Bankruptcy Kitchener Blog by Scott Schaefer

Today I met with Jack and Samantha (as always, names are changed) for their second credit counselling session. It struck me right off that their appearance today was relaxed and content – much different than when I had met with them for the first time 6 months ago.

At our first meeting I learned that Jack had been laid off and had been out of steady work for a period of time. This unemployment had set them back. Prior to his layoff, they had never missed a payment on any of their bills. However, the lack of steady income forced them to use one credit card to pay another. This mid-forties couple was stressed, fighting, and plain old stuck in the money shuffle. Before this time, in some ways you could say they were living their dream. They owned a nice home in Kitchener and had 3 great children – what more could they ask for?

They had accumulated debts that had become too large to manage after the unfortunate turn in their circumstance. We explored their options in detail and they decided on a consumer proposal as their solution to manage the debts. For them, the advantages of a consumer proposal were:

- They had financial control again through a monthly budget that balanced by making some changes in their spending and savings practices,
- They were able to pay one monthly payment toward their debts in the consumer proposal,
- The consumer proposal protected them from their creditors since it is creditor and court approved,
- They protected their family home, vehicles, and pensions,
- They did not have to file for bankruptcy – they really did not want to even consider bankruptcy,
- They were provided two credit counselling sessions with me in my Kitchener office to sit and work on their future plan, and
- They could imagine and work towards the future they wanted,

At the start of today’s meeting, I let them do the talking. They both explained to me how since filing their consumer proposal, they finally felt control over their finances. They expressed how now with the consumer proposal in place, they only need to think about their bills on pay days; the stress between pay days was gone – becoming the biggest advantage for them.

The consumer proposal for Jack and Samantha put all the unsecured debt payments together into one monthly payment, but the hard work for them was to make changes to their lifestyle that allowed them to work toward a future they wanted. We are all constrained with how much cash comes into the bank each month, it is how we spend it that we all need to continually work on.

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Do you have questions about debts?
Do you want to understand your options?
Do you want to know about debt consultants and why they charge money to see them?
Do you want to know about what a trustee in bankruptcy does?
Do you want to learn more about personal debts?
If you answered yes to any of these questions, then join Doug Hoyes and Ted Michalos live on Ask the Expert on 570 News this coming Saturday September 24 at 1:05 on AM 570 News. For the first time ever, the Ask the Expert Show will have a live video feed to the 570 News website. Therefore you can tune in at 570 AM or by going to the AM 570 News video feed on the web. To learn more about the show, click here.

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Today in my Kitchener office, I filed a consumer proposal for a couple from Waterloo. I first met with Joe and Jane (names have been changed) in the summer. They were struggling to keep up with their monthly debt requirements and all their monthly living expenses. They were exploring their options as they felt they were being controlled by their debts. Let me share some fact about Joe and Jane:

- They were married five years ago,
- They have two children together,
- They purchased their house in Waterloo three years ago,
- Joe works in construction so experiences some seasonal swing in his income,
- Jane works for one of the large insurance companies and has steady income,
- Joe was married once before and pays child support for one child,
- They now have day care costs of $800/month,
- Over the years, Joe and Jane have accumulated debt of $60,000 including lines of credits, credit cards and overdrafts.

In our initial meeting, we discussed their options and how they applied to Joe and Jane specifically. One option – a consolidation loan through their bank. Unfortunately, they tried before meeting with me and their bank had already turned them down. Another option – a debt management plan through Mosaic Counselling and Family Services in Kitchener. This would cost them about $1,000/month for five years. The next option – a consumer proposal that offers $30,000 to their creditors payable through monthly payments of $500 for 60 months. As a final resort – a personal bankruptcy which would impact their house and would leave them with variable monthly payments into the bankruptcy based on their actual income. They did not want to file for personal bankruptcy, they felt to pay back some of their debt.

The consumer proposal that Joe and Jane offered today is a legal settlement. It encompasses all of their unsecured debts but not their mortgage or car lease. After Joe and Jane signed the consumer proposal documents, I e-filed them with the government and they were immediately provided with their estate number – proof that they were legally protected by the consumer proposal. Only a trustee in bankruptcy is permitted to file a consumer proposal which is why Joe and Jane met with me in my Kitchener bankruptcy office. A consumer proposal is not a bankruptcy but provides the same legal protection. Creditors cannot continue or start any collection actions after a consumer proposal has been filed.

