Student Loan Regret

A new survey for BDO Canada Ltd. shows that and over-whelming number of Canadian students under 40 regret their student loans.  The study, shows:

Three in four (77%) Canadian graduates under 40 who had student debt after graduation have at least some regrets about their decision to take out student debt, mostly centered on the fact they could have saved or earned more and spent less.

The poll, which surveyed Canadians aged 21-39 with a completed college diploma or university degree finds that the most common regrets include wishing they’d lived more frugally or had a budget while in school (30%), worked more hours at a side job during school (28%), or avoided adding to other debts (like credit card debts or vehicle loans) while at college or university (25%).

The study offers some advice from grads to perspective students, including making more financial sacrifices during school and getting part-time job to lower the amount borrowed.  Two in 3 students reported having debt upon graduation – the average $22,084.00.

Many reported they thought they would be able to pay off their student debts within a year. In reality, those who did pay off their student debts took more than 3 years to do so.  However, a majority of students with outstanding debt (68%) have turned to some form of assistance or relief to pay down their debt:

Taking a job outside their chosen field of study is the most common means of dealing with student debts (24%), followed by Repayment Assistance Plans (RAPs) from the federal government (20%), or pursuing additional employment alongside their full-time job 19%). Graduates with debts still outstanding have also sought out financial assistance from parents or grandparents (17%) or a spouse or partner (13%), while smaller numbers have consolidated their private loans with a bank or lender (8%), filed a consumer proposal (3%) or even filed for bankruptcy (3%).

You can read more about the study here.

Canadians and BC Residents still living paycheck to paycheck – new CPA study

The Canadian Payroll Association’s latest survey shows that 47% of Canadians say it would be difficult to meet their financial obligations if their paycheck was delayed by even a single week.

The number is even higher for BC residents – 59% live pay cheque to pay cheque, more than anywhere else in Canada.

The survey also shows that 41% of employees nationally, and 49% in B.C spend all of or more than their net pay.  The number one reason given for increased spending is higher living costs. Forty-two per cent of survey respondents  (and 46% in B.C.) said they save 5% or less of their earnings, below the 10% savings level generally recommended by financial planning experts.

Illustrating just how strapped some employees are, 22% (nearly 1 in 4) say they could not come up with just $2,000 within a month for an emergency expense. Twenty-six percent of B.C. employees would struggle to come up with $2,000.

This is the 9th annual survey by the CPA.  You can access the full report and other documents here.

In the News – September 2017

Recently, The Canadian Association of Insolvency and Restructuring professional held their annual conference in Kelowna BC.  Lisa Breault and John McEown of Boale, Wood & Company Ltd. were both featured on panel discussions.

Lisa’s panel focused on the discussion the latest issues relating to Consumer Proposals.  John spoke on two panels, one relating to the liquidation of Strata Corporations and the other was a rapid fire question and answer session for interaction with the audience.

If you would like any of the LITs at Boale, Wood & Company Ltd. to speak on a specific subject, please contact David Wood to make those arrangements.

Why Licenses Matter

Recently, the OSB issued a report into its Review of Licensed Insolvency Trustee business practices in relation to the administration of consumer insolvencies.  It followed that up in its recent newsletter that it was planning certain regulatory initiatives to address its findings. That article can be found here.

It is clear from both of these publications that the OSB is taking steps for LITs to become more responsible for the entire insolvency process.  The OSB was also concerned that debtors were paying too much for debt services that they don’t need.

The OSB has published articles on why debt advisors/credit counselors are not required.  That article can be found here.

It has published articles on what an LIT does and why people in financial difficulty should use them and no other service provider.  That article can be found here.

They have a search feature on their website that allows you to search for an LIT who has a license. That page can be found here.

To get to my point and the headline, it is clear that Licenses Matter.

When dealing with debt, LITs are the go to professionals.  LITs add value to the system of dealing with debt.  LITs are highly trained individuals, can provide you with a range of options, and they are the only professionals who can provide access to regulated insolvency options, such as consumer proposals and bankruptcies.  Licenses Matter!

If you are in debt and the company or individual you are dealing with doesn’t have a license issued by the OSB, they cannot help you file a proposal or bankruptcy. All they can do is refer you to an LIT for a fee. A fee you don’t have to pay.!

Office of the Superintendent of Bankruptcy Plans Regulatory Initiatives

You may recall in our June 2017 newsletter that we reported that the OSB had issued a report into its Review of Licensed Insolvency Trustee business practices in relation to administration of consumer insolvencies

As a result of that report; the OSB is proposing some changes that will address three areas:

  1. Renewal of counselling in insolvency matters;
  2. New directive on service delivery to be proposed;
  3. Amendment to Directive No. 6R3, Assessment of an Individual Debtor.

