Bankruptcy Kitchener Blog by Scott Schaefer

According to Wikipedia, a staycation “is a neologism for a period of time in which an individual or family stays at home and relaxes at home or takes day trips from their home to area attractions. Staycations have achieved high popularity in the US during the financial crisis of 2007–2010 in which unemployment levels and gas prices were high.”

In the Kitchener-Waterloo Region, I have seen and heard this term being used more and more. Staycations are a great way to take in the vast amount of activities and attractions we have in Kitchener and Waterloo. I think there are many activities that we have never experienced because they are local and often overlooked. So from a budget and local impact point of view, a satycation is an excellent way to save money and still get out. But the reality of it is that many people cannot afford to travel away from home right now. With financial debt levels increasing, the amount people are spending just to make their monthly debt payments is growing into a large number. I understand how the past 2 years have affected many people and families in the area.

I have found that summer can be a time when families in the Waterloo Region look at their situation and ask themselves, is this where they wanted to be financially? If a staycation is in your summer plans due to your debt levels, then maybe this is the sign that it is time to consider a plan for your future financial situation. Maybe a consolidation with a bank will help, or maybe it is time for a debt management plan or a consumer proposal.

At this point, the best thing to do is:
a) Create a list of all your debts with total owing and monthly payments to each;
b) Work on a monthly cash-flow tracking what you have coming into the family unit as income and where you spend your funds. See this link for a budget worksheet;
c) Talk to someone to see if your cashflow is missing or omitting something that you missed and will affect your decision making;
d) After drawing up your cashflow, determine what your overage or shortage is.

If you would like to sit down and review your situation to determine how the various options work for you, please call my Kitchener office at 519-747-0660 or send me an e-mail. There is no cost or obligation in meeting with us. We will gain an understanding of your situation and then provide you with details of how the options work and at what monthly amounts you would have to pay.

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Since the last snowfall, the government has been issuing warnings to consumers to reduce debts as interest rates will be rising in the future. This of course is in despite of the government not listening to their own advice as the government debts are rising too, but that is another issue. We just witnessed the Bank of Canada make their first increase, so when are we going to see interest rates increase again and how fast? What do these warnings mean to consumers?

Consumer debts are reaching new levels and as all debts are tied to interest rates, any increase will have a significant affect. I have an economic degree from Wilfrid Laurier University so analyzing trends and effects is quite interesting to me, but one does not need this degree to see the impact interest rates will have on the people from Kitchener Waterloo. Every increase in an interest rate will affect everyone’s amount they have to pay. Let’s consider some of the following areas:

- First through the debts that they pay as interest rates are tied to prime – for example, line of credits, overdrafts, new loans, etc.
- Second, the cost of items we buy will have to rise over time due to businesses carrying debt. If the costs to a business go up, then they will have to pass these on to the consumer in order to maintain their profits.
- Third, higher interest rates could affect government debts as well, which are paid through taxes.

Overall, we have seen very low interest rates for a long time. People are not talking today about how mortgages used to be at 20% back in the early 1980s. That is like paying your mortgage on a visa card today. I am not saying we are going to see these high rates again, but the government is warning us to be ready for rates to increase.

The hard part is, as consumers we need to spend to help us recover from the recession, so if we are paying off our debts verses spending the money on consumer goods our economy could take longer to recover. With rising debts and costs, the question people are asking is how do we reduce our debts and still afford to live. Everyone’s situation is different so the same solution is not always available to everyone.

If you are from the Kitchener Waterloo area and feel that your situation is too tight now, then it may be time to consider a plan to deal with your debts. A debt management plan to pay 100% of your debts without interest may be one solution or a consumer proposal where you make one monthly payment to pay back part of your debts may be another. We can arrange a free consultation in my Kitchener office to review your situation and gain an understanding of how the various options would work in your situation. I can be reached at 519-747-0660 or by e-mail.

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There is a very simple budgeting system that has been around for a long time, but today, with the use of credit, this system is used less every day. This is a system of understanding our “needs” and our “wants”. After taxes, we are all constrained by how much money we have available to us to spend. We live in an expensive society. For example, our housing costs are a significant percentage of our income. The issue then is, how do we allocate the rest of our income?

In theory, it is easy to understand the needs verses wants principle, but is much harder to practice.

The first step is to know which items are needs and how much they cost. Once we have totaled the need items, we can calculate how much we have available (or left over) for the want items.

Over spending on wants is where we tend to accumulate too much debt. Most times, if we are using a credit card for want items, we likely do not have the full amount of cash available to pay back the credit card for this item. Therefore, debts accumulate. The problem is compounded by high interest rates on those credit cards.