The consumer proposal documents are sent to all of their creditors. As it is a “proposal”, the creditors do get to vote on it. The consumer proposal is automatically accepted unless more than 50% of the dollar value of the voting creditors say no within 45 days. In general, the creditors prefer to accept a consumer proposal over a personal bankruptcy as they will receive more money than they would in a personal bankruptcy.

To learn more about a consumer proposal, please do not hesitate to call me at 519-747-0660 or send me an e-mail. If you would like more reading on consumer proposals visit consumer-proposals.org, a website devoted solely to consumer proposals or hoyes.com for an informative and comprehensive site on creating a plan.

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Sally (not her real name of course) was in to see me last week to discuss her options. She was emotional while she was sitting talking to me about her current situation. Sally was working for a company in Kitchener until 2009 when she was laid off after 11 years of employment as a result of the company’s downsizing. Since the layoff, Sally found new employment with a business in Waterloo, but at a lower pay rate than with her previous job.

Over the years, Sally carried balances on her credit cards and following the layoff, her debt level rose somewhat due to periods without income. During that time her employment insurance barely covered rent and basic living expenses. After the reduction in Sally’s monthly take home pay, she is now receiving $2,275/month. This amount is spread out on paying rent, utilities, car payments, insurance, gas, food, and all the other costs of everyday life. With interest charges and minimum payments due on the $31,000 in credit cards and line of credit debt, Sally felt it was just too much to keep up with.

Sally’s story is a relatively common example of someone being affected by job loss and reduction in income. She really did not want to file for bankruptcy but she knew she could not afford to pay her debts; she needed financial control. To avoid bankruptcy, she decided to file a consumer proposal. Her consumer proposal offered her creditors $250/month for 50 months. Sally felt with the consumer proposal in place, she would be able to gain control of her monthly budget while paying what she could afford back her creditors.

Currently in Kitchener Waterloo region, the rate of consumer proposal filings is approaching the ratio of one consumer proposal filed for every personal bankruptcy filed. After the first six months in 2011, 45% of individual filings were consumer proposals as compared to the first six months of 2010 when the rate was only 35%. Accounding to the government statistics released today, almost 25,000 Ontarian’s have filed a consumer proposal in the last 12 months. For a breakdown on consumer proposal statistics, please follow this link consumer-proposal.org.

If statistics and numbers are your thing, follow these links to Ontario Statistics at bankruptcy-in-ontario.com and Canadian Statistics at bankruptcy-canada.com.

Statistics are just numbers, but sometimes people want to know they are not alone in their financial struggles. We live in an unstable ecomony that affects our jobs and income. When we are carrying an increasing level of debt and any small changes in income can significantly affect our ability to deal with this debt. Consumer proposals are still becoming the preferred method of restucturing. If you feel you want to explore your options to gain financial control like Sally, please give me a call at 519-747-0660 or send me an e-mail.

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Amie Carroll, one of my Kitchener office credit counsellors provided me with this blog for last minute back to school shopping advice.

Back to school season is in full swing and the kids will be back to the classroom next week. For many, this can be a hectic and expensive time of year, but saving money on back to school expenses might be easier than you think. There are many low cost ways to get the kids what they need for the school year without breaking the bank. Consider the following:

- Take advantage of dollar store deals (you’ll be amazed at what you can find)
- Compare prices (many store offer back to school deals, and will price match competitors)
- Reduce, reuse, recycle! (that’s right – try purchasing only what is necessary versus what your child wants and reuse items from previous years that are still in good condition. As for back to school clothing, why not check out a local thrift store!).

The back to school season is also a great time to start teaching our children about money!
I recently read a book that has some useful advice, titled: “Power Spending: Getting More for Less” by Carolyn Johnston, Eric Poulin and Robin Poulin.

The authors of this book have dedicated an entire chapter on the importance of teaching our children about money. When it comes to money lessons, sooner is better. They point out that “if your child is old enough to ask for candy or toys, they’re old enough to start gaining some financial awareness” (Pg. 83). Why not get the children involved in some money spending decisions so they can understand “stuff” comes at a cost. As suggested in the book, “It is important to let children be involved in some of the money spending decisions. They are more likely to understand your response to their requests for stuff, and may even stop asking, once they do understand” (pg.82). It’s also important to note that when children have money handed to them and are free to spend it at their own discretion; they begin to see money as disposable income. This can lead to poor money habits in the future. It is wise to teach our children the importance of saving!

Johnston, Carolyn, Eric Poulin, Robin Poulin, and David Johnston. Power Spending Getting More for Less. Clarington, Ont.: ABC Pub., 2010. Print.

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