Questions from Twitter

Can My Creditors Seize My Property?

We had a terrific question raised recently by someone who came in to meet with one of our debt managers to discuss her financial pressures face-to-face. The question was about the power a creditor can bring to bear on someone who owes them money. Specifically, this young woman asked if Visa could force her to pay back the $50,000 debt she owed to them. She was also terribly concerned about her home, her car and her monthly paycheque – could they do anything to her? Could they force her to pay back the debt?

We find these types of questions to be among the most common we receive, and while every single person’s situation is slightly different, the fear and the concern expressed are traditionally the same: Can my creditors take my possessions? Can they garnishee my paycheque? And can they touch my personal property? The short answer is: Yes they can, and they may already be taking steps to seize your wages or other property if your debt is over-extended.

All of this doesn’t occur instantaneously. Luckily, in most cases, your creditors will give you ample warning of their determination to be repaid, including advising you that legal action will be pursued. You may be asked to appear at Ontario Superior Court to explain why you have not paid your debts to a particular creditor. And even before your case reaches the courts you will be receiving harassing, and often disturbing, telephone calls and letters from collection agencies who have been hired by your creditors to collect the money you owe them.

Normally, by the time the collection calls start to become a big problem, most people who owe money to their creditors have made a move to come in and talk to us. They want the calls to stop, the demand letters to cease, and they don’t want their friends, neighbours, family members and co-workers (especially their boss or immediate supervisor) to know that they are in debt and under extreme amounts of pressure from these collection agencies and creditors.

Some people can even hold off the collection agencies for long periods of time, utilizing a variety of methods. But ultimately the garnishment or legal decision demanding repayment will appear and a decision must be made: How do I make this problem go away as quickly as possible?

That’s when we recommend you contact us (though, preferably, getting in touch with us when the collection calls begin would be a better option, especially if such calls are causing you undue stress). We can quickly book you a free consultation at one of our more than 30 offices across Ontario. There we will discuss your situation with you in detail, free of charge, and present you with a variety of options that could help alleviate your financial pressures.

All of this is part of what we call “The R Plan” and you can download a free copy of our R Plan brochure right from our web site at

www.afarber.com/cms/en/brochure

You can also call us toll-free from any area code by dialing 310-1100.

Help is available for your debt problems. Let us know how we can be of assistance to you.

Farber Trustee Andy Fisher interviewed by CBC News

Bankruptcies declined 11% in 2010

CBC News

The total number of Canadian businesses and individuals claiming bankruptcy dropped 11.5 per cent in 2010 compared to the previous year, new data released Friday shows.

The Office of the Superintendent Of Bankruptcy Canada said consumer involvencies were 11 per cent lower last year over 2009, while commercial insolvencies declined by 22.3 per cent.

The term insolvency refers to people who undergo formalized bankruptcy proceedings, but also those who make a proposal to creditors — an attempt to pay back the terms of a loan under newer, less onerous terms. It is generally less rigid than a formalized bankruptcy process.

‘People were living on the edge.’—Andy Fisher, bankruptcy trustee

A full 96 per cent of the 140,234 insolvencies last year were by consumers. That has been the trend for several years, not only because there are more people than businesses in Canada, but also because businesses tend to come in to deal with the problem a lot sooner, says Andy Fisher, a partner with bankruptcy trustee A. Farber & Partners Inc.

“People were living on the edge,” he said. “On the corporate side, companies were already in a good position to be able to prepare for the recession as it came in. They got their debt structured to manage unexpected changes.”

A lot of times when a company goes under, it just closes its doors. That never gets recorded as an “official” bankruptcy, he notes.

Figures improve in subsequent months

In September 2009, Ottawa changed the bankruptcy act to make it more flexible. The changes might not be having much an impact on the number of filers overall, but it’s changing the mix of proposals versus bankruptcies, Fisher suggests.

Early indications are that’s exactly what’s happening, as 31.3 per cent of consumer insolvencies last year were proposals, not firm bankruptcy filings. That’s an increase from the 21.6 per cent in 2009.