Counselling

The counselling Directive is planned to address four main objectives:

  1. to ensure that the individuals an LIT involves when providing for insolvency counselling meet OSB standards with regard to knowledge, experience and professional ethics;
  2. to ensure the learning curriculum is tailored to meet the needs of the majority of insolvent debtors;
  3. to pursue an innovative, cost-effective and efficient means of delivery adopting the best use of technology and in-person counselling, and;
  4. to facilitate the monitoring and assessment of the outcomes of insolvency counselling, to inform future improvements.

The OSB is proposing to strengthen the regulatory requirements which apply to the registration and monitoring of individuals whom LITs may use to fulfill their counselling obligations. This will include having LITs register insolvency counsellors against their individual license as well as to formally designate a registered counsellor to deliver counselling with respect to each bankruptcy or proposal.

Rules related to LIT registrations will ensure that individuals providing counselling are properly qualified and not involved in activities that represent a conflict of interest. Rules around the LIT’s designation of an insolvency counsellor will also require that there is no conflict of interest between the interests of the debtor and those of the counsellor.

It seems that the main theme of these changes are aimed at counsellors who are not employees of the LIT and provide counselling outside of the LITs office.

Service Delivery

One of the issues with regards to service delivery was that certain LIT firms were travelling to places where they did not have a presence. Whether that be a resident or non resident office.  The OSB hopes that by issuing anew Directive it will assist in clarifying those issues.

The principle objectives for the new requirements will include:

  • a high standard of client service offering for BIA insolvency services where LITs wish to operate offices;
  • transparency on the availability of consumer service at different types of LIT offices;
  • a level playing field for LITs regarding the geographic operation of offices where they offer services; and
  • prohibiting delivery of BIA insolvency services at unauthorized locations, including those associated with incompatible activities and the operations of unlicensed third parties

This means that LITs will be prohibited from practicing in areas where they have no presence by using the office of an unlicensed third party who may perform incompatible services or who has a conflict of interest.

Assessment of an Individual Debtor

The (OSB) will be proposing amendments to Directive No. 6R3, Assessment of an Individual Debtor, with changes to standards and requirements that apply to the individuals who may assist the Licensed Insolvency Trustees (LIT) with the debtor assessment process, as well as new standards for existing assessment requirements and related statutory documentation.

Clarified LIT requirements for the assessment of an individual debtor are proposed to ensure:

  • An LIT is accountable and responsible for all elements of the debtor assessment process;
  • Debtors understand the insolvency process and receive high quality advice and service from their LIT throughout the duration of their insolvency, as well as the information they need to avoid paying unnecessary costs;
  • Individuals the LIT involves in the assessment process have the necessary competencies, knowledge, experience and education to independently and accurately perform prescribed assessment requirements; and they are without any real, potential, or perceived conflict of interest with the interests of the debtor they serve;
  • Statutory and estate documentation is prepared by the LIT, with objectivity, and that completely and accurately represents the debtor’s financial situation; and
  • The OSB, LITs and debtors have increased opportunities to identify non-compliance related to the debtor assessment process.

 Some points to ponder.

  1. Does this mean an end to third party counsellors who are not employees of the LIT? Only time will tell what the OSB has in mind.
  2. Does this mean that third party counsellors need to be covered by the LITs professional negligence insurance?
  3. Does this mean that all sign ups and counselling be done in the LITs office?
  4. Will this mean that any third party who provides services to the Trustee need to take a prescribed training course.
  5. Will the OSB be prescribing what it perceives the conflicts to be?
  6. The LIT will remain responsible for all aspects of the entire insolvency process.

Consultations on the new measures are planned for the fall of 2017, with implementation and compliance measures coming into effect in 2018. The entire newsletter can be found here.

A closer look at June 2017 insolvency statistics

Consumer insolvencies in BC increased in June 2017 by 21.7 percent from May 2017.  Consumer proposals increased 25.9 percent while bankruptcies increased 16.9 percent.

The proportion of proposals in consumer insolvencies in BC accounted for 55.5 percent during June 2017 while they accounted for 50.4 percent for all insolvencies across Canada for the same period.

Consumer insolvencies in BC for the 12-month period ending June, 2017, decreased by 7.1 percent compared with the 12-month period ending June 2016. Consumer bankruptcies decreased by 6.3 percent, while consumer proposals decreased by 7.8 percent. Consumer insolvencies in all of Canada are down by 1.1 percent over the same period last year.

