Bankruptcy is a scary word, and an even scarier situation for Canadian’s who don’t have a clear understanding of what it can mean for their future. To help clear up common misconceptions and provide a better understanding of the help available to those in financial confusion, Bankruptcy-Canada conducted an interview with second-generation Trustees Barton Goth and Desmond West-Chow of Goth and Company. Goth and Company is an Alberta institution founded in 1993 by James D. Goth that gives people struggling with financial difficulties personalized help understanding and managing debt and bankruptcy. The company operates its insolvency practice in Edmonton and Northern Alberta, with offices in Sherwood Park, Edmonton, and St. Albert. Barton Goth has been part of his father’s business for 22 years, starting in reception and operating as a Trustee for the past 10 years. Desmond West-Chow became a Trustee this year, but has worked for Goth and Company for four years as a Client Services Specialist and grew up watching his father work in the same industry.
As Bankruptcy Trustees, Goth and West-Chow are licensed by the federal government. Bankruptcy Trustees are neutral, court appointed officers that work with both the debtor and creditor to ensure rules and regulations are being followed and the process of bankruptcy and consumer proposals are understood and properly adhered to by both parties. “It is like a referee at a hockey game,” explains Goth, “We’ve got one set of rules and two different parties and our job is to try and make sure that both parties are following those rules as best as possible.”
In the interview, Barton and Desmond explain how Bankruptcy Trustees can help people understand their options, the kinds of debt to look out for, and what Bankruptcy looks like for those facing it.
Top 3 Causes of Debt
“I’d say one of the most common is probably marital breakdown and divorce,” says Desmond. A close second is health related issues; people get sick for longer than they may anticipate or undergo lengthy treatment and are unable to get back to work, meaning they must rely on credit and dwindling savings to get by. The third cause, simply taking on more debt that can really be handled. Big vehicle payments, big line of credit payment, big mortgage payment and quite often, especially being in Alberta with the drop in income because of an unpredictable economy. “You can’t over emphasize how quick and easy it is to get money from banks and other lending institutions,” Says Barton, “everywhere you turn around credit is being pushed faster than people can spend it for the most part, and unfortunately, that thing is good when interest grades are low but have a tendency to catch up with people fairly quickly when the economy makes the shift.”
What does bankruptcy look like?
There is a misconception about what bankruptcy looks like; the common idea of bankruptcy is based off what we see from television shows from the States. There are many different kinds of bankruptcy – it is important for individuals to understand that bankruptcy in Canada is a very different system from the United States, and that company bankruptcy is a different process from individual, consumer bankruptcy. “[Debtors] are quite often concerned that they are going to lose everything that they worked hard for, their homes, their vehicles and things of that nature and quite often people don’t necessarily lose those things or they are allowed to keep at least a reasonable portion of them,” explains Barton. There are certain provisions within bankruptcy and insolvency legislation that protects individuals and allows them to keep what is necessary to live a reasonable lifestyle and continue working while paying off debt.
What is the difference between a consumer proposal and bankruptcy?
Bankruptcy is a last case scenario that won’t be recommended if there are other options for managing debt. The law requires an individual to make certain monthly payments as well as other duties, and once those payments are made and duties met then the individual is discharged from the debt. A consumer proposal is a way to avoid bankruptcy. “It’s a deal that’s made with the creditors, right? So the idea is for a court sanctioned and supervised process, you make an offer to your creditors to provide them a better recovery than they would receive in the bankers. The recovery typically isn’t paying the debts in full, in fact it’s usually paying a portion of the principal.” A consumer proposal also eliminates interest, meaning an easier amount to of debt to pay back so that bankruptcy can be avoided.
What are most people worried about?
Garnishment, when a creditor goes to court and takes money directly off a paycheque, it is a major fear for individuals. “Often they simply looked at their credit card bill and they have realized that they have been making a minimum monthly payment for the last 12 months, but when they read on that statement that’s making the minimum monthly payment is going to result in having any payments over the next 67 years or some ridiculously large number like that.” In these situations, a person sees that a bad situation is imminent and needs help managing payments before interest gets out of hand.
Why should a client not feel embarrassed coming to see you?
“Sometimes the best way to know whether or not you can avoid bankruptcy is talk to the person that knows most about a bankruptcy” says Desmond. Often, a client afraid of filing for bankruptcy will be told that there are other, less intimidating options. A Trustee is available to provide information so they can make informed decisions about all parties involved and all options available, not judge clients for how they got into heavy debt situations. An individual meeting with a Trustee can expect information on the industry and laws, advice on their situation, and even referrals to other professionals better suited to help in their specific situations.
What does bankruptcy cost?
This is the big question that has people confused about how bankruptcy will affect them. Barton and Desmond explain that the cost of bankruptcy depends on the situation of the individual. “What happens is there’s a minimum cost that’s set by every individual trustee’s office in Canada and so there are some fluctuation on that minimum cost although quite frankly most trustees are fairly similar. But what happens is that there is a guideline that is sent to every trustee kind of determine:
- Who qualifies to that minimum cost
- If they don’t qualify, there is a formula that have to be followed to determine how much their payment is going to be.”
Barton and Desmond say that the best way to know what bankruptcy would cost to you, contact your local trustee to get individual advice based on your income and family size. Bankruptcy typically lasts anywhere from 9 to 36 months, depending on the rate of the person experiencing and their rate and circumstances.