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Personal Financial Recovery
WHAT ARE MY OPTIONS?
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Philip H. Gennis,
LL.B., CIRP
Vice President,
Recovery &
Reorganization
Grant Thornton
Limited
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Personal financial hardship takes many forms: past-due notices on bills; borrowing between pay cheques; new borrowing to repay old debt; arrears of rent or mortgage payments; frequent reliance on overdraft protection; use of credit to meet monthly necessities; making minimum payments only on credit card accounts; borrowing from one credit card to make payments on another; lawsuits; wage garnishments; frequent disputes about money and family resources; constant worry about finances and personal financial security.
The solutions to any or all of the above are as varied as the problems themselves.
Financial and Budgetary Counselling
Financial and budgetary counselling attempts to modify behavior by addressing spending habits and money-management skills. Often, addressing these two issues and creating a repayment plan for existing obligations may be sufficient provided that the quantum of debt is not severe nor the number of creditors too large.
Debt Consolidation
Debt consolidation loans are available from many financial institutions. These loans are given to qualified borrowers to permit them to make a single monthly payment often at a lesser interest rate than that already being paid.
Formal Proposals under the Bankruptcy and Insolvency Act
A Proposal is a legal process which allows a debtor to offer creditors a repayment plan covering all or a part of the debt in a lump sum or over an extended period of time. Once creditors have accepted the Proposal in accordance with the rules and payment has been made the debts in existence as at the date of the making of the Proposal are considered to have been paid in full.
Consumer Proposals are made through a licensed Bankruptcy Trustee. A debtor will be provided with financial and budgetary counselling together with a complete review of his or her financial circumstances. The causes of current financial problems will be assessed and the Trustee will assist in formulating a proposal that is reasonable to all concerned.
This option will be effective only in those situations where a Debtor has sufficient surplus earnings or funds available from independent sources.
What About Bankruptcy?
Bankruptcy provides immediate relief to over-burdened debtors by a “stay of proceedings”. This has the effect of stopping all collection efforts, lawsuits, seizures and wage garnishments. The only exception to this general rule are the rights of secured creditors to realize upon assets which have been pledged as security for a loan.
What follows is a formal process supervised by a Bankruptcy Trustee which, at its conclusion, (i.e. upon your discharge from bankruptcy) relieves you from payment of most debts including unpaid income taxes, but excluding court fines; debts for alimony or support; debts incurred through fraud or misrepresentation; certain civil damage judgments and some student loans.
2. What happens to the things which I own?
Assets, which you own free and clear (except those which the law permits you to keep) are sold and the proceeds distributed amongst creditors.
Any assets which are acquired or to which you become entitled while an “undischarged bankrupt” must be turned over to the Trustee. These include inheritances and lottery winnings.
Assets, which are subject to validly, registered mortgages (such as houses, cottages, etc.) or liens (such as cars, boats, etc.) will also be examined by the Trustee to determine whether or not there is any equity in them belonging to you. If no such equity exists, the Trustee will release its interest in the property to the mortgage or lienholder. If you wish to keep the asset, private arrangements will have to be made regarding a continuation of payments.
If equity exists, the Trustee will have to convert it into cash and distribute it amongst creditors. The sale for this purpose may very well be to a friend or relative, so as to assist in limiting the disruption to your family.
Income tax and GST refunds for the prior years and for the year of bankruptcy are paid to the Trustee and form part of the dividend paid to your creditors.
3. What can I expect from the bankruptcy process?
Attending Creditors’ Meetings and Examinations
You may be examined as to the causes of your bankruptcy and your dealings with assets. Your conduct before bankruptcy may also be reviewed.
If your creditors require a meeting with you, you must attend. This meeting is usually held at the Trustee’s office and is for purposes of allowing your creditors to ask you questions about the information provided on the documents which you signed.
Mandatory Financial Counselling
You will be required to attend two mandatory financial counselling sessions with your Trustee. The purpose of these sessions is to assist you in understanding the causes of your financial difficulties and to provide you with advice on financial matters
Financial Contribution to your Estate
As part of the process, the Trustee reviews your income and expenses. In those cases where your income exceeds your household expenses, he will make a determination from government guidelines as to what portion of this excess should be paid to him on behalf of your creditors.