The proportion of proposals in consumer insolvencies in BC was 56.9 percent during the 12-month period ending June 2017, up from 53.6 percent during the 12-month period ending June 2016. It indicates the popularity of consumer proposals as a way for consumers to deal with their debt and with dealing with a Licensed Insolvency Trustee over other unregulated service providers.

The insolvency statistics indicate the increasing benefits of the protections provided to consumers under the Bankruptcy and Insolvency Act over other non-legislated options, whether that is a consumer proposal or a bankruptcy.   It also indicates that consumers are seeing the benefits of seeking the professional advice of a Licensed Insolvency Trustee rather than those of other non regulated service providers.

If you would like to know exact details of how a consumer proposal or a bankruptcy would benefit you in dealing with debt, call us at (604) 605-3335 to schedule a free consultation.

Call us.  It’s not too late.

See this article for more on Canadian insolvency statistics in June 2017.

Insolvencies down in Canada – June 2017 stats

The latest numbers from the office of the Superintendent of Bankruptcy Canada shows a 7.0% percent decrease in the total number of insolvencies in Canada in June 2017 compared to the previous month.

Bankruptcies decreased by 10.3 percent and proposals decreased by 6.5 percent.

Compared to a year earlier, insolvencies decreased by 1.9 percent.

Other stats: For the 12 month period ending June 30, 2017, the total number of insolvencies decreased by 1.9 percent compared with the 12-month period ending June 30, 2017.

You can read the summary and full report here.

A closer look at May 2017 insolvency stats

Consumer insolvencies in BC increased in May 2017 by 21.7 percent from April 2017.  Consumer proposals increased 25.9 percent while bankruptcies increased 16.9 percent.

The proportion of proposals in consumer insolvencies in BC accounted for 55.5 percent during May 2017 while they accounted for 50.4 percent for all insolvencies across Canada for the same period.

Consumer insolvencies in BC for the 12-month period ending May, 2017, decreased by 7.1 percent compared with the 12-month period ending May 2016. Consumer bankruptcies decreased by 6.3 percent, while consumer proposals decreased by 7.8 percent. Consumer insolvencies in all of Canada are down by 1.1 percent over the same period last year.

The proportion of proposals in consumer insolvencies in BC was 56.9 percent during the 12-month period ending May 2017, up from 53.6 percent during the 12-month period ending May 2016. It indicates the popularity of consumer proposals as a way for consumers to deal with their debt and with dealing with a Licensed Insolvency Trustee over other unregulated service providers.

The insolvency statistics indicate the increasing benefits of the protections provided to consumers under the Bankruptcy and Insolvency Act over other non-legislated options, whether that is a consumer proposal or a bankruptcy.   It also indicates that consumers are seeing the benefits of seeking the professional advice of a Licensed Insolvency Trustee rather than those of other non regulated service providers.

If you would like to know exact details of how a consumer proposal or a bankruptcy would benefit you in dealing with debt, call us at (604) 605-3335 to schedule a free consultation.

Call us.  It’s not too late

See this article for other Canadian insolvency stats for April 2017.

Consumer Proposals, the Licensed Insolvency Trustee (“LIT”) and Third Party Debt Consultants – the debate continues

There has been considerable debate as to whether an individual needs an independent debt advisor to file a consumer proposal to “protect” the interest of the debtor and get the lowest consumer proposal possible.

Quite often the discussion boils down to the fees of the LIT.  The argument is that the LIT doesn’t represent the debtor’s best interests as they get paid more if the debtor pays more. The underlying theme is that the LIT wants you to pay as much as you can to obtain a higher fee.  Hence, they say that the LIT is in a conflict of interest.

It has also been suggested that at the initial meeting the debtor might provide information to the LIT that could possibly be used to obtain a larger amount for the creditors, and thus greater fees for the LIT or that going to an LIT without a debt advisor is like being unrepresented in Court.  In my experience, I can’t think of one situation where that would apply.

Other arguments include that independent representation is needed to protect assets without having to also worry about your creditors.  Assets are either exempt pursuant to provincial legislation or they are not.  There should be nothing to hide.

There have been comments that it costs $1,500 to file a consumer proposal.  Not true.  Most LITs require an up front payment, but typically not anywhere near $1,500.

Frankly, none of these assertions could be further from the truth.