The figures also show an improvement as the months went on. Bankruptcies and proposals decreased by 16.7 per cent from November to December, for example.

It’s worth noting, however, that the total number of bankruptcies is still 20.6 per cent higher than it was during the 12 months ended in September 2008 that preceded the recession.

“The total figure was down 11 per per cent, which is encouraging, but we’re still talking about 140,000 bankruptcies here,” Fisher said. “We’re still busy and unfortunately, we’re still seeing a lot of people coming in.”

An excellent question from an undischarged bankrupt

I received a terrific question recently from an undischarged bankrupt who had been dealing with another Trustee firm and didn’t know how to finalize his process.  He informed me that he had filed for bankruptcy protection in 2004 but failed to fullfill all of his duties under the Bankruptcy and Insolvency Act (otherwise known as the BIA).  Specifically, and sadly, he had failed to attend his two credit counselling sessions because they had conflicted with his work schedule.

Not fullfilling your duties in a bankruptcy scenario means your Trustee loses the power to discharge you from your debts, and you effectively are in a state of financial limbo.

This debtor told me he had attempted to open a bank account at one of his former creditor’s branch locations and all kinds of bells and whistles started going off, even though the bank’s computer screen indicated the original debt had been “written off.” That information led this debtor to believe, incorrectly, that there was some form of closure to his former debts.

When a creditor “writes off” a debt, it has nothing at all to do with a bankruptcy filing. Writing off a debt means the bank has essentially “eaten” the debt and realizes it will not be able to recoup it.

And if this debtor didn’t fullfill all of his duties under his bankruptcy, and did not attend any subsequent court proceedings, he would need to speak with his Trustee to determine what items remained outstanding and get them completed (i.e. finish paying his fees, attend counseling sessions, provide tax info, provide monthly income reports and any outstanding asset information) before his Trustee or the bankruptcy court will issue a discharge to him.

It is probably not prudent to try to conduct business with a former creditor anyhow, whether discharged or not. Despite what may appear on a person’s credit report, creditors themselves keep detailed records of bad debts and would rarely accept a discharged debtor as a client again.

The simple answer is this: There has been no closure to this debtor’s former debts, and he is still on the hook to complete his duties to the bankruptcy court and his Trustee.

I strongly recommended that he contact his Trustee as soon as possible to make arrangements to clean up this situation so he can put his debts behind him and get a fresh financial start.

Do you have a question about bankruptcy and insolvency?  Please post it here, or on our Twitter feed at  @rplan and we will be happy to answer it for you.

My depressing job is anything but: reflections of a Bankruptcy Trustee

I am often told by people who come to see me that “it must be depressing doing your job.”  That “listening to people’s challenges and issues every single day must be awful.”

In reality, I couldn’t disagree more.  I remind these clients that it would be taxing on me if there wasn’t a solution for their financial pressures, or some helpful guidance I could offer them.

If my only answers to people’s unfortunate stories was “wow, that’s terrible,” then I believe my days would be very tiring and frustrating.  However, since I CAN help I find being a bankruptcy Trustee an incredibly-rewarding profession.

Preserving the family home and repairing monthly cash flow are obvious examples of the inpact of our popular R-Plan, but the less obvious, and even more rewarding, impact is the preservation of a marriage (and keeping a family together and emotionally healthy as a result) or of a business that can refocus and continue to provide employment and peace of mind.

So is my job “depressing?”  Nothing can be further from the truth.

How To Get Out Of Debt Fast

There’s nothing like worrying about the monthly bills to inject some major stress into your life and your relationships.  You can easily spend more time worrying about your finances than you will about your family… or yourself.  But remember: The sooner you address your financial pressures, the more options are available to you.

For example, if you act early enough you could utilize the services of a financial professional who could provide you with helpful financial and budget counseling.  You may also qualify for a consolidation loan if your debt level isn’t too extreme.  And if things get really tight you could call upon the services of a Certified Insolvency Repair Professional (also known as a Bankruptcy Trustee).