We consume more “stuff” then prior generations. Instead of fixing, we buy new. Every few years we need to replace the old computers and electronics as they may no longer be in style, etc. There are huge marketing campaigns out there to ensure we keep spending.

The availability of credit in today’s world has made it easy to make spontaneous purchases on “want” items. Before you purchase a “want” item, save up for it and then wait a couple of days or weeks to ensure that is truly how you want to spend your money. You may find that you change your mind during that waiting period.

Once you are on the need and want system, you need to determine the appropriate plan for dealing with your debts. These include bank consolidation loans, liquidating assets, doing a debt management plan, filing a consumer proposal or a personal bankruptcy. If you are in Kitchener Waterloo and want to understand your options to deal with your debts give us a call at 519-747-0660 or send me an e-mail.

In order to succeed in any plan, you need to know how to spend your hard earned funds in the future. Use the system that existed well before credit was in play, the needs and wants system. Save up for the want items and do not use credit.

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As New Year’s is upon us again, it is time to look into 2010 and make our resolutions. If one of those resolutions is to get your finances in order, then let’s discuss some of the steps you need to take. A couple of major hurdles we have to overcome are; one – our spending habits do not change overnight and two – we are generally limited to the amount of money we bring in.

The first step is to take inventory. To take inventory we have to figure out where you are. You need to make lists of your:
a) debts, and
b) major assets (house, vehicles, investments)

Second, make a realistic personal budget. Making a personal budget can be overwhelming, but is very important. Simplify the budget to calculating what income you receive and where you spend money. Review old bank statements to see where money was spent. For assistance on making a budget, here is additional information.

Third, set goals. Think about what is important to you and your family, and consider where you want to be in the future. It is sometimes easy to be wrapped up in our day-to-day lives and not think about the future. News Years is a good time to reassess and think about the future, by setting your goals.

In order to deal with you debts, you need to understand the inventory of your debt load and assets, the personal budget, and what your goals are. Then you can evaluate the pros and cons of each option in your situation.

Options to deal with debts include:
a) Use your assets – house equity and investments,
b) Consolidation loan with a bank,
c) Credit Counselling/Debt Management Plan through a not-for-profit agency,
d) Consumer Proposal, and
e) Personal Bankruptcy

For a debt option calculator see this link.

If you are in the Kitchener-Waterloo area and want to sit down for a free consultation to discuss your situation and options in greater detail, call me at 310-PLAN or send an e-mail.

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This Saturday, November 14th, Howard Hayes and I will be spending the hour between 12:00 and 1:00pm answering your questions live on air on the Ask the Expert Show on 570 News. If you have questions and want to hear them answered, please send us an e-mail at this e-mail address created for this show. We will attempt to answer all of your questions.

We receive many e-mails from people in the Waterloo Region. These e-mails are asking questions about garnishments, personal bankruptcy, consumer proposals, assets, creditors, or any debt related question to name a few. Personal finance problems are stressful and overwhelming, so hopefully our live radio show will help you understand your options and how specifics in your situation will be handled.

As a Trustee in Bankruptcy, I am responsible for our Kitchener Office. I can be reached at 519-747-0660 or at this e-mail if you would like to talk specifically about your situation.

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After 57 years in the Kitchener-Waterloo community, the local not-for-profit organization, Catholic Family Counselling Services is experiencing a name change – going forward, they will be known as Mosaic Counselling and Family Services. The organization is a member agency of the United Way.

The Mosaic Counselling and Family Services is located at 400 Queen Street South, Kitchener. They offer a wide range of services to residents in Kitchener-Waterloo. When someone is in need, counsellors are there to meet with the person and help in a supportive role.

One key area of focus for the organization is offering credit counselling. They meet with individuals and families to review their situation, work on budgets, and help guide them in the right direction. One aspect of the business is a Debt Management Plan, which is a 100% repayment option through the Ontario Association of Credit Counselling Services. Another service offered is credit counselling in a personal bankruptcy. For individuals filing personal bankruptcy in Kitchener, the system requires 2 one on one credit counselling sessions to assist in obtaining a fresh start. We refer several people Mosaic Counselling and Family Services for these sessions.

If you are in financial stress, call Mosiac Counselling Services at 519-743-6333 or call us at 519-747-0660. We are both located in the Kitchener-Waterloo region to help people in tough financial situations.

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As I sit on my campsite in the Muskokas overlooking the lake, I reflect on the first seven months of this year. In the personal insolvency business, we have seen more personal bankruptcies and consumer proposals than ever before. The recession and financial crisis has had deep laying effects on many individuals and families.

