- Since the law was changed in September 2009, a higher percentage of consumers have chosen to file a Consumer Proposal each and every month
- For the 12-month period ended April 30, 2011, 33% of people who chose to deal with their debts opted for a Consumer Proposal instead of Personal Bankruptcy. This compares to approximately 20 percent just one year earlier.
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Not your father’s bankruptcy
Debt is as old as money itself. Along with the invention of money came laws to govern its use, and, therefore, so too came laws to govern debt and bankruptcy. In fact, the Code of Hammurabi, a set of laws written in Babylon in the eighteenth century BC (!), outlines what should be done when a debtor is unable to repay his loan. Among its more civilized tenets is that which states that after selling yourself or your family into bondage to repay the debt, your loan will be considered paid in full after only four years of hard labour.
As the centuries passed, and mankind (supposedly) became more genteel and cultivated, our bankruptcy laws evolved likewise. In Colonial North America, rather than be forced into servitude, the offending party would merely be brought to court from where they could be thrown in jail, publicly flogged, or branded, thus becoming identifiable as an unreliable borrower. The good news today is that for people who find themselves unable to repay, while the threat of legal action remains, current legislation protects debtors from harassment and aggressive collection tactics. Furthermore, no one is going to flog you in the street. In fact, bankruptcy, despite technically being “public information”, is a surprisingly private affair. Whereas it used to be common practice to parade the borrower around for all to see and ridicule, nowadays confidentiality reigns. With most cases, only the creditor(s), the debtor, the Trustee, and the Office of the Superintendent of Bankruptcy are made aware of the proceedings. Never mind your nosy neighbours.
Unlike the days of our fathers, proceeding with a bankruptcy today is a dignified, non-invasive, and painless affair. You will endure no physical harm, no public shaming, and not only will you be able to save your family from slavery, you will be able to retain possession of many of your assets, including your vehicle, your home, and even your RRSPs. Though some may still think that bankruptcy is an arduous and shameful process, I can assure you that today’s debt relief is much nicer than in the days of Hammurabi.
So, What is a Trustee anyway?
You find yourself at a dinner party and, in classic small-talk manner, the dashing character beside you mentions that they work as a bankruptcy Trustee. You scan the people around you hoping one of them might be able to help you figure out exactly what that is. The fact is that, while some individuals may have a basic idea as to what a Trustee in bankruptcy is, most of us honestly don’t have a clue.
Simply put, a bankruptcy Trustee is someone who manages the funds of an insolvent, or nearly insolvent, party. (Note: not dinner party) When faced with a seemingly insurmountable financial burden, a Trustee is there to help you make a plan to overcome it. In much the same way that a doctor reviews one’s health issues and suggests a variety of treatments, visiting a Trustee will allow him or her to confidentially assess your financial state and provide counsel on how to best ensure a “speedy recovery”, whether that be in the form of a Personal Bankruptcy, a Consumer Proposal, Credit Counselling, etc.
With access to an inexhaustible amount of online content, or any number of well-meaning friends, co-workers, and family members, lots of people in financial trouble may attempt a self-assessment. But this choice often proves overwhelming and even dangerously inaccurate, sometimes leading to further problems. With a bankruptcy Trustee, these potential problems never occur.
The long and the short of it is that a bankruptcy Trustee is an independent person that is there for you, the individual. It is the duty of a licensed Trustee to advise you of your rights, to ensure all of your creditors play by the rules, and to provide you with the best option for moving forward financially. Armed with extensive knowledge and an invaluable perspective, with a Trustee you are protected.
At Sands & Associates, our staff of Trustees meet daily with individuals who are experiencing financial difficulties. Our firm’s success is rooted in our commitment that we will always treat you with respect and empathy from the moment you walk in the door. Please Contact Us to arrange for a free, confidential evaluation of your financial options.
Click here to learn more about the role of a Trustee.
Are you reading the fine print?
Somewhere buried amongst your financial obligations, holdings, wheelings-and-dealings lays the fine print. But just how many Canadians are reading it?