Let’s look at the facts:

  1. An LIT is an Officer of the Court and is required to balance the interest of all stakeholders and be objective.
  2. The Assessment Directive issued by the Office of the Superintendent of Bankruptcy (“OSB”) provides that the LIT shall provide a complete assessment of the debtor’s affairs including assets, liabilities and income AND explain all the options available to the debtor for dealing with their debt. There is your independent assessment.
  3. The fees that are paid to the LIT are set by the Government of Canada through the OSB. So the Trustee hasn’t set the fees. The LITs fees are a byproduct of an accepted proposal.  Every LIT gets paid the same in a consumer proposal. And if the LIT is banking on more fees, then objectivity has been lost.
  4. The creditors are the ones that vote on the proposal. The LIT has no say in the outcome.
  5. The LIT is best positioned to know what creditors want by reason of their experience in administering consumer proposals since 1991. That experience leads us to tell the debtor what may or may not work.
  6. The LIT is governed by a Code of Ethics by both its regulatory body, the Office of the Superintendent of Bankruptcy and its professional association, the Canadian Association of Insolvency and Restructuring Professionals (“CAIRP”).

If you have nothing to hide and want a proposal to be accepted to bring certainty to your situation, then you are best served by an LIT and no one else.

The insolvency process is about full and frank disclosure to your creditors.  If you want your creditors to take a discount on what you owe them, then you need to be prepared to make full disclosure of your situation.  By not disclosing everything to your LIT might mean that they would have changed their advice to you.  As well, any proposal that is obtained by fraud or fraudulent means can be annulled.

Lastly, if you don’t do anything wrong, you won’t get in trouble.

LITs have been administering consumer proposals since 1991 and nowhere has it been stated, by the OSB or other stakeholders that LITs are in a conflict.  The very nature of the role is that of conflict as we answer to many stakeholders.  But we carry out these duties every day without any one complaining.

We have illustrated the nature of our role below;

As is apparent, we answer to many stakeholders.

What you need to make a fair and reasonable proposal to your creditors is the expertise of an LIT who will treat you fairly and give you the straight goods.

The experienced professionals at Boale, Wood & Company Ltd. understand the stress that financial difficulty can cause.

We know that realizing that you are experiencing financial problems is a hard thing to do for most people and sometimes you feel helpless. But instead of feeling helpless, let us help you gain control of your debts and understand your options.

Start by scheduling a meeting with us to discuss the solution best suited to your situation. This meeting is free and there is no pressure or obligation for you to make a decision right away.

We have the expertise to find the solution best suited to you.

Call us, it’s not too late. (604) 605-3335.

 

I filed for a consumer proposal or a bankruptcy and I am still receiving statements from my creditors!

One of the most common questions I receive from a debtor is “Why do I keep receiving statements from creditors when they know I have filed a consumer proposal or a bankruptcy”.  Usually it’s a frantic phone call or email that says, I finished my proposal or bankruptcy and now I receive this statement.  They are still coming after me for payment.

There is no reason to panic.  The reason statements are sent has to do with timing, computer generation, lack of human intervention and legal disclosure requirements and not with pursuing collection.

Timing

When an individual files a consumer proposal or a bankruptcy the Licensed Insolvency Trustee notifies the creditors of such.  In many instances, financial institutions and credit card companies use third party service providers who are tasked with filing the claims with the Licensed Insolvency Trustee and providing information relating to the debt. So it is not the Bank directly who does this work.  So there is a time lag between the Bank actually receiving notification of the insolvency and the sending of statements.

As well, the statements are computer generated every month.  There is no person actually looking at this. And it does take a while for these institutions to do their housekeeping such as closing accounts and to stop sending statements.  Yes there are additional interest charges on these statements but again, these are computer generated and you are not responsible for interest charges after the date of filing.  The Bank will ultimately get around to fixing this.

So it is very common that a debtor files and continues to receive statements for a period after the filing.  It’s all about the timing.

Legislation

Financial institutions are required, by law, to send a statement to the debtor when a payment is received.  In fact, the legislation says that the Bank is not required to send statements if there is no outstanding balance at the end of the period or the credit agreement has been suspended or cancelled and the bank has demanded payment of the outstanding balance.  So in the case of when a bankruptcy or a proposal has been filed, the credit agreement has been cancelled and the bank is no longer required to send statements.  If they receive a payment through the Licensed Insolvency Trustee by way of a dividend, that then triggers the requirement to send a statement and hence, the phone call to the Licensed Insolvency Trustee.

Conclusion

So if you have filed a consumer proposal or a bankruptcy, it is not uncommon to receive statements from creditors after filing.  It is nothing to be concerned about.  If you are compliant with your payments and documents, then you have nothing to fear.