By Selina Jacobson, Registered Insolvency Counsellor

Scheduling and attending a Free Confidential Consultation with an MNP Licensed Insolvency Trustee is the first step to changing your financial future. You may initially feel hesitant because you don't know what they're going to ask you, or you're unsure of what to bring with you. Perhaps everything you've heard about filing a bankruptcy or a Consumer Proposal is negative. If these are your fears, you're not alone. But the only way to get the right information is to speak with a qualified professional, specifically trained to get you out of debt.  

To set your mind at ease, attending a Free Confidential Consultation does not automatically mean you will be filing a bankruptcy. Your consultation is an information gathering opportunity where we will use our education and experience in solving debt issues to advise you of your best options. You can ask as many questions as you need to. Our role as consultants is to do the same; ask specific questions to gather all the information relevant to your situation.  

Think of it like a puzzle.   First, we put the edge pieces together to frame the picture and gain perspective as to which pieces will go where.  Next, we group pieces according to their color or pattern, fit those pieces together and join them to the frame. Then we move on to another set of pieces and so on. Soon all the pieces fit and the entire picture connects. This systematic approach helps save time compared to randomly grabbing pieces and attempting to put them together with no clear plan or strategy.

Throughout the consultation, questions will be grouped together according to topic.  Initially, some may not seem relevant. But each reflects a piece or section of the financial puzzle we are fitting together. Once we have a clear picture of your financial situation, we'll present you with options and help you make an informed decision regarding your next steps.  

The Frame

What makes up the frame of your financial puzzle? A good starting point is to briefly explain the causes of your financial difficulties. When we understand where you are coming from, we can tailor the remainder of our questions to your unique situation. For instance, if you operate a business, we would ask what type of business it is.  Depending on the answer, we'd proceed with specific follow up questions that contextualize how your business might inform your options for getting out of debt.  

Questions regarding your personal life are also part of the framework. Are you single or married? Do you have dependants or pay support to an ex-spouse? Do you own or rent? What is your total household income? 

Why does this matter? Well, if you're married with 10 children, we would carefully analyse your monthly income and expenses to evaluate what type of debt solution would be affordable for you and avoid further financial hardship to your household. On the other hand, if you're single with no dependants, you may have more freedom to pursue other debt solutions.

Once we have the frame complete we can start grouping questions to gather specific sections of the puzzle. These sections include: your assets, debts, monthly income and expenses and a brief history of your financial transactions.

Your Assets

Many people avoid investigating debt solutions from fear of losing their home, car, household goods, etc. However, each province provides exemption amounts for certain assets to help ensure rehabilitating debtors are not left homeless, carless or couch-less. 

Full disclosure of your assets, including investments like RRSPs or TFSAs, insurance policies, recreational vehicles and potential future windfalls like an inheritance or settlement helps your Licensed Insolvency Trustee assemble a comprehensive list of what your assets are worth, along with what is exempt and not available to creditors. It's also the first big chunk of the puzzle to help determine whether you are insolvent and what MNP can do for you.

Your Debts

Knowing the total amount of your debts is the next large chunk of the puzzle required to determine whether you are insolvent and what solutions are available. Your Licensed Insolvency Trustee will benefit from any recent loan or credit card statements you have, collections notices and a simple list of any other personal debts you may owe to friends or family.

It's important that you disclose all debts you owe – whether it's to a credit card company, an automotive lender, the Canada Revenue Agency or a family member. With few exceptions, all creditors rate the same under insolvency legislation.   For your protection and to ensure all creditors are treated fairly throughout the process, this means you cannot decide to disclose one creditor and not the other. Whether it's a $100,000 tax debt or a $10 library fine, you want to include absolutely everything. 

Your Monthly Income and Expenses

Your Licensed Insolvency Trustee will then look at the actual income coming into your household every month– including employment income, tax credits, pensions, social assistance, etc.
They can also assist you with creating a comprehensive list of your expenses and will prompt you for the kinds of expenses you may not have thought of - like bank fees, pet food, and the weekly (or daily) coffee splurge. Bringing a recent bank statement with you will help with detailing specific payments like insurance and utility bills that may be automatically debited from your account.

Being insolvent doesn't mean you have to forego living a normal life – you need to get haircuts, buy shoes, spend money on gifts, buy a bottle of wine. However, you need to be realistic and honest with us about your spending each month, so we can make sure your bases are covered.  

Now with this third chunk of the puzzle added, we are getting very close to seeing the whole picture.

Recent Financial Transactions

Questions about recent financial transactions help your Licensed Insolvency Trustee understand whether any personal property such as a home, vehicles, personal goods or investments have been sold, transferred or cashed out in the previous year, and what was done with the proceeds from those transactions. 

Among other things they will ask:

• Have you filed a bankruptcy or consumer proposal in the past?
  
• Are there current court fines you are responsible to pay?
  
• Are you involved in any civil litigation matters where you may be entitled to a settlement?
  
• Are you up to date with filing your taxes?
  

These seemingly random pieces will fit into the final gaps of the puzzle. With those in place, you Licensed Insolvency Trustee can craft a solution to fit your unique situation.

Your Options

It is your Licensed Insolvency Trustee's duty to ensure you are informed of all debt relief options available to you. They will explain each of them to you in detail. These range from proceeding as you are with your current debt reduction strategy to consolidating debt with a personal loan through a financial institution, filing a consumer proposal or bankruptcy.

