Trustee Talk #102 – Jillian Taylor Discussing Debt Issues Affecting Canadians
October 14th, 2015 by Jillian Taylor-Mancusi, Trustee | B.A. | C.I.R.P
Trustee Talk #102 - Jillian Taylor Discussing Debt Issues Affecting Canadians
Let’s get started with a formal introduction, you can give me your full name, business name, and website address.
My name is Jillian Taylor-Mancusi, I am a Trustee in Bankruptcy and Managing Partner at LCTaylor. Our company website is lctaylor.com.
Okay, how long have you been a Bankruptcy Trustee for?
I have been a Bankruptcy Trustee since 2007.
And what area do you service? So geographically, are there any specific cities or specific areas that you work with?
We are operated in Manitoba and in North West Ontario, our primary office is in Winnipeg and we also have a remote office in Kenora, Ontario.
What would you say the top three causes of debts problems are that bring clients to your door?
There are a number of reasons that people get into debt and I would say that the primary cause of financial difficulty would be marriage break up. And the primary reason for that would be, when you are happily married you have two incomes coming in supporting one household. When a marriage or a relationship breaks up then you’re really supporting two households on one income that you’ve always been used to supporting with two.
The other reason that people have financial difficulty, I find in our area would be unpaid income tax. You find that there’s a lot of self employed people out there, whether it be self employed professionals or self employed construction people, and they are not really well versed on how to budget their money properly, how to make sure that their taxes are being paid on time, and then they tend to fall into a bit of a hole and not being able to catch up and get themselves out of that.
The third thing I would say would be gambling and other addictions, especially since things such as VLPs came into the market 10/20 years ago, I find that there’s a lot of people that have gambling addictions as well as a lot new online gambling that’s available, so there’s a lot of people that have those kinds of unfortunate addictions that eat up a lot of their money and put some tough financial difficulties.
Who would you say that a Bankruptcy Trustee works for?
Is it the individual that is coming to you for help? Or is it for the companies, organizations etc. that are looking to collect the funds they are owed?
Technically a Bankruptcy Trustee works for the unsecured creditors and their job is to try and maximize the realization for those unsecured creditors so that they might be able to get something back when someone goes bankrupt.
But in reality, a trustee in bankruptcy wears a number of different hats. So for example, when somebody comes to our door looking for financial advice or options to deal with their financial difficulty, the trustee is wearing a hat where they’re giving that person all of the options that are available to them.
So, whether it be filing a bankruptcy, filing a proposal, or just finding a way to budget themselves out of their difficulty, that’s one of the hats that a trustee wears.
What would you say most people are worried about when they come to see you?
Most people are worried about the stigma that’s attached to a bankruptcy. Back 40, 50 years ago people didn’t go bankrupt, and there was a real stigma that was attached to people who did find themselves in financial difficulty and how to go ahead through a bankruptcy. But the world changed when things like credit cards become readily available and consumer debt levels increased, therefore things like consumer proposals, and bankruptcies increased as well.
And I find that there are still a lot of people that are worried about that stigma and how people are going to judge them. But what they don’t realize is there are so many people that are in the same situation as them, and are just looking for that ability to start over as a clean slate.
Why should clients not feel embarrassed about coming to see you?
People should not be embarrassed coming in to speak with a bankruptcy trustee because there's a lot of people out there who are in financial difficulty, and are unable to find the right options to get them back on track.
In order to file bankruptcy, technically you need to owe a $1,000 as well as be insolvent or unable to pay your debts as they come due.
Now, that probably affects most people walking down the street and that’s what people don’t realize is that they are not alone. There are a lot of people that have financial difficulty. And it’s just a matter of how much those people can handle as far as juggling bills or trying to budget themselves out and sometimes they just need the extra help that a Trustee can give you.
What is the difference between a consumer proposal and a bankruptcy?
The difference between consumer proposal and a bankruptcy is, a bankruptcy is basically cashing in. So what you are doing when you go bankrupt is just signing over everything that you own, have a right to, or an interest, into the trustee. Now, there are some exemptions that are attached to that so you are not going to loose everything, there’s exemption for things like household furnishing, and sometimes a vehicle, or an RRSP.
