Bankruptcy Kitchener Blog by Scott Schaefer

Are you struggling to make ends meet for you and your family? Do you lose sleep worrying about how you are going to manage your debt? Understand that you are not alone. Many people in Kitchener-Waterloo have seen the same financial ups and downs for plenty of different reasons and as a result, our phones continue to experience large volumes of people calling with questions about their debts. To address all the questions that we are receiving, Ian Martin and I will be on the 570 News “Ask the Expert” show this Saturday February 4th at 12:00 noon. You can tune in and listen to the radio show on 570 AM or watch the live video feed on the 570 News website.

We are going to dedicate the entire hour show to answering debt related questions for the residents of Kitchener-Waterloo and all of Waterloo region. We will explain in detail consumer proposals and personal bankruptcies. In addition we will discuss surplus income in bankruptcy, what assets are protected when you file, who can file a consumer proposal, and what debts can be included.

If you can’t wait until Saturday, feel free to visit our hoyes.com website for more information to help you with your situation. If you would like to discuss your situation now, please call us at 310-PLAN or send us an e-mail.

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Debt Consolidation, Debt Management Plans, Consumer Proposals and Personal Bankruptcy – you may have heard about them before, but do you really understand how they work? In my Kitchener office, I have met with thousands of people from the Waterloo Region who have tried all of these solutions. What may work for one, may not work for another person.

Doug Hoyes and I were guests on the Ask the Expert radio show on 570 News and we discussed each of these topics in detail. Below I have listed various clips from our show for your reference. To discuss your specific situation, please do not hesitate to call me at 519-747-0660 or send me an e-mail.

What are the dealing with debts options?

What is a consolidation loan?

When does a consolidation loan not work for someone?

What are the advantages of consumer proposals?

What is personal bankruptcy?

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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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Earlier this week in my Kitchener office, I met with Jane and Tom (for privacy reasons, I have changed their names). Jane and Tom were referred by a family member who had previously filed a bankruptcy with me. They were very nervous and concerned about meeting a “trustee in bankruptcy” but knew that the meeting was necessary since the pressure of their debts was causing great stress and strain on their family unit. It was obvious to them that they needed to do something to deal with their debts, but really did not know what options were available to them. They thought that I (as a trustee in bankruptcy) would only talk to them about personal bankruptcy – they did not realize that there were other options. I understand this is a common misconception people have and so I thought this would be a good time to share with you what a meeting with me involves.

The initial role of a first consultation is to review both the financial and personal situation in detail and discuss how all the options available apply. I remain completely unbiased during the meeting and do not make judgement on anyone. The options available are the same for everyone I meet with however, they will not apply the same for each individual case and the key during our meetings is to find the right solution to deal with the debts and develop a plan for a desirable future.

The meeting typically begins with open conversation, which then leads to a review of the specifics with respect to debts, assets, and income. Once I understand the exact situation we discuss in detail how the options work and review the pros and cons of each. At that point the meeting opens for other unanswered questions. We often also discuss future plans and goals. At the end of the meeting, I encourage the individual to go home and consider what they want to achieve going forward and which option they feel will work best for them to obtain these goals.

I feel it is about making the right plan for each situation. Just because one option works for one person/family does not mean it will work for everyone. As for Jane and Thom’s case, they went home and thought about the details of our meeting and gave me a call back today to let me know they thought a consumer proposal is the option for them. They realized that they needed control of their debts. They wanted to protect their house. They felt they had enough money to pay some of the debts back through one monthly payment and did not what to file bankruptcy. Their misconception of the intimidating meeting with a Trustee in Bankruptcy was dissolved. They already feel better about their situation and they have only had one meeting with me.

You too can review your situation with me in a private environment. Please do not hesitate to contact me. I will sit down with you free of charge to explore the options and help you develop a plan for the future. I can be reached via e-mail or at 519-747-0660.

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Over the years in Kitchener-Waterloo, many significant business stories have made the news. When business such as Budd Canada, Labatts, Uniroyal Goodrich, Electrohome and Kaufman Footwear first opened their doors they became a huge contributor to the earnings of Kitchener-Waterloo residents but they also became a big news story when they downsized and eventually closed. The impact of this on local families resulted in difficult times for many as they worked to recover from job loss and to find new employment at comparable income levels.

