Trustee Talk #103 – Doug Stuive Discussing Debt Issues Affecting Canadians

This is on top of actual debt types say credit cards, students loans, taxes etc. What life events would you say generally accompany debts?

There are many reasons why people face financial difficulty, but the top three would be a loss or reduction in income due to a job loss, or medical issues, separation or a divorce, and finally gambling and other addictions. We know marital breakdown is one of the top reasons as you mentioned.

In your experience, could you elaborate a bit on the connection between marital breakdown and debt?

Sure, marriage breakdown is linked to debt issues in many ways. Debt may have been the root cause of the breakdown in the first place. When we see an individual struggling to pay their creditors after a separation, a lot of times debt was also a problem during the marriage. The difference is when the marriage was still functioning, there are normally two incomes available to maintain the house of debt. This means that while the couple worked together, they found a way to meet your obligations to the creditors.

After separating we now have additional expenses as there are two households that need to be maintained. When this happens there’s no longer enough income available to make these minimum payments. Add it to that are issues related to which person is going to take responsibility for the very steps accumulated during the marriage.

This can create conflict in what is already an emotional situation. Dealing with your debt in a separation or divorce is as important as dealing with all the other issues that need to be addressed during this time period, and seeking professional advice is highly recommended.

Is it for the individual that is seeking out for your services? Or is it on behalf of those who are owed debt and are looking to collect? 

A Bankruptcy Trustee is licensed by the federal government to administer bankruptcies and consumer proposals in accordance with the Bankruptcy and Insolvency which is a federal statute.

A Bankruptcy Trustee is an officer of the court. Therefore the trustee’s role is to make sure that all parties involved with the bankruptcy process receive fair treatment as outlined by the Bankruptcy and Insolvency act, and that everyone, including ourselves, adhere to the requirements settled in the act.

While we make sure that those individuals struggling with debt who deal with us are treated fairly, and with respect, it is not the same relationship that happens when you hire a lawyer or other professional. I’m sure that for many people who find themselves in a position where they have to seek out the advice or services of a Bankruptcy Trustee, there’s probably a lot of fear involved in that situation.

I would say the biggest fear people have is that they will lose everything, and they would never recover financially, and really this isn’t the intention of the bankruptcy laws. In fact just the opposite. Bankruptcy law was intended to give people a fresh start. A chance to start over financially. Those are provincial and federal legislation outlines a number of assets that individuals can keep when they are filing and signing a bankrupt.

During the bankruptcy process consumers are also taught the proper ways to manage their finances and rebuild their credit moving forward. We have seen many of our bankrupts go on for finance vehicle loans, build a more solid money management system, and even qualified for home ownership in time.

Another fear that individuals have is will my employer become aware of my bankruptcy? Or will my friends and neighbors find out? And unless we have to contact an employer because of garnishment in place, employers typically do not become aware of an employee bankruptcy. Most bankruptcies today are filled as a summary administration which means that your bankruptcy is not published in the local newspaper and the general public, such as neighbors and friends, do not become aware of an individual bankruptcy.

In addition to fear, I’m guessing that a lot of people that find themselves in this situation are going to feel embarrassed.

Now would you say that clients should not feel embarrassed?

It’s true that many individuals are embarrassed by the situation that they find themselves in, and we can’t control how they feel coming to meet with us. But our goal is to carefully listen to their situation and make sure they fully understand the options that are available to them.

No one chooses to be in financial difficulty. Those major causes discussed earlier can happen to anyone. When you come to our MNP offices for help, you’ll find our staff are not judgmental, are caring, understanding and informative. Everybody deserves to be treated with respect.

Bankruptcy is really meant for those individuals where the monthly income is only enough to pay for all the monthly living expenses, and they have little to no money left to service their debt. That mounted debt only continues to grow and there’s nothing in the foreseeable future which will allow them to chip away at it.

Bankruptcy becomes your only option to allow them to get out of debt and start fresh. Whereas a consumer proposal is meant for those individuals who have an ability to make a monthly payment towards their debt but can’t afford to make their current required monthly debt payments. Proposals normally require a monthly payments for a three to five year period but some call for a lump sum payment. I’ll give you an example.

