Proposals and Bankruptcy in Depth

	Proposals and Bankruptcy in Depth - Money Problems Radio Show (Opens in a new window. Optimized for Windows Media Player 6.4 and later versions.)
Originally aired on January 06, 2007.

Show Topic:

On today's show we go in depth and discuss a couple of options when it comes to dealing with your debt management. We focus on consumer proposals and personal bankruptcy and talk about: what they are, how they work, to what situations they best apply, and the role of the bankruptcy trustee in the process.

Guests:

Ted Michalos joined us from the firm of Hoyes Michalos & Associates, Trustees in Bankruptcy. Ted and his partner Doug Hoyes started their firm in 1999 and have helped thousands of clients throughout Ontario take charge of their financial life and get that badly needed "fresh start". Ted is a chartered accountant and is an expert in personal insolvency and consumer proposals.

Show Summary:

Since 1968 personal bankruptcies have risen an average of 13% per year. The reason? According to Ted, the largest single contributing factor is the access to credit. We discussed the fact that most people have no nest egg or emergency plan available to them if they encounter a "seismic event" in their lives that lead to money problems. Most people work with the notion that "It can't happen to me". It's important to prepare for unseen circumstances.

Ted defined a consumer proposal, suggesting it was the best kept secret in the financial industry in Canada. It is essentially a "deal" between you and your creditors whereby you offer to settle your debts with your creditors.

The trustee's role in a proposal is two-fold:

(1). To make sure you can afford to deal with this plan and
(2). To make sure you are putting forth a deal that has a reasonable chance of being accepted by your creditors.

When you pay on a proposal, you provide the funds to the trustee and they disburse from there. Ted discussed the debts that were not included in a proposal, including child or spousal support and court ordered fines.

Bankruptcy in Canada is different from the U.S. In this country it is designed to be non-adversarial and does not require a lawyer unlike the States. You see a licensed trustee who advises you of your rights and responsibilities and you voluntarily agree to file bankruptcy. For 9 months and one day you will deal with your trustee, providing monthly paperwork, attending counselling sessions and insuring that your tax filings are done. The term "discharge" has 3 different meanings, involving you, your trustee and your debts. Bankruptcy is a legal procedure and you must treat all your creditors fairly and equally. Again, court ordered payments are exempt from a bankruptcy proceeding.

Don't let your money problems overwhelm you, contact a licensed bankruptcy trustee for more information about consumer proposals and bankruptcy, and your other options when dealing with debt.