Today, we are experiencing different success stories of companies in the high-tech and insurance industries. With large companies like RIM, Sunlife, Manulife, come many good jobs. These companies are playing key roles in our local economy.

Large companies in their best years offer large amounts of jobs and bring in significant revenue to the community. These jobs allow people to settle into Kitchener-Waterloo by spending their income at local retailers, buying homes, raising families, and participating in the community. It could be said that large companies have helped shape the city into what we have today.

With the business world constantly changing, people have to adapt; change in employment is almost inevitable. The idea of “life-long” employment at one place is a thing of the past. This greatly affects individuals and their families as they try to maintain a secure lifestyle through changes in jobs. When you add a change in employment or a period of time without employment, with the amount of debt that families are carrying, it can be devastating to the family. In fact, job loss or reduction of income is one of the common causes of someone filing a consumer proposal or personal bankruptcy in my Kitchener bankruptcy office.

With RIM’s lay-off announcements over the past week, we are likely going to see people in our community experience job loss and may leave others stressing over future uncertainties. Not to mention the impact on the investments and shares people are holding in RIM stock.

Good, steady paying jobs are vital to keeping a budget balanced. If you are struggling financially due to changes in your employment, periods of time off work, wage cuts, etc and want to discuss options to deal with your debts, give me a call at 519-747-0660 or send me an e-mail.

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One common question I receive when reviewing someone’s financial situation is “can I keep my car in a bankruptcy?” This is an important question for many people living in Kitchener-Waterloo as there are requirements for a vehicle due the geography of the area and the need to be able to get to and from work, school, stores, etc.

The answer is normally “yes” however, there are a few scenarios that need to be considered;
1. The vehicle is owned by the individual without a lien against it, and
2. There is a loan against the vehicle thus resulting in a lien being registered.

Vehicle is owned without a lien:

For cases where the vehicle has been paid for in full and there is no loan or lien against the vehicle, Ontario law allows for a vehicle to be exempt from seizure for a value up to $5,650. That is, if the vehicle was sold by you today, if it is worth less than $5,650, then it is your vehicle to keep and your creditors do not have rights to the vehicle. If the vehicle is worth more than $5,650, the difference above this amount would have to be paid to the trustee in order to keep the vehicle. Therefore you are permitted to keep the vehicle in bankruptcy in this scenario.

Vehicle with a loan/lien against it:

Vehicles are typically a larger expense purchase, so most times people have to finance the purchase through a loan. The lender then has a right to put a lien on the car until the loan is paid off. This lien allows the lender to have first rights to the vehicle in the event you cannot pay for it any more. We refer to this lender as a secured creditor.

If a bankruptcy is filed, you have a right to keep your payments current and on-going to your secured creditors. As long as you do not have payment problems or arrears with the secured lender, they cannot take the vehicle from you if a bankruptcy is filed as the bankruptcy laws restrict any changes to the secured agreement. Therefore, if you feel you can afford to keep the vehicle payments current, then you are allowed to keep the vehicle in bankruptcy. This is also the case for leased vehicles.

If you cannot afford to keep the vehicle, you have a right to surrender it as part of a bankruptcy and then have loan balance included in the bankruptcy.

If you are experiencing financial difficulties and would like to discuss your situation and options, then call me at 519-747-0660 or send me an e-mail. I can meet with you in my Kitchener Waterloo office for a free consultation.

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The Office of the Superintendent of Bankruptcy (OSB) released their 2010 statistics yesterday. The reports detail the number of bankruptcies and consumer proposals filed in all of Canada. The report breaks down the numbers by province and even by Census Metropolitan Area which includes Kitchener. The OSB is the governing body that oversees the insolvency process in Canada – it is part of Industry Canada. All consumer proposals and personal bankruptcies are filed directly with the OSB as they are legal options available to Canadians to obtain a fresh financial start.

I am going to detail some of the information I saw in the statistical reports. I understand reviewing statistical information is not for everyone. I like to review these statistics for 2 reasons: First, I find it is important for us to look at the big picture every once in a while so that people can understand they are not alone in their financial struggles. And second, analyzing numbers is part of my formal education as I have a degree in Economics and Accounting from Wilfrid Laurier University in Waterloo.