Most people, for obvious reasons, don’t want to hear the “B-Word” (as Bankruptcy is otherwise known).  That’s a fair reaction since Bankruptcy is really a last resort for someone in debt.  It’s the final option when all other possibilities have been exhausted.

The goal here is to do the very best you can under the circumstances you’re encountering, not the worst you can.  An alternative to bankruptcy protection could be a government-supervised repayment plan, or Consumer Proposal.

A Proposal is administered by a Bankruptcy Trustee but it’s NOT a bankruptcy. But by harnessing the power of the Bankruptcy Insolvency Act (the B.I.A.) to oversee the Consumer Proposal, this powerful legislation allows you to meet your debt obligations half-way (normally the balance owing is discharged at the time the Proposal is completed) while giving you the same legal protection from your creditors as a bankruptcy.  The result is a quick (and manageable) solution to the financial pressures you are experiencing.

By accessing an innovative financial solution, such as a debt repayment plan or a Consumer Proposal, you can take control of your money problems, allowing you more time to focus on your family, your household and yourself.

And that’s how you get out of debt fast!

Gen Xers Are Racking Up Debt But Not Saving

Gen Xers Carrying Too Much Debt, says recent survey

Not that this will come as a surprise to most people, but it was revealed in a recent survey by the Investors Group that Gen Xers (Canadians aged 30 – 45) are grappling with higher mortgages and more credit card debt that their parents’ generation.

It seems Gen Xers, with their higher income potential, post-secondary education and lack of pension plan investments, are buying more and saving less.  And racking up major credit card debt and mortgage debt in the process.

The study quotes Tom Moran of Investor’s Group as saying “you want to own the house, you don’t want the house to own you.”

How can Gen Xers solve this problem?  First, pay down the credit card debt as soon as possible.  Secondly, begin putting funds aside in a RRSP for retirement.  Third, pay down the mortgage debt.   The end result will be no high interest rate debt accumulating (i.e. credit cards and department store cards), an asset that you fully own (your house) and retirement funds in the bank to fall back on once you reach retirement age.

It’s never too late to start this process but it’s always better to initiate it as early in life as possible.  That’s why 30 – 45 year olds are in a dangerous position.  They’re not that far away from retirement and they’re accumulating too much debt along the way.

Where have all the full-time jobs gone? And what does it mean for our economy?

Statistics Canada released its employment figures for July today and the news wasn’t good.  Approximately 139,000 full-time jobs disappeared (including the slashing of jobs in the education, finance, insurance, real estate and leasing categories).  Granted, 130,000 part-time jobs were added during this same time period.  But we all know you cannot equate part-time jobs with full-time employment.  Many of those part-time jobs are most certainly student-held positions that will, come September, vanish again.

And many part-time workers who are not students need to hold down two or more part-time jobs just to equal the income levels they would earn if they had only one full-time job. Not to mention  the emotional stress such work-loads place on many households across the country.

So are we turning into a nation of part-time jobs and contract positions?   Only time will tell but it sure looks like the full-time job (complete with health and wage benefits and other perks) is quickly becoming a rarity in Canada, as it has in the United States.

And with our labour market shrinking as well (due to older workers retiring and not enough younger workers entering the work force), our ability to compete in world markets could be affected.  Already we’ve seen a slight increase in interest rates by the Bank of Canada, and a drop in the value of our dollar against the American greenback.   According to Bank of Canada Governor Mark Carney, our annual growth rate slowed from the 6.1-percent rate during the first three months of 2010 to an anemic 2.8-percent pace in the current quarter.

All of this means less money coming into Canadian households, more corporate failures and more financial uncertainty, after two years of an already-fragile global economy.

Once again I urge everyone to pay down their credit card and loan debts and try to put some savings away in a TFSA or RRSP as an emergency back-up for any potential job loss or household income drop.

Times continue to be tough and there is not necessarily a simple solution to our economic uncertainty this year… and possibly next year as well.

