Bankruptcy Kitchener Blog by Scott Schaefer

I moved to Waterloo in 1993 when I first attended Wilfrid Laurier University. Since then, I have made Kitchener Waterloo my home. I believe that in my profession, it is important to live and work in the same community. I feel a greater connection with my community knowing I am helping fellow residents of Kitchener Waterloo.

I try to support and participate in local activities and events. Just this past weekend, I ran the 10K Oktoberfest race in the Waterloo Running Series. Along with the other participants, I ran from Conestoga Mall down King Street to William Street, then looped around and ran by the University of Waterloo and Wilfrid Laurier University before finishing at the Waterloo Recreation Complex.

I find running can be a lot like budgeting. I started running a few years ago for general health reasons as well as for my personal enjoyment. Much like budgeting it started for financial health reasons. When a run goes successfully, it is very rewarding, much like when the budget you set works out and you end up with left over funds in your pocket. The hard part of both running and budgeting is that it takes a lot of practice to make it work. If you over spend one day, the budget will not balance without negatively affecting another area of the budget. With a run, if you over eat one day, your run will be slower than normal and hurt that much more. Further, it you stop running for a period of time, it takes some time to get back into it. Just like budgeting, by not tracking your expenses for a period of time it will be difficult to make sure you do not over spend and you may even need credit to help you out.

Therefore, to become good a budgeter, it takes a lot of practice. There will be good days and days not so good. Making a budget work, takes time and discipline. The better you can become at budgeting the more money you will have to save for the goals that matter to you. Just like in running, the more you run and train, the faster and better runner you can become.

Over the past year I have improved my 10K race time from 49:23 to 46:28 and helped hundreds of people from the Waterloo Region make their budget work again. If you want meet with me in my Kitchener Waterloo office located at 607 King Street West and review your options so that you can make your budget work, e-mail me or call me at 310-PLAN.

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As I prepare my kids for the first day of school, I think how much simpler life is to be a kid. Our children may feel that they have many stresses today, but we all know life is much tougher as an adult. There are stresses we face as adults that include jobs, family budget, marriages, raising children, health concerns, etc. Just when things are going well, it can all change. We live in a changing economy that can have big impacts on our lives. We are faced with making tough choices and may not be fully prepared to make these choices. The old saying that we learn from our mistakes comes at bigger costs as an adult. Making the wrong choice could have a huge financial impact on our future.

Therefore as the kids return to school, we should ensure we are providing them with our knowledge of real life lesson s that we have learned so they can be more prepared for their future. The two school boards we have in Waterloo region provide a strong curriculum for our children to learn, but I do feel that one area that is not talked about as much as it should be – personal finances. Our children are not taught how to purchase a house, how to negotiate a car deal, how to manage financially if someone loses a job or become ill. These are areas we all enter into during adulthood and often have to learn as we go. Therefore we should work at teaching our children how to cope with these experiences. We should teach our children how to do a budget and encourage them to save. It becomes hard when the family budget is not working and debt levels are rising.

We all need to keep learning when it comes to finances. I believe that our time today is much different than any other time in history as we live in a time with a record amount of debts as consumers and as a nation. Once someone reaches their limits, a consumer proposal or a personal bankruptcy may be necessary to allow for a fresh start financially. Once someone files a consumer proposal or a personal bankruptcy, they need to consider a world without unsecured debt (ie. credit cards etc) and how they are going to learn from past experiences. The key will be to develop a budget/cash monitoring system given the individual’s situation. This includes understanding our wants vs needs. Cash becomes king again. There are many different methods available and we need to educate ourselves to find which one works for us.

If you are searching for plan to allow you a fresh financial start, please send me an e-mail or call me in my Kitchener office at 310-PLAN.

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The Office of the Superintendent of Bankruptcy released their report on the 2010 second quarter statistics on personal bankruptcy and consumer proposal filings in Kitchener Waterloo. The results show a decrease in the number of filings for the first 6 months of 2010 compared to the same period in 2009. This is something we all expected, as 2009 saw a record increase in personal bankruptcy and consumer proposal filings due to the economic recession, especially in Kitchener Waterloo. Comparing the 2010 second quarter number to the same period in 2008, we see the number of filings in Kitchener Waterloo are up over 14% for the same period.

Based on the situations I see in my Kitchener office, residents in Kitchener Waterloo are still feeling the effects of 2009 and the burden of carrying too much debt. Most people have found employment but at reduced incomes and debts may have risen in 2009 due to the financial strain the recession had.