When entering into mortgage, vehicle or loan agreements there are many things to be considered: payment amounts and frequency, length of term, interest rates and, of course, where the money is going to be used. Other items which may be quickly disregarded or forgotten could include closing costs, commission fees, annual charges and balloon fees.
In addition to appealing reward programs and incentives, many seemingly simple credit card agreements may also contain hidden fees in the form of preliminary low-interest rates, membership costs and rapidly-accumulating convenience fee charges.
Many Canadians without regular consumer credit may also be taken unaware when entering into something as common as a cellular phone contract. Temporary complimentary features and upgrades as well as overage charges may easily increase the customer’s anticipated bill.
In late 2009 the Government of Canada instituted a number of regulations aimed at increasing disclosure of the ‘fine print’ for consumer credit. Some changes you may have noticed on your credit card statement include:
- Summary boxes on credit contracts setting out key features such as interest rates and fees
- Disclosure of just how long it will take to pay off your debt in full if you make only the minimum payments. Terms of 100+ years are not uncommon in people we see daily
Other notable amendments include provisions that require express consent for credit limit increases, limitation on debt collection practices used by financial institutions and prohibiting over-the-limit fees solely arising from holds placed by merchants.
Although these changes have provided greater transparency for consumers, individuals not fully aware of their financial commitments may still struggle with their obligations once credit has been granted.
There are several ways to obtain more knowledge and insight on your obligations with respect to debts. A couple of good starting points we recommend include the Office of Consumer Affairs and the Department of Finance Canada.
We invite you to refer to the attached press release: Government of Canada Helps Protect Canadian Credit Card Users.
As always, we invite you to request a Free Consultation to discuss your debt questions and help develop a plan for you to become debt free.
Are you hitting your personal debt ceiling?
You may wonder how all the discussion about the “debt ceiling” in the United States might apply to you – the Canadian consumer. We urge you to consider a few potential similarities and their impact on your personal financial situation.
The U.S. government averted a financial crisis by raising their debt ceiling. They had to do this because, like the average Canadian consumer these days, they are spending more than they make and as such are accumulating increasing levels of debt.
It is also the lack of savings that puts the U.S. government and the Canadian consumer at risk. In particular, the absence of savings in case of an emergency (like an illness, or loss of job) can create a precarious financial situation. When these emergency savings are not in place, the result is an increased reliance on lines of credit and credit cards when you are least able to make the payments. With mounting levels of debt and high interest costs, serious financial problems could be right around the corner.
The attached article provides several tips to help Canadians from hitting their own personal debt ceiling including tactics for saving for a rainy day, curbing spending habits, and shedding high-interest debt.
For the full list of tips, we encourage you to continuing reading the referenced article: “Avoid hitting your own personal debt ceiling” from the Globe and Mail.
Got Debt? Poll Shows the Majority of Canadians Do
As reported in a recent study conducted by a major Canadian bank, 72 percent of Canadians are carrying some form of debt. In our age and perpetual mind-set of “gotta have it now, pay later” is it any wonder?
In case you’re curious as to how the “Jones’” are faring – now you know: Reportedly, 89 percent of 35 to 44 year-old Canadians say they are carrying some type of debt and a further 40 percent say that their current debts are impeding their ability to meet financial goals.
It would appear that the baby-boomers enjoying their golden years are not faring much better with nearly one-third of retirees suggested to be carrying debt loads into retirement per a 2011 Statistics Canada report. More significant is the magnitude of these debts – of retirees carrying debt, more than 40 percent have a balance exceeding $25,000, with nearly 20 percent of retirees having a debt load that exceeds $100,000.
The figures speak for themselves to debunk any misconceptions as to just how many individuals are juggling significant debt loads. With so many Canadians seeming to precariously budget for living expenses and credit repayment it’s no surprise that one (or a few) unexpected life events may seriously rock the financial boat to the extent that they are seeking assistance in debt resolution.
At Sands & Associates, we offer a Free Consultation to discuss your financial options. For many people filing a Consumer Proposal is a better option than declaring Personal Bankruptcy. We will help you make an informed choice.