When the picture of how to fix your financial troubles becomes clear, it's much easier to decide which solution seems best for you. 

Don't wait too long to schedule your Free Confidential Consultation with a Licensed Insolvency Trustee. The sooner you can assemble your financial puzzle, the quicker you will find relief from financial stress and the sooner you can start working toward a financial fresh start for yourself and your family.  

This article was originally published by MNP.  To view the original article, click here.

Fear Statement #1:  A Licensed Insolvency Trustee doesn’t work for you, he or she works for your creditors.

This statement bothers me every time I hear it!  To say that a Trustee works for one party suggests that he or she works against someone else.  The above fear statement is meant to lead you to believe that the Trustee is working against you and therefore you need to be represented by someone who will stick up for you and protect your rights. If you’ve done something fraudulent or illegal, I will be the first to refer you to a lawyer, but if you are like 99% of the consumers I meet every day, you are an honest but unfortunate debtor who doesn’t need a lawyer.

The simple fact is the Trustee does not act for any one party but instead has a duty to all stakeholders in an insolvency proceeding, including the debtor (the person who owes money), the creditors, the Office of the Superintendent of Bankruptcy (the regulatory body that oversees insolvencies filed in Canada) the Court, when it is involved, as well as other affected parties, as applicable.  Rule 39 of the Bankruptcy and Insolvency Act, which is contained in the Code of Ethics for Trustees, requires a Trustee to be honest and impartial, which is defined by Collins Dictionary as “not prejudiced towards or against any particular side or party; fair; unbiased.” 

Clearly, a Trustee doesn’t work for the debtor either, but a Trustee provides such invaluable help and relief that most people feel like they’ve had a positive life-changing experience.  The reality is there are many ways that a Trustee helps, starting with providing a free, confidential information session to individuals looking at their options. 

Fear statement #2:  A Licensed Insolvency Trustee will always encourage you to go bankrupt.

If my profession was about encouraging people to go bankrupt I never would have put in the time it takes to earn a license as a Trustee!  Plus, Trustees are too dynamic, creative, educated, well-trained and experienced to be so one dimensional. 

Directive 6R3 of the Bankruptcy and Insolvency Act sets out the comprehensive information to be discussed with a debtor who is considering their options, and it requires that a Trustee discuss the formal (bankruptcy and proposal) AND informal options (consolidation loans, informal debt management plans, etc.).  When dealing with a debtor who is insolvent, the Trustee is required to determine if a consumer proposal is a viable option, as an alternative to bankruptcy.  According to government statistics, proposals comprised exactly 50% of formal insolvency proceedings filed by consumers in 2016.  Clearly, Trustees helped half of all insolvent debtors avoid bankruptcy in an formal insolvency proceeding.  And only a Trustee can administer a formal proposal to creditors, despite misleading advertisements by non-Trustees claiming they can help an individual file a proposal.

If you ask the Trustee for his or her recommendation and they say, “I recommend that you go bankrupt”, rest assured that this is a professional opinion based on comprehensive assessment and not a pat answer.  No Trustee will make that recommendation lightly.  But, if there are other options the Trustee will let you know what those are.  Nothing thrills a Trustee more than helping a debtor avoid bankruptcy; in fact, we do just that every single day!

Fear statement #3:  A Licensed Insolvency Trustee will disclose your confidential information.

It’s always kind of awkward when I sit down with that rare someone who grills me about confidentiality and to whom I will divulge their information – usually before I even know their last name!  While I appreciate that it is very humbling and difficult to discuss sensitive financial information with anyone, rest assured that a Trustee is bound by some rules and regulations around confidentiality.

Rule 40 of the Bankruptcy and Insolvency Act, which is contained in the Code of Ethics for Trustees, prohibits a Trustee from disclosing confidential information to the public concerning any professional engagement, unless the disclosure is 1) required by law or 2) authorized by the person to whom the confidential information relates.  The Canadian Association of Insolvency and Restructuring Professionals (“CAIRP”) imposes Rules of Professional Conduct on its Trustee members, and Rule 5 provides that a member has a duty to confidence to a client and shall not disclose or exploit any information obtained in the course of an engagement.  Moreover, there are provincial and federal laws respecting the protection of personal information, and most organizations have written policies regarding the same.

At the same time, certain information must be shared with certain parties in a bankruptcy or proposal proceeding, particularly with the Office of the Superintendent of Bankruptcy and creditors of the debtor.  The Trustee will let you know what information will be shared, and with whom.  As I like to say to people, I am far too busy to go sharing your information with third parties when I don’t have to! 

If you hear or read the above fear statements, ask yourself what the individual or entity has to gain by making such statements, and what they are selling.  Chances are, they want you to avoid seeing a Licensed Insolvency Trustee – even when it will benefit you – because they want to sell you something that they have to offer.  In many cases, what they are selling will lead you directly to a Licensed Insolvency Trustee anyway. 

A Licensed Insolvency Trustee is an educated, highly trained and strictly regulated professional.  Trustees are the only professionals who can legally administer bankruptcy and consumer proposal proceedings.  To find out more about how a Trustee can help you or someone you know, please contact us for a free consultation.

Lana Gilbertson is a Licensed Insolvency Trustee with MNP Ltd., based in Vancouver, BC  for more about how Lana can help, contact her directly at 604-637-1599 or lana.gilbertson@mnp.ca.