Looking more at the statistics, consumer proposal filings grew over 32% in the first 6 months over that in 2009, and further grew 65% higher than that in the same period in 2008. This is mostly due to the new bankruptcy rules that came into effect on September 18, 2009. These changes have increased the length of time and costs for some bankruptcy filings. For more information on this, please see this blog link.

The fact is that if someone is struggling with their debts and they need relief, the government has provided the option of a consumer proposal as an alternative to the last resort option of personal bankruptcy. For the people that file with me, about 60% have filed a personal bankruptcy with 40% filing a consumer proposal. To sit down and review your situation and options in a free no obligation meeting, please send me an e-mail or call me at 310-PLAN.

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As debts levels rise in Canada, people at retirement age are facing the challenge of retiring with debts. Retirement is seen as a rite of passage – we work hard our whole lives and are to be rewarded with an extended vacation in our senior years. Problems arise if one retires with debts and their monthly pension income has decreased, making it difficult to keep up with debt payments and living expenses.

In my Kitchener office, we see several seniors who are struggling financially and are looking for relief from the collections and overwhelming stress of carrying these debts. Seniors are very proud people and are upset about their situation, but they also realize that the stress of the situation is affecting them too much.

Sometimes we see the adult children coming into meetings with their parents who are having financial difficultly. This is a good sign for me as I see the children acting as a support network for the retired parent. It is hard for anyone to admit they are struggling financially, but when they do, those around them can help to seek financial advice with someone who will talk with them about the situation and alleviate some of the stress.

Personal bankruptcy is a last resort for anyone, including pension earners. But if someone cannot handle their debts and collections calls, then a personal bankruptcy will be available to give the debtor relief. Personal bankruptcy still has costs and is handled over a period of time not less than 9 months, so it is not simply walking away from debts. When someone files for personal bankruptcy, a note is put on their credit rating which affects their future ability to obtain new credit. I believe that seniors should be debt free and therefore not applying for new credit as they are on a fixed pension income.

Last week, Doug Hoyes, was interviewed by the Financial Post on the question “Do Senior Citizens Need to File for Bankruptcy?”. There any many cases in which a senior does not have to file for bankruptcy and several cases where bankruptcy may be the relief they need. The fact of the matter is, if a senior is struggling with their debts, they can talk to someone about the options available. If you are from the Kitchener Waterloo surrounding area and want to talk with me about a senior’s options to manage financial debt load, please call me at 310-PLAN or send me an e-mail.

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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 310-PLAN 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 310-PLAN or by e-mail.

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Wells Fargo announced yesterday that they are closing their Canadian operations. The following notice was posted on the Wells Fargos website yesterday:

“Effective June 9, 2010, Wells Fargo Financial Corporation Canada discontinued sales of new customer loans, and closed Wells Fargo Financial store locations across Canada. We have shifted our focus to serving existing real estate, auto, and consumer loan accounts. There will be no change to our customers´ existing account terms and conditions.”

Wells Fargo had a store location in both Kitchener and Waterloo. Several local residents used Wells Fargo as a lender for many different reasons. One of the main reasons was that the banks had turned them down. So with this lender now not available in Kitchener Waterloo, individuals may not be able to consolidate their debts or renew their mortgages the same as they could in the past. This is one more example of the fall out of the financial crisis and recession has lead to.

If you feel your debt load is now too large to manage and want understand how a consumer proposal or a personal bankruptcy would work in your case, call me in my Kitchener office at 519-747-0660 or send me an e-mail. We will sit down and have a free meeting to discuss your facts and impact of each option.

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As a licensed Trustee in Bankruptcy, I am a one of just over 1,000 Trustees in all of Canada. A Trustee in Bankruptcy has a unique role. We are like a referee in the bankruptcy process. We sit down with people who are experiencing financial hardship and assess their situation as well as review the options to deal with their debts. Then, if someone needs the protection and relief from their creditors, we administer the bankruptcy process. We are not lawyers, but rather licensed by the government. We are all required by law to uphold a minimum standard and we report to and are monitored by the government.

So how are the Trustees at our firm different?

At Hoyes Michalos and Associates Inc. we think that people make the difference. In our Kitchener Waterloo bankruptcy office, my associate Ian Martin or myself meet with every individual. Ian and I are both Chartered Accountants. We personally work with everyone who sees us in the Kitchener Waterloo to make the process is fully explained and understood.