Discharge from Bankruptcy
If you have never been bankrupt before, you will receive a Certificate of Discharge automatically once nine months from the Date of Bankruptcy have expired. Subject to your obligations to make financial contribution to your Estate and to provide post-bankruptcy income tax information to your Trustee, your involvement in the process is at an end. This is subject to the right of creditors to oppose your discharge as a result of which a hearing will be held before the Court at which time both you and the opposing creditor will be heard.
4. Additional Comments
Bankruptcy is a matter of public record although few people other than credit grantors search such records. Ontario law permits credit reports to contain details of bankruptcy for seven years after discharge and longer if bankruptcy has been declared more than once. This will not automatically deny a person access to credit.
Your employer cannot use bankruptcy as a reason for terminating your employment.
This is the first in a two-part series on personal insolvency. The above covers general information; the second part will address the concerns of managers/employers faced with the insolvency of their employees.
Philip H. Gennis, LL.B., CIRP, Vice-President, Financial Advisory Services, Grant Thornton Ltd, may be reached at (416) 777–7221 Website: www.grantthornton.ca
Everything You Wanted to Know About WHMIS
...BUT WERE AFRAID TO ASK
If you, like most working Canadians, are hearing a lot about WHMIS but aren't exactly sure what it's all about, the following Q&A might shed light on the beloved acronym.
What is WHMIS?
The Workplace Hazardous Materials Information System (WHMIS) is Canada's comprehensive way of providing information on the safe use of hazardous materials used in workplaces. That information comes in the form of hazard identification and classification through product labels, material safety data sheets (MSDS) and worker education programs.
What is the purpose of WHMIS training?
The overall goal is to give workers knowledge and information that will protect their health and safety every day on the job.
Do I have to be educated and trained in WHMIS?
Yes. All Canadian jurisdictions require that employers develop, implement, and maintain a worker education program that will enable workers to work safely with hazardous chemicals. The first step is classification (i.e. is it a controlled product?) of the products used in your workplace. You are required to learn how to use product labels and data sheets, how products may affect a person's health or safety, and what the necessary safety and emergency response procedures are in the workplace.
What do you mean by 'controlled product?'
Controlled products are what we call products, materials, and substances that are regulated by WHMIS legislation. (Products that are not controlled don't need labels, MSDS's or training). All controlled products fall into one or more of six WHMIS classes that consider the product's health, fire and reactivity hazards.
What, in general, does a WHMIS training program include?
Very simply, training typically has two parts:
1. Education about labels, MSDSs, and other identifiers. You will learn about the information printed on labels and MSDSs - such as the type of chemical product, its location, and the colours, numbers and abbreviations that identify it -- and understand what it all means.
2. Training in work procedures such as storage, handling, use, disposal, emergencies, and what to do in unusual situations.
When will my WHMIS training come in handy?
WHMIS is about enabling workers to work safely with hazardous chemicals to prevent incidents or respond effectively to them when they do occur. In the event of a chemical incident, you'll have the confidence of knowing more than just that the MSDS suggests a particular type of respirator for protection against certain products. As a WHMIS-trained worker, you will know where to get the respirator, where its use is mandatory in the plant, how to test it for fit, and how to maintain and store it. If your WHMIS program is successful, you'll know how to safely use a controlled product and understand why such procedures are necessary.
What makes a WHMIS program successful?
At the end of the education and training program, you should be able to answer four general questions:
1. Where can I get hazard information?
2. What are the hazards of the controlled product?
3. How am I protected from those hazards?
4. What do I do in the case of an emergency?
Reprinted with the permission of the Canadian Centre for Occupational Health and Safety (CCOHS), 135 Hunter Street East, Hamilton, Ontario L8N 1M5; Tel: (905) 572 2981; Toll free
1-800-668-4284; Fax: (905) 572-2206
The End of Mandatory Retirement in Ontario
IS THIS THE ANSWER TO THE LABOUR SHORTAGE CRISIS?
As of December 12, 2006, mandatory retirement (with few exceptions) will be illegal in Ontario. By 2012, many boomers are also eligible to start retiring and conventional wisdom suggests that their exodus will likely lead to a shortage. While the end of mandatory retirement might help to address the shortage issue, not everyone agrees that it is wholly desirable. Here are some key issues that various interest groups have identified.