In 2010, there were 135,008 consumer filings of personal bankruptcies or consumer proposals. This is down from the recession year of 2009 which saw 151,712 filings but is still up from the 2008 total of 115,789. In the 4 year period of 2007-2010 there has been more than 503,000 individuals who filed a personal bankruptcy or consumer proposal.

One trend that is showing steady increase is the number of consumer proposal filings. Consumer proposals saw increases of 17% in 2008, 40% in 2009, and 20% in 2010. With the new bankruptcy laws that the government introduced in September 2009, consumer proposals are becoming a more viable option for individuals to gain financial control again. This remains true for my Kitchener office. I am meeting with people that are more often choosing a consumer proposal over a personal bankruptcy.

From these numbers you can see that individuals in Canada are still facing hard financial times during the past years that have seen record low interest rates and smaller inflationary periods. Gaining control of personal finances is something we all try to accomplish, but changes in employment, relationships, families, health, and spending habits all play a vital role in this. If the debt load is too large, it will control the situation. There are options to restrict the debts. Of course the first option is to sit down with a bank and ask about a consolidation loan. If the bank is unable or unwilling to consolidate, there other options such as a debt management plan, consumer proposal, or as a last resort option of personal bankruptcy.

If it is time to make a plan for your future financial situation and want to sit down for a free no obligation review your situation and options please call me at 310-PLAN or send me an e-mail. As a licensed trustee, I offer you an unbiased assessment of your situation so that you can make the right decision for you and your family. There are no fees to see me and our discussion will be around you, your goals, and your situation. We will try to find the right option for you and focus on the future plan.

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When someone files for personal bankruptcy the amount they must pay into the bankruptcy is calculated based on their take home income (after taxes and payroll deductions) less certain expenses such as child care, child and spousal support and medical expense. As everyone’s situation and income is different, the amount they would be required to pay into a bankruptcy can be very different. The government refers to this term as “Surplus Income”. The general concept is to be, the more someone makes, the more they have to pay into bankruptcy. These funds are used then to pay the creditors part of the debt back.

The length of a personal bankruptcy is based on the amount of surplus income calculated over the course of the bankruptcy. A first time bankruptcy can be discharged (completed) after 9 months if there is no surplus income calculated. If surplus income results on an average up to discharge, then the first time bankruptcy can be discharged after 21 months. These time lines are relatively new as they were part of the change in the bankruptcy laws on September 18, 2009. For a second time bankruptcy, the length of bankruptcy can be 24 and 36 months respectively.

The government uses these monthly surplus threshold amounts for what base amount people can earn during a personal bankruptcy and any amount above that threshold, the government expects 50% to be paid into the bankruptcy. These thresholds are based on the family size. The 2011 monthly threshold rates were just released on March 11, 2011 and are as follows:

Family of 1 – $1,926
Family of 2 – $2,398
Family of 3 – $2,948
Family of 4 – $3,579
Family of 5 – $4,059
Family of 6 – $4,578
Family of 7 or more – $5,097

Let’s discuss a couple examples:

Case 1 – A single person making $2,500/month of take home pay on average. He pays $200 in child support. Therefore, net income for bankruptcy purposes is $2,300 ($2,500-$200). He is over the threshold limit by $374 ($2,300-$1926). He must pay surplus of $187/month for 21 months.

Case 2 – A married couple with 3 children. Their combined monthly take home income is $4,755/month which is a combination of employment income, child tax benefits and child support. They pay $300 in child care expenses. The net income for bankruptcy is $4,455 ($4,755-$300) and they are over the government limit by $396 ($4,455-$4,059) and 50% is payable into the bankruptcy for a total of $198/month.

Do any of these situations hit home? Or sound familiar? If you are in need of a fresh financial start and surplus is going to be too much per month based on your income bracket, the option of a consumer proposal maybe the solution. In fact, since the new laws came out in 2009, consumer proposals have been on the rise as the preferred option in restructuring personal debts.