I was sitting in the Kitchener Bankruptcy Court last week where I noted some major differences between trustee firms. There were 65 individuals being seen by the court for their discharge hearing that day. Not all personal bankruptcies have to appear before the court, only certain cases go to court to get their discharge. I was there to report to the court as the trustee on 5 individual bankruptcies. There was only one other trustee firm represented at the court, even though there were individuals at the court for at least 10 other trustee firms.

How does court work? The judge deals first with clients whose trustee is present. Therefore, the individuals there from Hoyes Michalos were dealt with first and out of the court within minutes. After that it got interesting. I decided to stay in court until all cases were heard. I sat in the court room watching what happened for the individuals whose trustee chose not to appear at court. Each case was heard one by one, with just the individual sitting before the court and having to speak alone – without the support of their trustee. There were some cases where there appears to be some miscommunication between the trustee and the individual and the trustee was not there to sort it out. This left the individual confused and not sure of what had just happened.

For most people, they have never been in a court house. Now if their bankruptcy has to go to court, they are left to go it alone. At Hoyes, Michalos and Associates Inc. we will appear at all discharge hearings because we see it as part of our role as trustees. Further, it is imperative that everyone understands want the process is so that there is no confusion. This is one major difference between us and the other trustee firms in the area.

For a free assessment of your situation, call me at 310-PLAN or send me an e-mail. The Kitchener Waterloo office is located in the middle of both cities at 607 King Street West in Kitchener – near the intersection of King and Victoria.

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Statistics Canada released the bankruptcy and consumer proposal rates today and Kitchener Waterloo was hit harder than the Ontario and Canadian averages. 2009 was a year marked by the recession, the downturn in the automotive sector and financial crisis. These all contributed to individuals falling on tough financial times.

In 2009, 151,712 individuals filed a consumer proposal or bankruptcy in Canada. This was an increase of 31.0% over the 2008 number of 115,789. For Kitchener Waterloo, the increase in personal bankruptcies and consumer proposals was 39.2% which was higher than the Canadian increase of 31.0% and the Ontario increase of 32.7%. The numbers with respect to just personal bankruptcies in Kitchener are even more drastic – Kitchener bankruptcies saw a 45.9% increase as compared to Ontario of 28.5% and Canada 28.4%.

For my Kitchener office, we met with many people from Kitchener Waterloo and as such personally understand how hard this year was on them as they saw the impact of the recession on them and their families.

In the past, Kitchener Waterloo may have fared better due to our diverse economy with the high tech sector, universities and college, hospitals, insurance, and manufacturing sectors, but 2009 had a deeper impact that spread to all areas and sectors.

Kitchener Waterloo is rebounding, but individuals are still feeling the long lasting impacts that 2009 brought to their situation and with increased debt levels, individuals still will need the assistance to get a fresh start through a consumer proposal or bankruptcy.

If you would like a free review your situation to make a plan to deal with your debts, call our Kitchener office at 310-PLAN or send me an e-mail.

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My associate Ian Martin and I spent the noon hour this past Saturday on the Ask the Expert show on 570 News. During the show we discussed market trends, the significant increase in insolvency filings, and how consumer proposals and personal bankruptcy work. We consider the Ask the Expert radio talk show an important forum for providing the community of Kitchener Waterloo with information.

While preparing for the show, I looked at various statistics. Here is what I found; the current debt to income ratio is now at 145%. When we did a similar show in February 2006, the ratio was only 118%. That is a significant increase of 27%, but the fact that this number has increased to over 100% is of concern. This could be one of the leading causes that for the 12 months ending November 2009, there were more than 150,000 personal bankruptcy and consumer proposals filed in Canada. Further, when I compared previous data, I found that 2005 was the first time more than 100,000 people filed personal bankruptcy or consumer proposals. Seeing an increase on this scale is of concern because it can cause people to fall into financial hardship when they experience something unexpected in their life.

Kitchener Waterloo has been affected by the recession as well as unemployment rates which are now at 9.9%. This is above the current national average of 8.3%. Many people have gone back to work to be retrained, taken lower paying jobs, or have had over-time slashed. When you compare that to the demands for debt payments, people are overwhelmed.

As Trustees in Bankruptcy, we are available to help people obtain fresh financial starts through consumer proposals and personal bankruptcies. Ian and I meet with many people from Kitchener Waterloo who have faced tough times and were thankful for the options available. While a consumer proposal or personal bankruptcy is not the option people plan for, it does provide a safety net and allows these individuals to take control of their financial future.

If you are from Kitchener Waterloo and want to sit down and discuss your situation in detail so that we can make a plan to deal with your debts, call us at 310-PLAN or send us an e-mail. There is no cost in meeting with us.

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