%photo1Those who support the end of mandatory retirement see signs of skill and knowledge shortages based on demographic analyses and evidence of a robust market in need of larger pools of engaged talent that should include mature workers. Re-defining retirement and developing creative retention strategies will be keys to corporate resilience and success. Companies will rise and fall based on how effective they are at retaining their retirees or poaching talent from the competition.
Reinventing retirement is coming at a time when there is a willingness, especially on the part of boomers, to co-create various work options. They plan to live forever—or at best, stay young forever. Research tells us that we are living healthier and longer and the majority of boomers have no intention of packing in work after 65. At the same time, they want work-life balance—more leisure, flex-time and different semi-retirement models from which to choose. Medical studies have re-surfaced suggesting that losing work through downsizing or by choice, including retirement, has a deleterious effect on health. This research heightens the argument that the end of mandatory retirement will benefit retirees by supporting their goals for balance and wellness. At the same time, companies will have just-in-time talent when business needs dictate.
Apart from the lifestyle argument, many retirees will need paid work. The financial industry likes to point out that social systems will be over-strained and elders will not manage the gift of additional of twenty (plus) years past 65. One advisor sarcastically debunked the myth that there is a retirement fairy who will lead us to newly-discovered funds to support ‘golf and cruise’ siren images of retirement.
While life of the idle rich may not be financially feasible for many, it doesn’t have sustainable appeal. However, the epiphany doesn’t usually hit until after the honeymoon stage of retirement—a stage that could last one month to five years. Post-honeymoon kicks in when costs of ‘golf and cruises’ are tallied or when ignored values start nagging: “Any meaningful activities today?” “Bored yet?” “Learned anything lately?”
New Age Retirees can’t imagine 20 years of indolence. Where’s the dialectic? How can leisure be fully enjoyed if not pitted against its opposite and vice versa? This decade, we witnessed a reversal to Freedom 55. Bored, ill-prepared early retirees returned back to work. They wanted back in—albeit on different terms. Conveniently, talk of a labour shortage on the horizon helped re-open doors. Also, thought leaders started pointing out that a ton of knowledge left the building as a result of years of corporate restructurings-- leading to a re-think of the value of legacy workers.
Then there are critics who represent interests of younger executives. The ‘fresh blood’ argument claims that younger workers’ careers have been blocked, especially as organizations have flattened. Older workers might continue to hold plum positions with retirement no longer mandatory. The original idea behind retirement was to ensure that younger workers would move up the ladder or at best, into the spaces where exciting challenges were finally open to them—thus, keeping them engaged. At the same time, older workers could move on with dignity, rather than be shown the door because of aging or performance issues. Retirement was a socially-acceptable, culturally-defined passage. Everyone knew the rules— no need to defend, nor justify.
Now what? What will the new meaning of retirement be? What indicators will be used to suggest it is time for the older worker to move on and how will that be achieved without breaking the law? Will younger workers, in the ‘prime of their career life’, continue to feel disenchanted or bottlenecked?
This position also argues that there will be another issue that companies will face; namely, managing dynamics due to competing intergenerational needs. One could say ‘twas ever thus. However, piled onto age-old value differences among generations, is resentment against older boomers who, it is feared, will continue to dictate workplace terms by dint of their size and privileged position in the market. This perception might have spilled over from the concern that there will be precious little left in social coffers to support younger workers. However, it might be noted, that these fifty year old trail blazers were also the ones most affected by ageism and corporate restructuring—a reward for all their commitment and passion for hard work. They experienced the changing of the loyalty rules, first hand.
Somewhere in between supporters and critics are those who are neither alarmed by the end of mandatory retirement, nor threats of a labour shortage. Jobs that need to be automated will be. Immigration, outsourcing and off shoring will take care of some of the shortages. Boomers will not retire on a dime once they reach 65. They know boomers like to work and play and will be open to flexible work arrangements (part time, full time, virtual, contract work, consulting). Furthermore, to those concerned about whether there will be exciting projects to engage mid-workers, they argue that older workers will eventually retire and/or cycle in and out in just-in-time arrangements, leaving lots of opportunities and challenges for the rest.
Mickey Mehal VP Career Management Consultant, Right Management, Toronto, may be reached at 1-888-926-1324
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