first.

Hopefully, you come out ahead and have some money to spare. If this is the case, the surplus of money can be put towards your savings. If you break even you can always go over your expenses with a fine-toothed comb and review all of your credit and debit transactions. The chances are, you will be surprised at how much you are spending. The more expenses you can reduce the money you can give to those high-interest creditors.

Look for savings opportunities, such as no more coffee and muffins at work, making your lunch instead of buying it, less takeout food and fewer clothes purchases. You can then start putting that money towards increasing the amount you are putting towards your debt. Getting rid of those high-interest creditors will give you more money to work with and then to eventually put towards actual savings.

Assess Your Minimum Payments

Look at your debt and consider the minimum monthly payments. Look for opportunities to pay more than the required. This will help you pay off your debt faster. As suggested you should put money towards the cards with the highest interest and balances to pay them down faster. Once that balance is paid, go onto the next balance adding the extra money you would have used towards the card you just paid off to your payments. This will help pay the debt off more quickly. Continue this process until all of your debts are repaid.

Set-up a Savings Account

Living with just one account for everything can make it difficult to manage your money. Instead, set up a separate savings account. Once you have reached your debt repayment goals you can also set up an automatic deposit from your chequing account into your savings account for a set amount each paycheque. Make sure this is based on what you can afford from your budget. As your savings grow, you can consider speaking to a certified financial planner to help you plan for the future.

Track Your Spending

Most banks provide you with tools to track your spending, such as pie charts that show how much went towards debt, how much to the mortgage, how much through chequing, etc. If you keep track of your budget using a spreadsheet, you’ll have a better handle on your spending and can compare this to the budget you have set for yourself. Make sure to include any money you might use from your savings account.

Look for patterns of spending such as takeout food or car repairs. This will help you look for areas to adjust your budget.

Plan Your Spending

When you have tough months you will be tempted to spend the funds in your cushion savings. Before deciding if this is necessary to consider if you really need what they funds will be sent on (e.g. rent or food) or if you could go without. Avoid splurging on things such as trips, clothes or a fancier car, as this will just get you back in debt. Also, try to make a plan to replenish your savings cushion if you do have to use some of it for an emergency.

Once you have paid off the current debt obligations, you can also set up “expense buckets” in anticipation of expenses that are likely to come up in the future. You can do this based on short, medium, and long-term expenses. Some of the most common expenses include a new car, a down payment for a home or even putting money towards investments or retirement savings.

Best Method to Pay Down Debt

If you find your debt remains unmanageable there are a few things you can consider. As mentioned, you can start by working your way through your debt based on the highest interest rate.

If your debt is becoming a burden due to interest you can look into a debt consolidation such as a consumer proposal. Debt consolidation provides you with a loan at a lower interest rate while a consumer proposal can freeze the interest altogether. This provides more cash flow for savings while also reducing the money you pay towards the interest with more focus on paying down the principal.

Carrying debt should never become unmanageable. These tips will help you get back on track so you can begin building your savings.

To learn more about how to save which getting out of debt, call Kevin Thatcher at 1-866-719-8547 or contact us here.

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