Knowing your options is the first step to becoming debt free

January 26, 2015 by · Leave a Comment
Filed under: Debt Management, debt relief, Information Seminar 

The Bank of Canada recently dropped its prime lending rate from one per cent—where it has been since 2010—to .75. Gas prices, too, are at a record low. But instead of springing into a spending spree, now might be the best time ever to explore clearing up personal debt.

Debt can be all-consuming, impacting every corner of one’s life. The strain does not just stress the bank account, it impacts interpersonal relationships, how you interact with your children, and it can even impact interpersonal-office relationships. Insomnia is a common side effect which invites a host of negative health issues. For some, insurmountable debt can result in an incredible downward spiral.

“There is a way out,” said Kyle Stroshein, an Estate Manager with Abakhan & Associates Inc. Trustee In Bankruptcy. “In fact, there are several. Most people know about the two extremes, which are to pay it all in full for the duration of your life, or to do nothing.”

Others may have heard about the dreaded B-word, and there is a lot of misinformation out there on bankruptcy.

“The worst thing you can do is to cash in your RRSPs without proper advice,” warns Stroshein.

Stroshein has worked with Abakhan & Associates Inc since 2011, and during that time he’s helped a number of people deal with debt.

Debt is nothing new to most Canadians. The third quarter of 2014 saw a record high for Canadian debt loads. According to Statistics Canada, “household credit market debt to disposable income increased to 163.7% in the third quarter from 163.1% in the second quarter.” In other words, for every dollar earned, Canadians owe almost $1.64.

The recent drop in gas, along with the drop in interest rates makes this a great time for people to begin addressing their own personal debt.

Stroshein will be hosting a free informational seminar to discuss the range of options available in March. For information, visit www.aMatterOfLifeAndDebt.com

“When people know their options,” said Stroshein, “they can move from fear to action. Money problems are infinitely solvable, and it begins with knowing the facts.”

Legislated debt-reduction programs

January 23, 2015 by · Comments Off on Legislated debt-reduction programs
Filed under: Bankruptcy, Debt Management, debt relief 

The Three Programs


1. Bankruptcy

Bankruptcy is a legal process carried out through a trustee in bankruptcy designed to relieve honest but unfortunate debtors of their debt burden. When individuals are in bankruptcy, creditors cannot initiate any collection actions against them.

At the end of the process, a first-time individual bankrupt is usually discharged from debts after nine months.

2. Consumer Proposal

A consumer proposal can be submitted to creditors only if an individual’s total debt does not exceed $250,000, not including debts secured by their principal residence.

A consumer proposal is a formal process that is carried out through a trustee in bankruptcy. The trustee puts together an offer to pay creditors a percentage of what is owed to them over a specific period of time, or extend the time the debtor has to pay off the debt, or a combination of both. Payments are made through the trustee, and the trustee uses that money to pay each of the creditors. The debt must be paid off within five years.

3. Division I Proposal

Also known as a “commercial proposal,” this is a formal procedure available to businesses or  individuals — there is no limit with respect to how much money is owed. This process is carried out through a trustee in bankruptcy who will put together an offer to pay creditors a percentage of what is owed to them over a specific period of time, extend the time the debtor has to pay off the debt or a combination of both. Payments are made through the trustee, and the trustee uses that money to pay each of the creditors.


The Program Administrators


Trustee in Bankruptcy

A trustee in bankruptcy is a person licensed by the Office of the Superintendent of Bankruptcy (OSB) to administer bankruptcy and proposal estates. An officer of the Court, the trustee has an obligation to look after the rights of the creditors and to investigate the affairs of the debtor, as required. The trustee also ensures that the rights of the debtor are not abused.

The trustee’s primary duties are to

  • review the situation and counsel the debtor on available alternatives;
  • prepare official documentation that is both filed with the OSB and used to notify creditors;
  • ensure the validity of creditors’ claims;
  • ensure that debtors are provided with mandatory counselling and access to mediation services if there is a dispute regarding any income they are required to contribute;
  • sell the debtor’s assets, except those exempt from seizure by provincial and federal laws, and hold the proceeds in trust for distribution to creditors;
  • administer the bankrupt estate from beginning to end;
  • assess the debtor’s conduct both before and during a bankruptcy, as well as the cause(s) of the bankruptcy; and
  • make an application for a debtor’s discharge (in the case of individual debtors).

Debtor/Bankrupt

A debtor is a business or person that is unable to meet debt obligations. A bankrupt is a business or person that has declared bankruptcy.