The concept of surplus income can be confusing. If you are feeling the pressure of your debts and want to explore all options call me at 310-PLAN or send me an e-mail. As a licensed trustee in bankruptcy and a consumer proposal administrator, I have an obligation to review all options in detail with someone so that they can make an informed decision. My Kitchener bankruptcy office is conveniently located at 607 King Street West between uptown Waterloo and Downtown Kitchener. There is free parking and a bus stop in front of our office. For more information and a worksheet on surplus income please follow this link. To read the full directive issued by the government, please use this link.

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One question we all consider in some form or another is “am I normal?” This question also applies when it comes to debts and financial difficulty. When I meet with people in my Kitchener office, several ask if they are the only ones experencing these difficulties. It is quite normal to ask this as the person did not plan to be overwhelmed by debts. Often a sequence of events in their life leads them to harder financial times. I have always believed part of this is due to the fact that many people will not discuss their finances with family and friends. We tend not to discuss our debts, income, or savings with others. People will discuss issues or concerns regarding health, marriage, relationships, and children, but rarely do they open up about personal finances.

Many people have the opinion that someone who files bankruptcy is not working or is just using the system. A recent study by Hoyes, Michalos & Associates Inc. took a deeper look at the average person who files a consumer proposal or personal bankruptcy. The results of this study put this myth to rest. The average Joe Debtor in Ontario is a person who resorts to a consumer proposal or a personal bankruptcy as a solution for a fresh financial start is:

• A 41 year old male
• Married
• Working and making slightly less than the Canadian average income
• Has debts of almost $60,000 (unsecured debts).

Does this meet your stereotype of the average insolvent person? Comparing Kitchener Waterloo to the Ontario results, the average is not that different. The average person who filed bankruptcy or a consumer proposal in Kitchener and Waterloo has over $48,000 in unsecured debts, but also has an average mortgage amount of $227,000.

These are interesting numbers to demonstrate how someone compares to the average. As in any situation, there are many cases in which people have higher or lower debts. As I noted in my previous blog post, with debt levels rising in Canada, problems can arise in any situation or age group. From the individuals and couples I meet with in my Kitchener office they range in age from 18 years old to 80 years old. Times have changed; credit is readily available and as a result, if someone is carrying debts and a few things go wrong, the pressures of debts can become too much.

The Canadian government has created both a consumer proposal and a personal bankruptcy as an option to give a person a fresh financial start. These are last resort options for when all the other options do not work.

If you are reading this blog and wonder about your options, give me a call at 310-PLAN or send me an e-mail. We will discuss your situation and can sit down to review the options and how they work in your situation. From there you will need to go home, plan out the future and find the right option for you. My role as licensed trustee in bankruptcy is to give you an unbiased and fair assessment of your options. There is no cost to see us and our fees are paid through a government tariff when someone files a consumer proposal or a personal bankruptcy.

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If you are feeling like you have too much debt, you are not alone. A report by The Vanier Institute of the Family released today indicates that the average family debt level is $100,000. Furthermore, the debt to income ratio has reached a record 150%. Since debt is up, you are correct in assuming that savings are down. For 2010, the average savings per household was only $2,500.

What is the future outlook given these facts? You will hear many views on this topic, as everyone’s situation is different the impact on your family can also be different. My concern – we have seen low interest rates for a relatively long period of time. Every small increase in interest rates will have a big impact on $100,000 in debts. The impact may be a short or even a long term impact on the family situation. Increased interest costs take more of the monthly budget to pay, and therefore less for savings and other items. Increased debt costs today, will decrease funds availabe to pay for future things like children’s schooling, repairs to the house or vehicle, retirement savings plans, etc.

The time to make a plan to deal with the debts is now. First take inventory of your situation. How much do you owe, what are the family income and expenses, and what are the family’s plans/hopes for the future. Look at your debt level, is it increasing, decreasing, or staying the same on a month by month basis.

You need to consider your ability to pay the existing debts. If your debt level is overwhelming and controlling you, then call me for a free meeting to review your situation and your options so that you can make the right plan for you and your family. I can be reached in Kitchener Waterloo at 310-PLAN or send me an e-mail. My Kitchener office is located at 607 King Street West between uptown Waterloo and downtown Kitchener. As a licensed trustee in bankruptcy, my duties are to explore all options with your including debt consolidation, credit counselling, debt management plans, consumer proposals and personal bankruptcy.

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