Bankruptcy Kitchener Blog by Scott Schaefer

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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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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Every once in a while, we need to step back and look at where we are and whether or not we are meeting our objectives. It is at this time, I look at my blog site and consider the past postings and the direction I should be going with the site. The first step for me is to consider what the overall goal of the site is. From this review, I have determined that the forward focus of my blogs will be to provide the residents of Kitchener Waterloo with appropriate and relevant information about consumer proposals, credit counselling, consolidations, budgeting, and personal bankruptcy as they relate to our local situation. Our homes and the communities we live in are here, so we should focus on how things relate to us here at home in Kitchener Waterloo.

While I have written several blogs over the years containing information that may be helpful to some, I want to make a more active attempt at providing relevant stories, examples, and key information to help individuals deal with their current situations. By passing on situations and experiences that people from Kitchener Waterloo have faced, I believe that the readers can then use this information to compare to their own situations to gain a better understanding of how they can move forward. Personal finance is something friends and family rarely share with eachother, therefore it can be hard for some to understand their own situation and they may feel alone in their struggles.

Research on the internet is a primary source of information and it plays a vital role in all our lives. We need to know how things work today and how they apply to us. Therefore, I also want to be able to provide information as it becomes available – avoiding delays in relaying that information – as a result, I will soon be adding a Twitter feed to my site. Another key step in providing information to local residents of Kitchener Waterloo, will be to allow questions and comments to be posted to me via my blog site. I can then respond to someone`s questions and comments to my postings to address any clarification or specific questions. In this sharing of information, we all can benefit.

Stay tuned and provide me with any comments you may have. I would love to hear your suggestions, please do not hesitate to send me an e-mail. Change is one thing most of us struggle with, but I feel I need to change to move forward in order to provide the appropriate and relevant information to my fellow residents in KW.

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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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This past Thursday night I attended the second annual Father Daughter Ball in support of Mosaic Family + Counselling Services. It was a great night to spend with my two daughters. This fund raising event provides funding for Mosaic the “not-for-profit” agency which provides various counselling and other support services to residents in the Kitchener Waterloo area. One of the counselling options Mosiac Family + Counselling Services offers is credit counselling. They have five friendly and professional counselors dedicated to helping individuals and couples cope with financial situations and budgeting.

One of the services the credit counselling group offers is a Debt Management Plan program. A debt management plan is an option to allow someone the ability to pay back 100% of their debts over a period of time up to 5 years. The plan is administered through the Ontario Bankers Association and the Ontario Association of Credit Counselling Services (OASSC). Mosaic Family + Counselling Serivces is a member of the OACCS.

Mosiac Counselling + Family Services provides excellent service in several areas. If you feel you need their help, please visit their website or call them at 519-743-6333. They are located on Queen Street in Kitchener.

If you are experiencing financial difficulty and want to understand all your options, including credit counselling and debt management plans, please call me at 519-747-0660 or send me an e-mail. We can discuss the situation over the phone and arrange for a free consultation in my Kitchener office.

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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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