Both the debtor and bankrupt’s primary duties are to

  • attend the first meeting of creditors (if a meeting is requested by the creditors);
  • attend two counselling sessions (for bankruptcy and consumer proposals);
  • advise the trustee in writing of any address changes; and
  • generally assist the trustee in administering the estate or proposal.

In addition, the bankrupt’s must

  • disclose all of his or her assets (property) and liabilities (debts) to the trustee;
  • advise the trustee of any property disposed of in the past year;
  • surrender all credit cards to the trustee; and
  • attend an examination at the OSB, if required.

At the end of the process, the bankrupt is released from his or her obligation to repay the debts.

Under the Bankruptcy and Insolvency Act, some debts are not discharged by bankruptcy. These include

  • alimony payments and child support;
  • student loans (if it is less than seven years since the debtor ceased to be a full- or part-time student);
  • fines or penalties imposed by the Court; and
  • debts arising from fraud.

Creditors

Important: To participate in insolvency proceedings and share in the distribution of dividends, if any, creditors with unsecured claims must file a Proof of Claim with the trustee.

There are three main types of creditors:

  • Unsecured creditor— A creditor who comes forward but hasn’t taken measures to guarantee that he or she will be repaid.
  • Secured creditor— A person holding an instrument, such as a mortgage or a lien on or against the whole or part of the property of a debtor, as security for a debt due him or her from the debtor. This type of creditor is usually not affected by bankruptcy or proposals.
  • Preferred Creditor— A creditor who has been given priority under the Bankruptcy and Insolvency Actover other creditors in the distribution of dividends. Preferred claims include unpaid wages, commissions or other remuneration of any employee of a debtor and, under certain conditions, any debt or obligation of support to a spouse, common-law partner or child living separate from a debtor.

Creditors can become fully involved in the process by participating in meetings of creditors or by being named an inspector. (Inspectors are appointed by creditors to represent them before the trustee during the administration of proposals and bankruptcies. They are expected to assist the trustee and are required to supervise certain aspects of the trustee’s administration.) Creditors are duty bound to inform the trustee if they have information about possible irregularities on the part of the debtor.

Creditors will be provided with, among others, the following two documents:

  • Statement of Affairs— The bankrupt’s financial statement or balance sheet of assets and liabilities showing the estimated value of assets and the names and addresses of creditors and the amounts owed. This is usually presented at the beginning of the process.
  • Statement of Receipts and Disbursements— A statement detailing the receipt and disbursement of funds, interest received, fees charged by the trustee, all dividends distributed to creditors and particulars of property that is not sold. This is usually presented at the end of the process.

Office of the Superintendent of Bankruptcy

The Office of the Superintendent of Bankruptcy supervises the administration of the Bankruptcy and Insolvency Act. Its main duties are to

  • supervise the administration of estates in bankruptcy, consumer proposals and Division I proposals;
  • maintain a publicly accessible record of bankruptcy and insolvency proceedings;
  • record and investigate complaints regarding possible wrongdoing by someone involved in the insolvency process;
  • license private-sector trustees to administer estates; and
  • set and enforce professional standards for the administration of estates.

The OSB has 15 offices across Canada.


Understanding your credit rating


The most common ratings are “R” ratings. These are known as North American Standard Account Ratings and are the most frequently used. The “R” indicates that the item being described involves revolving credit. If you always pay on time, it will be coded an R1. If an amount was written off because you never paid it back, it is coded R9. The R ratings are a coding system that translates “on time”, “one month late”, “two months late”, etc., into two-digit codes.

R0 Too new to rate; approved but not used.
R1 Pays (or paid) within 30-days of payment due date or not over one payment past due.
R2 Pays (or paid) in more than 30-days from payment due date, but not more than 60-days, or not more than two payments past due.
R3 Pays (or paid) in more than 60-days from payment due date, but not more than 90-days, or not more than three payments past due.
R4 Pays (or paid) in more than 90-days from payment due date, but not more than 120-days, or four payments past due Pays (or paid) in more than 90-days from payment due date, but not more than 120-days, or four payments past due.
R5 Account is at least 120-days overdue, but is not yet rated “9.”
R6 This rating does not exist.
R7 Making regular payments through a special arrangement to settle your debts.
R8 Repossession (voluntary or involuntary return of merchandise).
R9 Bad debt; placed for collection; moved without giving a new address or bankruptcy.
Other rating indicators that might be found on a report are “I” for instalment credit or “O” for open credit line.

