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.

In declaring bankruptcy, you are robbing banks — of fake money

January 19, 2013 by · Leave a Comment
Filed under: Bank's Profits, Bankruptcy, debt relief, taxes, Videos 

Good god if a twelve year old gets it, surely the rest of us can!

When you take a loan from a bank, the banks literally invent that money. When you pay interest on that loan, banks are getting what I call sweat money (money that you have worked for) in return for their invented money.

When you can’t repay your loans, there are the loan collectors who are very good at making you feel like shit about not being able to pay back imaginary money — which, typically by the time they are knocking at your doors, is mostly interest that you are repaying. You’ve probably already paid an amount equal to the principal.

The government, probably because they know it’s a scam, has created an out, commonly known as Bankruptcy. Many people associate bankruptcy with embarrassment and shame, even though it’s quite accepted as a corporate strategy.

We’ve got to get over that. Bankruptcy is a legitimate way of making debt go away. Yes, there are costs, both monetary and lifestyle. But nothing that compares to hanging on to the debt till your dying days. With Bankruptcy, there is a definitive end to the pain. With debt repayment in full, especially when you don’t have the means to repay for whatever reason, you can live under duress for a long long time.

There are also in between ways to resolve your debt. Banks won’t tell you about these options. If you get a good consultant (such as myself) or a good Credit Counselling rep or a good Trustee, you can get all the facts.

Do yourself a favour. Get informed. It can, literally, save your life.

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.

Are we numb to banks’ profits?

August 28, 2012 by · Leave a Comment
Filed under: Bank's Profits, Bankruptcy, debt relief, Videos 

Is it just me? The “news item” is that banks are increasing their dividends (what they pay out to their investors), but the real story behind that headline is that bank profits are exploding through the roof. But it’s kind of hard to write a news article about that. When bank quarterly profits climb into the billions and then continually exceed the last quarter’s record, it really becomes incomprehensible. And when it’s incomprehensible, when it’s so out of our mental grasp, it’s really hard to care.

Mostly, the banks say that their profits are because the economy is good and very few people are defaulting on their loans. Meanwhile, Canadians are seeing the highest household debt ever.

Makes you scratch your head, don’t it?

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

What are my debt-relief choices?

Below are some of the debt-relief choices that are available to you. While we cater to Vancouver Island and the Greater Victoria area, this information is applicable Canada-side. We do strongly recommend that you consult and independent debt counsellor for debt-relief advice, be it through this website or elsewhere, to get the information that best applies to you. Read more

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