We invite you to review the referenced articles:
Consumer proposals chop into bankruptcy numbers
Many people are surprised to learn that the total number of bankruptcies has declined year-over-year in Canada. This during a time when the economic recovery is uncertain, debt loads are at record levels, and real disposable incomes are not increasing at any meaningful rate. What is behind this decline? Two words: Consumer Proposals.
Legislative changes enacted in 2009 made a Consumer Proposal accessible to a greater number of people, while concurrently making personal bankruptcy a more lengthy and costly process for people who earn above low-income cutoff levels (roughly $2,000 per month cash take home for a single person). The result of these changes is that the proportion of people who opt to file a Consumer Proposal instead of declaring personal bankruptcy is growing by leaps and bounds. Here are two key stats from the below-referenced article:
Why are Consumer Proposals gaining in popularity so dramatically?
For many debtors, a Consumer Proposal is a much more attractive alternative to bankruptcy. Unlike a bankruptcy, the consumer proposal allows debtors to retain ownership and control of their assets. Many debtors feel very strongly about their responsibility to pay off their debts, and the consumer proposal offers debtors a way to pay off a portion of their outstanding debts over time.
Filing a consumer proposal involves meeting with a Trustee in Bankruptcy. Only a Trustee has the ability under Federal Law to enact a “Stay of Proceedings” which stops creditors from charging any additional interest on your overdue accounts. The Stay of Proceedings also requires creditors and collections agencies to stop calling you. From the date of filing a Consumer Proposal, the creditors are required to deal directly with the Trustee.
Creditors are usually quite receptive when given an opportunity to accept a Consumer Proposal as an alternative to a bankruptcy. Under the terms of a Consumer Proposal, creditors will receive a higher payout on their loans then they would from a bankruptcy. This makes accepting the Consumer Proposal a very attractive option for creditors.
It is a win-win scenario for both parties participating in a Consumer Proposal. The debtors keep their assets and are able to pay off a portion of their debts and the creditor receives a better return on the amounts owed to them than they otherwise would under the terms of a bankruptcy.
To find out whether a consumer proposal is the right option for you, please Contact Us for a free, confidential evaluation of your financial options.
Read the complete article “Consumer proposals chop into bankruptcy numbers” from The Financial Post.
Student debt has heavy price
At graduation time there are many reasons to celebrate. Years of hard work and sacrifice have culminated into a few moments of pride and a huge sense of accomplishment – you have earned that university degree! For many students, however, the euphoria is somewhat short lived when they consider their prospects for repaying their student loan debts.
Given that the economy is still pulling itself out from one of the deepest recessions in history, the availability of well-paying jobs in certain fields can be scarce. The ability of many students to earn sufficient income to service their student loan debt can be limited, leading them to wonder what options might exist to deal with this debt.
As the attached article states, an estimated 4.3 million students have received almost $32 billion in Canada Student Loans since the Canada Student Loan Program (CSLP) was created in 1964. In 2008-2009, the CSLP provided $2.1 billion in loans for full-time studies to more than 365,000 students across Canada, for an average of nearly $6,000 per recipient. 2009 statistics from the Canadian Federation of Students indicate that the average student loan debt was approaching $27,000 by graduation time.
At Sands & Associates, we see a large number of people who are struggling to keep up with what can be an unmanageable level of student debt. Here are a few things to keep in mind:
- Student loan debt is treated differently than most other debts in a personal bankruptcy or consumer proposal. Even though income tax debt and most other government debts can be discharged without a waiting period, Student Loan debt is subject to a waiting period of 7 years before the debt can be dealt with in a bankruptcy or consumer proposal. Quite simply, if you file for bankruptcy or make a consumer proposal prior to the expiry of this period, you will still owe your student loan debt when the process is finished.
- The 7 year clock starts ticking once you finish your studies, however, it’s important to confirm exactly what date is on record as your last day of studies. For example, if you left school prior to finishing a complete term, your last day of study could be noted as the day that you would have finished the program, rather than the day you actually attended your last class.
If you are struggling with an unmanageable student loan burden and need help to understand your options, please Contact Us for a free, confidential evaluation of your financial options.
Read the complete article “Student debt has heavy price” from The Globe and Mail.