 

 

Understanding the roles of the trustee, the credit counsellor, and the debt negotiator

February 27, 2013 by · Leave a Comment
Filed under: Bankruptcy, Debt Management, debt relief, Videos 

I work as a debt counsellor, which means that I help people who are dealing with debt. One of the biggest services I provide is information. The following videos details the roles of the three main debt managers in Canada: The trustee, the credit counsellor, and the debt negotiator.

Please note that one is not “better” than the other. They are different. Which means that each provides a good service to someone. As a debt counsellor, I can help you identify which solution would work best for you.

Keep expenses under control — Start living a debt-free life soon

February 5, 2013 by · Leave a Comment
Filed under: Debt Management 

(The following is a guest blog. Links to the originator’s website have been removed on request.)

Each day more and more people are falling under debt. A closer look at the statistics will tell you how difficult life has become due to the irresponsible and over usage of credit cards. Speaking of the climbing debt, this isn’t simply an issue of the irresponsible use of credit cards only. A huge percentage of the total debt is because of students taking out education loans and being unable to pay them on time. With the debt solutions not being used well, the debts continue to remain just the way they used to be and make things difficult. This article intends to help you become debt free. There are a few things that you must do so that getting rid of debt ceases to be a difficult procedure.

The most difficult part when you’re looking to become debt free is sticking with the basics. It’s really hard to control spending habits especially when you have huge debts to erase. It would require you to keep your expenses under control for a long time until you have successfully cleared your debts. The following are some tips that will make sure you’re able to become debt free without trouble:

  • Make smaller goals – It’s very natural to be overwhelmed by the huge outstanding bills. That would surely hamper your motivation to fight off debt. The wisest thing would be to divide the total debt amount in small and achievable parts. Assign them the highest priority of all. Try to forget the total debt amount that you owe and shift all your focus on to the debt payments that you can make every month. Proceed gradually and you’ll have reached the peak before you know it.
  • Avoid bursts of spending – There has to be a reason behind spending money. Unfortunately, many don’t have one and this is why most people are unable to pay off debt properly. Spending money irresponsibly in response to a tough situation is never the right way to go. Talk to your  friends and sort out your problems rather than burning a hole in your pocket.
  • Track your progress – You must do better than just observing the outstanding balances reduce over time. It’s important that you remind yourself of your success from time to time. Since you’ve already divided your debt into parts, try to visualize them as links on a chain.  Remove one link from the chain for each debt chunk that you pay off. This will motivate you and make you pay off your debts faster.

Repayment of debts isn’t easy unless you’ve learnt to control your expenses. No matter how much effort you put in, debt repayment will continue to be a tough task without proper measures taken on controlling expenditures. This never means that you must deprive yourself completely of the pleasure of having a nice restaurant meal. Make your pleasures occasional and bring in some flexibility in your daily routine. This will make sure you’re free of your debts without sacrificing all of your pleasures.

Debt solutions There are many debt solutions that you can always resort to. The point is to make them work. The aforesaid points when considered and followed will make sure you’re able to make the best of the debt solutions.

It’s important that you keep yourself updated on better ways of getting rid of debt. This way you won’t have to suffer a lot as you work towards the repayment of debt. Better debt solutions can be easily found. Make sure you have your debt issues reviewed by a debt consultant. It’s better to be all prepared before you go ahead with finding solutions to your debt issues. Participate in credit counseling sessions to know more about better solutions to your debt issues.

It’s very important that you stay all the more aware while repaying debt. Being ignorant about the current issues will prevent you from making the right decisions. You’ll go deeper in debt instead of climbing your way out of it.

Personal debt and government cutbacks

November 16, 2012 by · Leave a Comment
Filed under: Bank's Profits, Bankruptcy, Debt Management, debt relief, taxes 

First, let me emphasize that I am not an accountant or a financial analyst of any sort. I’m merely an individual who has gone through bankruptcy herself, and recognizes the value of the range of strategies that are individually available when it comes to debt.

Then, let me say that it makes a lot of sense to me that in times of financially difficult times (ie recessions and depressions), that government increases its spending, thereby stimulating growth in the economy. When governments spend (infrastructure development, social supports including mental health support), people have jobs. When people have jobs, they spend money. When they spend money, the economy is stimulated, more taxes are paid (and collected) and so on.