But what you are doing in bankruptcy is, you are giving those things that are not exempt to the trustee and saying, can you cash those out and give them to my creditors so that I can start over.
Whereas in a proposal, what a consumer proposal is, it’s a debt repayment plan, where you offer to pay back the creditors in full or a percentage of what you owe to them. What you do is you present that proposal to the creditors and they get an opportunity to vote on whether or not they would accept it.
If they accept it, it’s legally binding on them. If they vote against it, what we do is call a creditor and see if we can negotiate something else out. So, what a proposal is, it’s like a debt settlement.
What does bankruptcy cost?
When somebody goes bankrupt, they are going to be making payments to the trustee in accordance to what is called their ability to pay. Now, what an ability to pay is a formula or a calculation that’s put up by the government that says what different household sizes can live on and what they feel that somebody should pay.
Now, that changes every year and it varies depending on your household size and if you have something called a non-discretionary expense, child care, medical expenses, and so on. Now, that’s going to vary from person to person obviously depending on what your income is. Now, if you don’t have any surplus income, so you’re below the number that changes every year in that formula, then you may not have to pay anything to the trustee if you go bankrupt, but normally most trustees will charge a minimum monthly payment to help cover the cost involved in bankruptcy, as well as to get the person going bankrupt used to making a regular payment.
What does a consumer proposal cost?
When you file a consumer proposal, you are agreeing or making a plan to pay back the creditors either in full or percentage what is owed to them.
So that payment’s really going to fluctuate depending on a number of factors, what kind of income you have coming in, or how much debt you have, whether or not you have any assets, because, one other things that your creditors are going to do when they come upon your proposal is compare that to what they might get in a bankruptcy situation. So, in order to get your creditors to vote in favor of your proposal, you want to give them something more than they would get from a bankruptcy.
That’s why it’s very important to make sure that when you are coming up with a proposal, you sit down with something like a trustee in bankruptcy who knows this is what a creditor might expect, this is what they might go in favor of, this is what you would be paying in a bankruptcy and do a comparison.
How long will the process take?
What happens is, you would sit down with a trustee and go over your options. So an initial consultation with a trustee generally takes about an hour and then they can go through all of your assets, all of your liabilities, and give you all of the options. Now, if you decided to go ahead with the bankruptcy, a bankruptcy is going to last either 9 months or 21 months, if it’s a first time bankruptcy or 24 or 36 months if it’s their second time bankruptcy.
The discrepancy between the time frame is depending on whether or not you have surplus income. If you have surplus income you’re going to be
required to pay a little bit longer. Now with a proposal,a proposal is very much individualized. So there isn’t a minimum time frame for a proposal. For example, if you had a rich uncle that wanted to fund your proposal and provided it in lump-sum, you should have a one time payment.
Now with the proposal, the maximum time you can be in a proposal is five years.
What are your thoughts on the state of personal bankruptcy in 2015?
Would you say there’s an increase or a decrease over 2014? And what about the types of bankruptcy, more consumer proposals or actual bankruptcies, and also any noticeable trends that you see this year?
In 2015, I can see an increase in Manitoba in personal bankruptcies over 2014. Now, this is just a slight increase, it’s not jumping by weeks and bounce by any means. In Manitoba particularly, the reason that there isn’t a huge increase or huge decrease is their economy is pretty stable. There is a lot of jobs out there, a lot of jobs are coming up.
A lot of big building projects, and such that are supported by the government. So there is a lot of money flowing through the Manitoba economy. Now should that change or should interest rates increase in the next year, then I can definitely see that there’ll be a greater increase in personal bankruptcies.
Now, a big reason for that is, if you look at the Manitoba housing economy, housing in Manitoba, the prices have continually gone up, and there's a lot of new housing projects as well. Now, the first thing that people generally do when they're looking at dealing with financial difficulty is try to get out all of the equity in their homes.
We find that a lot of homes no longer have equity in them because they’ve already been mortgaged to get that equity off to pay further debts. So something like very slight increase of even 1% in interest rate, is going to dramatically increase them these mortgage payments, and that is going to cause a lot of people to have financial difficulty.
Thank you for your time today Jillian, I really appreciate it. If you would like to find out more about LCTaylor, you can visit them online at lctaylor.com.