The Revolving Door of Mismanaged Debt

Open your mailbox on any given day and you may find a credit card application inside that tempts you with its offer of low monthly interest.  Turn on your television, visit a movie theatre or listen to your car stereo and you’re similarly bombarded by hundreds of advertisements for a myriad of “must have” products.   We’re buying more iPods, big-screen TV sets and other products than we ever have before.  The result?  Massive consumer debt.

How bad is the problem?  The Bank of Canada estimates that Canadian consumers now owe more than three quarters of a billion dollars to their creditors.  This means we are racking up personal debt (including personal lines of credit, bank loans and credit cards) at an unprecedented rate.

Some of this new debt is being generated by people who have been discharged from a bankruptcy or proposal proceeding.  In other words, people who have had to go through the process of filing for protection from their creditors, completed the process and now, free to rely on credit again, have waded right back into the swiftly-flowing river of debt.

Worse yet, this renewed debt usage is often at the enthusiastic urging of highly-competitive banks and department stores.  Caught up in their spending, these previously-insolvent debtors forget far too quickly the stress and burden of taking on too much credit.  And just like before, they eventually reach the point where they have much debt and no way to pay it down.

Canadians used to be savers. Back in 1985, the average Canadian socked away close to sixteen per cent of his take-home pay. A decade later, the savings rate had slipped to a little more than nine per cent of our after-tax income. By 2003, the average Canadian saved just 1.4 per cent of his pay.

It’s become painfully obvious that the average Canadian has limited understanding with respect to the correct and proper use of credit.  This lack of education has resulted in increased consumer financial failures and a reliance on the Bankruptcy and Insolvency system to provide a fresh start – often more than once.   And as bankruptcy has become less of a social stigma, repeated use of insolvency to resolve consumer financial distress has become more commonplace.

The answer to this problem may be early education.  We need to educate kids long before bad spending habits are formed.  At this time, the education system does not teach most middle and high school students about personal financial issues, such as the benefits and risks of credit or personal budgeting.  Should this not be a major priority for our educational systems to tackle?

Luckily, many of the materials our educational institutions would need to launch such a program in their schools are already available from the Office of the Superintendent of Bankruptcy.  The OSB has created a range of education aides (available on their website) to assist in the education of children aged five through 15, as well as a detailed guide for young adults attending and completing post-secondary institutions.  These materials could be made available as either mandatory or elective units in the public school system to assist in the prevention of financial difficulties

Isn’t it about time we put the brakes on out-of-control spending habits and encouraged consumers to be not only better educated about their debt but more responsible for it as well?

“Don’t Put All of Your Eggs In One Basket”

The concept of spreading around your savings and diversifying, comes from an old adage that most of us probably grew up hearing our parents say:  “Don’t put all of your eggs in one basket.”    Basically it’s a simple financial strategy:  Divide up your savings into at least  three very different  types of investments:

Extremely Conservative  (and easily accessible in an emergency) could be a TFSA or savings account at your favourite financial institution (online or brick and mortar).  Mid-Range Risk could be a RRSP or mutual fund account (self-directed or handled by the institution you invest with – terrific for planning your retirement) and Higher Risk could be the stock market, DRIP investments (buy one share of stock then have all dividends from that stock reinvested with the company that issues the stock thereby ensuring a continuous small stream of income down the road) or something else that might be a bit less of a “sure thing.”

In this volatile and highly-unpredictable economy that we’re enduring (and will most-probably continue to endure for several more years) it’s essential that you have a mix of investments and cash reserves you can count on to carry you through the bad times and well into your retirement years.

By diversifying, and juggling multiple financial “egg baskets” you will discover over time that even when one type of investment isn’t performing as well as you would have hoped, another might be going gangbusters and really helping increase your overall portfolio.

The bottom line is this:  Spend less and save more.  Canadians used to be huge savers (we had more savings accounts and funds in safe havens like Canada Savings Bonds than any other types of investments) and we need to get back to that frugal approach in order for us all to weather the dips in the economy that we know will face us in the future.  “A saver not a spender be” is another old adage that hammers home that philosophy.