In times of financial distress, the job of government is to spend, not cut. See this short clip of Daniel Altman, a Chief Economist with Big Think, or the video by John Green that I recently blogged about.

I’ll grant that it’s not that easy. There are experts on both sides of the debate.

But this is what I see:

Governments are cutting jobs. The Canadian government recently “boasted” cuts of 11,000 through early retirement and collapsing vacant jobs. That means we are LESS millions of dollars in the economy. Mortgages haven’t collapsed, nor have university tuitions, nor has the “basket of goods” used to estimate poverty. Gas prices continue to rise. Conequently, there is increased debt.

It can be said that these debts are mini-stimuli for the economy, but personally I don’t believe that that is a burden that should fall to the individual.

I think we need NEW leadership. When governments DON’T spend during economic downturns, the financial simuli comes from increased individual debt that SOLELY benefits the banks.

Until that time comes, Canadians need to get informed of what their REAL options are when it comes to resolving their debt.

Contact me. I can give you an unbiased birds-eye view of your options.

Your Debt Collection Rights – A tip from Consumer Protection BC

November 2, 2012 by · Leave a Comment
Filed under: Debt Management 

I just received this content in an email from Consumer Protection BC. Follow these guys! They are there to help you!

The second point in their alert is (I believe) reference to a CBC news item stating that some collection agencies call (harass) people who share the same last name as the debtor — they may not even have the right number!

Get informed!


direct excerpt:

Your Debt Collection Rights: Top 2 Tips

With British Columbia having the highest consumer debt of any province or territory in Canada, at about $38,000 per household, Consumer Protection BC takes educating consumers about debt very seriously. Consumer Protection BC regulates the debt collection industry in BC and we would like to offer you 2 key tips about dealing with debt collectors:

For more tips around dealing with debt collectors and additional information about your rights when it comes to debt collection in BC, please click here to read our recent press release.

Consumer Protection BC is a not-for-profit corporation that was created to strengthen consumer protection in BC and enforce consumer protection laws. We license and inspect specific industries, respond to inquiries through our Inquiry Centre, investigate alleged violations of consumer protection laws, and educate consumers and businesses about their rights and responsibilities under the law. For more information about our organization, please visit our corporate website at www.consumerprotectionbc.ca. Follow Consumer Protection BC on Twitter @ConsumerProBC, like us on Facebook and read our blog for valuable tips and resources.

Free Presentation Reminder

September 19, 2012 by · Leave a Comment
Filed under: Bankruptcy, Debt Management, Information Seminar 

This Friday (Sept 21st), I will be hosting a free information session on Dealing with Debt. The event will be held at the Oak Bay Library, and goes from 6:00pm to 8:00pm. Parking is widely available.

The reason for this information session is very simple: To pass along the information that I wish I would have had when I was financially stressed. I’ve had parents contact me on behalf of their kids, and kids contact me on behalf of their parents.

Financial stress is very isolating. And typically when you finally consult a professional, you know so little of the industry that you will be inclined to follow whatever recommendation(s) they make.

People generally need to be more informed of their choices, and of the range of options within the industry.

At this upcoming seminar, I will talk about the full range of options (the seven that I know of) and how each option impacts you. I’ll also be touching on industry scams and tricks. You’ll also get to see me naked (metaphorically). I’ll tell you my story.

Ultimately, I want education vis-a-vis factual information to be your driver, not fear.

This is a trial seminar. If demand becomes apparent, I’ll do another one. If not, I’ll put together some online presentation that people can download at their own leisure.

This website is both a passion and a hobby for me. I’m still looking for a day job. Grin.

Hope to see you at this seminar. It might be the only one of its kind.

BMO profit rises 27%

Wow. Hidden in the back links of the CBC Business section is this wee little headline that screams, “BMO profit rises 27%.” Read more

What a debt counsellor does for you

We understand that many people who are in financial crisis struggle with getting the right information. Not because they lack intelligence, but rather because they lack experience and simply don’t know where to begin looking for help. After all, financial crisis is not a common occurrence in one’s life: it’s an anomaly, an unusual, one-time event. Read more

When a 12-year old understands banks, debt and taxes, perhaps there’s hope for the rest of us

From the Youtube page:

This is my daughter. She gave this speech at a businees meeting in front of 600 people. Her eyes have been opened to a scam that is being perpetrated upon Canadians and the rest of the world. I am the owner of this video. Feel free to use it freely without altering the content in a manner that would draw conclusions unintended by the speech. Read more

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