This does not even included the interest ratings that would also be there. One thing to take into consideration is that a consumer proposal at a minimum must offer the same amount to creditors as what they would be available in a bankruptcy. Most consumers we see acknowledge they owe the debt and a consumer proposal allows them to pay the debt off based on their ability to make payments.

There is no more simple answer. The cost of bankruptcy is dependent on a few different factors. In general trustees charge a reasonable fee to help cover the cost of administering a bankruptcy escape.

These fees are normally around $2000 and may vary slightly by trustee office. The cost of your bankruptcy can be affected by the individual’s specific situation, your income level, family size and the assets that you own could all affect the cost of your bankruptcy. Further, the cost can be different if you were a second time bankrupt as well.

However what is really important to understand is that you will find out what to expect in terms of cost at the first meeting you have with the trustee. There should be no surprises, and in most cases it’s a fraction of your debt you’re eliminating by filing for bankruptcy. At MNP we try to work with a person’s monthly budget as much as possible to make sure that the required payments are as affordable as possible.

The amount you pay into a consumer proposal is based on your budget and ability to pay. While trustees may take other factors into consideration while helping you file a consumer proposal, this is really the main criteria. In order for your proposal to be successful you have to demonstrate that the monthly
payment is affordable.

Once this amount is determined, your fee is taken from these payments. There is no additional cost. The fees of the administrator are set at government legislation. The government allows us to hold back a portion of the funds we collect each time we distribute your payments to the creditors. If this is a road that somebody is preparing to go down, how much time will they need?

How long does the process take?

The length of process can vary according to the specifics of your bankruptcy state. In general, a first term bankrupt will be in bankruptcy for a minimum of nine months. Depending on their income level this may increase the bankruptcy period to 21 months. After these fixed tight periods and if they’ve met all of the duties of bankruptcy, they will then receive their discharge certificate.

From that point the bankruptcy process is essentially over and it will stay on the Credit Bureau for a period of six years from the date of discharge. But in this six year period, you’re not considered bankrupt any longer and you can start to rebuild your credit. As I mentioned earlier, proposals typically run from three to five years.

Once you complete the terms of your proposal, then you’re discharged.

Would you say that there is an increase or decrease over 2014 and what about the types of bankruptcy currently? Any noticeable trends?

The number of new filings seems to be declining in the region that I’m covering but this is not necessarily the trend throughout the country.

For example in Alberta there is a large spike in the number of new filings due to the state of oil industry. We are seeing a bit more stability in Niagara than we’ve had in previous years. Though there is still a steady need for our services, there have been most significant increases or decreases in the region.

And the more this trend continues, the more awareness they will be about this option. People that are debt poor but income rich up often feel they have no choice but to keep paying the minimum payments as instinctively they understand a bankruptcy isn’t their best choice. I think with more education about consumer proposals, the same individuals may come to realize there is a way for them to get a fresh start by filing a consumer proposal and becoming debt free.

There is a coming change in your business and that is the designation from Bankruptcy Trustee to LIT or Licensed Insolvency Trustee. What are your thoughts on that coming change?

Well the change to our designation has little impact on the work I’m already doing. It does however better identify for those outside of the industry that we’re specifically licensed to deal with debt issues.

The solutions that we offer to individuals is more than just bankruptcy and the new designation reflects this. It is an important distinction when you look at the number of private companies offering consumers debt management services. These companies do not have the professional designation or expertise that the trustee offers.

A touching story that comes to mind was earlier in my career. We had been appointed as the receiver of a mobile trailer park in the Niagara region that was geared to seniors. We were appointed on December the 10th. Shortly after our appointment, I received a telephone call from an elderly lady indicating that she and her husband worked at moving to the trailer park at the beginning of the month.

They had given orders to their landlords that they were vacating on November 30th. She was very distraught as this elderly couple had no place to live. When I looked at the situation, her mobile home was still at the manufacturer and no safe preparations work had been done to set up the trailer. I was able to negotiate with all the various suppliers and trades to have this trailer set up as quickly as possible.

I will never forget giving the keys to the trailer to this couple the evening of Christmas eve. They indicated it was the best Christmas present ever.

That really was a great story Doug and thank you so much for sharing that. Doug, thank you for your time I really do appreciate it and if anybody would like to get in touch with Doug or his team at MNP Limited, you can visit their website at mnpdebt.ca