My family and I have been camping in this provincial park over the last week now. I am sad to report that it is far less than completely full. My best guess would put it around 50%. As a general rule, the weather has been cooler this summer, but we have lucked out and had sunny days in the low to mid 20’s each day. As we boat around the lake, we see more for sale signs on cottages than in years past.

What I conclude from this is that people in general have less disposable income for family vacationing – from those who once could afford a million dollar cottage to those who just want to go camping. What are we sacrificing though, is the quality family time and the memories of our children. It is easy to be caught up in the hustle and bustle of our busy, stressful lives. A lot of these pressures can be attributed to financial or money related concerns.

If you find yourself reading this article and can relate to the fact that there is nothing left over in your budget for quality family time, then maybe you need to consider what you can change in your situation to deal with your debts. There are options to manage your debts including bank consolidations, 100% debt management plans, or a consumer proposal. We can discuss your situation in detail and help you make a plan do deal with your debts so you can make a plan for you and your family. You can call our Kitchener office at 519-747-0660 or e-mail us.

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With each day that passes in these recessionary times, more and more people from Kitchener-Waterloo are finding that they or someone they know are being laid off. These layoffs may be short-term, a few months, or even permanent. This unexpected unemployment can have a major impact on the family budget. A big part of our demand for money is fixed, that is we have expenses to pay each month regardless of how much we make, such as mortgage/rent, utilities, car payments and insurance, groceries, etc. We have some variable expenses that change with each month but these make up a smaller part of the budget.

A few years ago, if someone was laid off, there where various other employment opportunities available. Today, we find unemployment rates increasing. Further, those that still have jobs are seeing decreased income with a potential scale back of overtime and even some concessions in cutting hours overall. This overall reduction in income (no matter what the cause) is the leading cause for people contacting our office right now.
These cases of unexpected unemployment or reduction in income can only be sustained for the short-term. The banks are tightening up on their lending and doing fewer consolidations. If an individual already has various credit card and lines of credit debts, then there may not be funds available to pay these debts plus all the other fixed costs we have. This all can lead to a time of overwhelming stress which affects all aspects of life. We need to make a PLAN to deal with the situation and reduce this stress.

If you find yourself having trouble keeping up with your situation due to an unexpected unemployment call me at 310-PLAN (or send an e-mail) and we can make a PLAN with you.

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It is my belief that our education system fails us in properly training us on cash control and personal finances. We are taught a lot of good subjects by many great teachers through our schooling, but I feel there are some significant shortfalls when it comes to teaching personal budgeting, credit management, understanding contracts and interest, etc. I feel we should be forced to take a real life course on this subject in high school.

I spent the morning today at St. Jerome’s University (part of the University of Waterloo) as a guest speaker in Dr. Tracy Penny Light’s course on “Sexuality, Marriage and Family“. I was asked to speak on the topic of “Family Work and Family Money”. In this 80-minute class of approximately 150 students, we discussed the impact of personal finances on family and individuals. In my everyday role as a personal trustee in bankruptcy, I meet with real people, having real money problems, needing a real plan. During my talk, I tried to keep the lesson open and allow students to add input to the conversation. While these students are very smart, some of them appear to be naive and untrained when it comes to formulating their thoughts on personal finances. Their text book was called “Choices and Constraints in Family Life” by Maureen Baker. Well, when it comes to finances and budgets, there are no two better words – choices and constraints.

We are all constrained by how much income we have available each month and when you compare it to actual demands for income we are left with choices. In today’s society, we are spenders and the economy is based on these spending habits. The difficult part is that the cash outs can exceed the cash ins on a regular basis. This is when we tend to fall back to credit cards to cover the shortage. For example, Canadian household debt as a percentage of personal disposable income per household is a staggering 131%.

This morning’s class allowed for the students to consider a situation – they were a married couple with 2 kids and due to an event (such as illness, lay-offs, reduced hours, change in employment, etc) their family income had dropped by $10,000 per year. They worked in teams to brainstorm how they would deal with this change. The students provided some good and practical solutions. The hard part is, these are real situations couples face every day and it is the use of credit that is sometimes what gets them by. When the debt levels are too large to manage, often couples consider personal bankruptcy or consumer proposals as an option. These are good people who did not plan for this to happen; it was the combination of many life events leading to that point in time.

In closing, I think individuals and couples would be better prepared to deal with changes though their lives if they were better equipped with personal financing courses included in their education. If you would like to discuss your situation, e-mail me or call me at 310-PLAN (no area code required).

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