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Category: Insolvency

Walking the Talk

May 6, 2010 - by Chelsey Taylor

Personal Bankruptcy Administrator

Do you budget, or are you one of those people who think budgeting is only for those who are strapped for cash? Think you know where every cent of your money is going? Think you know how much you spend on your weekly coffees, smoking, “treats”? Well, that’s what I thought. When I moved into my first apartment, I budgeted. I had to make sure my weekly pay cheques paid for rent, groceries, phone, and gas in my car. Down the road, without going into details, things got comfortable for me. Everything was paid, I had a pay cheque coming in regularly, and I had a cushion – a little extra cash in my bank account. So I wasn’t thinking twice about my daily coffee or weekly shopping trips. Like most parents, I want to give my little girl the world. And for a while I tried!

I am the personal estate administrator in Lazer Grant’s Insolvency Department and I am working toward becoming a registered Insolvency Counsellor under the Bankruptcy and Insolvency Act. Each bankrupt and consumer debtor is required to attend 2 counselling sessions throughout the process of a bankruptcy or consumer proposal. The first session is all about budgeting and money management. As I participated in the sessions with Lor Cleveland, Trustee in Bankruptcy, not only was I learning from her but I was also learning from the people we were counselling! I listened as they shared with us how stunned they were to discover that they were spending, say, $60 a month on coffeeshop coffee and muffins and how they decided to prepare those things at home now because it cost them so much less. Or how they always knew they should quit smoking but it wasn’t until they realized how much they were ‘burning’ away that they got the conviction they needed to butt out for good. I recall also sitting across from a man in his late 70s who said, “I didn’t know it cost this much for things. This is the first time in my life that I’ve really budgeted. I tried once but I didn’t like seeing the extent of my spending so I stopped.”

All of these experiences and others made me reflect. Do I really know where my money is going? So I decided if I was truly going to be able to help people with budgeting and to counsel them well, then I should try it myself so I can know what they are going through.

I started by figuring out all my monthly bills – who I have to pay and how much. That first step was the scariest. I looked at everything I had to pay – utilities, groceries, truck payment, gas, etc. — and realized that almost all of my “extra spending” – eating out, treats, clothes, entertainment, the “world” I was trying to give my daughter – was being paid for out of my cushion. This awareness helped me to think about where I was driving and if I really had to go there, in order not to overspend on gas. It was a huge reality check that, even though I am at a comfortable point in my finances, if I didn’t start watching where and how I was spending my money, it would dwindle down to nothing and I would be facing stretched pay cheques and wondering how to pay my bills on time.

It hasn’t been an easy task. I have slipped and relaxed a bit. But, like anything, to get good at it you have to keep doing it. When you slip you have to get back on track. And just like brushing your teeth, it will become a part of everyday life. So, thanks to my job and the people we help, I now feel that my savings will stay savings, and when I work hard for what I want, it will be more of a reward to get it and will be appreciated more than ever. And my daughter will be able to reap the benefits for watching and learning by my example of constantly weighing out the wants and needs in life.

Insolvency | Chelsey Taylor | Comments (0)

Mythconceptions

March 30, 2010 - by Lor Cleveland

Trustee in Bankruptcy

Chances are, if someone’s telling you about their pregnancy or medical experience, it’s about something exceptional that happened. You rarely hear someone say, “My root canal was no big deal.” I guess that’s because we like to talk about things that are unusual or remarkable. Things that will get a Wow! or a No Way! or a Poor you! response. We like to arrest people’s attention.

I think the same thing goes for bankruptcy. The problem, then, is that rumors abound and the fantastic, exceptional stories circulate. And the unusual is believed to be the norm. No wonder people who are experiencing financial difficulties are fearful and stressed.

The best way I know for dealing with fear is to face it head on. Turn on the “light” in a dark and scary circumstance with facts and information, and make those fears scurry away. So, with all the myths and misconceptions floating around out there about bankruptcies and proposals, let’s address a few here.

× I can’t pay my bills so I need to go bankrupt. Not necessarily. There are many options for dealing with debt; some the debtor can effect on his/her own, others which need professional assistance. With the recent amendments to the law, bankruptcy isn’t as attractive an option as it used to be. So it’s worth exploring all the alternatives.

× Tax debts can’t be claimed in a bankruptcy or proposal. Wrong. They are included in the list of creditors and are dischargeable by a bankruptcy or fully performed proposal. Source deductions may be the exception, depending on the circumstances. The Canada Revenue Agency may not be too inclined to vote in favour of a proposal, but majority rules, so it depends on how much CRA is owed compared to the whole body of creditors.

× Student loans can’t be claimed in a bankruptcy or proposal. Not necessarily. If it’s been more than 7 years since the debtor ceased to be a student, then the student loans have no special status and are dischargeable by a bankruptcy or fully performed proposal. If it’s been less than 7 years, the loans would be included in the bankruptcy or proposal but not dischargeable. They’d be subject to the stay of proceedings, but interest would continue to accrue. After 5 years from ceasing to be a student, a court application could be made to have the student loans discharged.

× I’ll never get credit again. Sure, bankruptcy will generate an R9 (the lowest possible rating) in the credit bureaus which will remain for 6 years from the date of discharge for a first-time bankruptcy and 14 years for a repeat bankruptcy. And filing a proposal will give an R7 for 3 years from the date of full performance of the terms. But that doesn’t mean one will never be able to get credit again. Lenders assess risk. So the ability to get credit will depend on the applicant’s ability to convince the potential lender that s/he’s not a bad risk.

× I’ll lose my car. That depends: on whether it’s collateral on a loan and the payments are in arrears; for a bankruptcy, on whether the value of the vehicle exceeds any encumbrance against it, on whether it’s needed for work and whether the value exceeds the exemption limit, on whether the bankrupt has the wherewithal to buy it back from the bankruptcy if the trustee is going to sell it.

× I’ll lose my house. Again, in a bankruptcy, that depends: on whether there’s any equity; on whether it’s jointly owned and only one of the owners declares bankruptcy; on whether the bankrupt can buy the equity from the bankruptcy.

Even if someone you’re speaking with is able to give accurate details about a previous bankruptcy or proposal experience, the amendments to the Bankruptcy and Insolvency Act may mean what they went through would be completely different now. Every situation has its own little nuances that dictate how something would play out. So, it’s worth taking the time to get the facts. Speak with us. We’d gladly help turn on the light and dispel those fears.

Nam et ipsa scientia potestas est.

Knowledge itself is power.

– Francis Bacon

Insolvency | Lor Cleveland | Comments (0)