40 – Most Important Bankruptcy Questions

Wayne Kay  0:04  

Welcome to the Debt Matters podcast where we help Canadians find solutions to their debt with Licensed Insolvency Trustees from across Canada. I’m Wayne Kay, and in today’s show, we’re going to be talking with Jillian Taylor-Mancusi from LCTaylor Licensed Insolvency Trustee in Winnipeg. They also have an office in Kenora. 

And by the end of the show, we’re going to talk about the most important Bankruptcy questions, the questions that get asked often and the questions you should be asking. Jillian, thanks for being here today.

Jillian Taylor-Mancusi  0:34  

Hi Wayne. How are you doing? 

Wayne Kay  0:36  

Terrific. How are you doing?

Jillian Taylor-Mancusi  0:38  

I’m great.

Wayne Kay  0:39  

Every day you’re dealing with Bankruptcies, you’re dealing with debt questions and problems. And I’m sure a lot of it sounds the same. But each situation is a little bit different today. Can we talk about some of the common questions that people ask when it comes to Bankruptcy?

Jillian Taylor-Mancusi  0:57  

Definitely. 

Wayne Kay  0:59  

All right, let’s talk about the five top questions that you get asked.

Jillian Taylor-Mancusi  1:04  

The first one is how can I avoid Bankruptcy? That’s a very common question. But instead of asking how can you avoid Bankruptcy, it should be how can I deal with my debt situation? How can I deal with my debt problems?

Wayne Kay  1:18  

Right, because the word Bankruptcy scares everybody.

Jillian Taylor-Mancusi  1:21  

Right, exactly. And sometimes a Bankruptcy is the best solution to your problems. There are other options like Consumer Proposals and budgeting. But sometimes Bankruptcy is the best option for you.

Wayne Kay  1:34  

Why do we have such a negative feeling about the word Bankruptcy?

Jillian Taylor-Mancusi  1:38  

I think that the negative connotations associated with the word Bankruptcy come from decades ago, when nobody filed for Bankruptcy – when consumer credit wasn’t something that people dealt with. Back in the day of your grandfather or your great grandfather, they wouldn’t go and finance a vehicle, they would pay cash for it. Or they wouldn’t charge a movie and a dinner on their credit card, because they would pay cash for it. So society is very different than it was many decades ago. But some of those negative connotations still stick with certain words, right? And Bankruptcy is one of them.

Wayne Kay  2:17  

Absolutely. Okay. So instead of asking about Bankruptcy, ask about how to solve the debt problem. What’s the next question that you hear?

Jillian Taylor-Mancusi  2:25  

The next one is will I lose my house or my car? Now, instead of asking that question, the question should be, can I afford my house or my car, because you’re trying to figure out a way to get out of your debt situation. And maybe your house or your cars are what’s keeping you under, under the thumb, if you will. 

If you look at something like a vehicle, for example, they can be very expensive. You take your vehicle payment itself, you take your auto insurance, you take your gas price, which we all know is more than your car payment these days, as well as maintenance. In Winnipeg, we have to change your tires, and you have to get your oil changed. You put all that together. And that can be a lot of strain on a cash flow, particularly if you’re going on a monthly cash flow situation.

Wayne Kay  3:17  

And of course, you add that in that you have got two vehicles, and it’s unbelievable what the price of vehicles are these days.

Jillian Taylor-Mancusi  3:25  

Right, exactly. So instead of saying, Will I lose it? Maybe you can’t afford it, and it should be a good time to give it up.

Wayne Kay  3:33  

Okay, but what about your house? 

Jillian Taylor-Mancusi  3:36  

Same situation with a house. Yes, everybody needs a place to live. But maybe renting is more affordable for you and your current situation, or maybe downsizing to a smaller house that’s less expensive, or that the upkeep is less expensive. Because if you’re in a house that has all the normal housing costs, the insurance, the cost of maintenance, the hydro, the water, everything that goes is associated with a house, maybe you can’t afford the house that you have.

Wayne Kay  4:10  

And you have to have insurance because I can hear sirens in the background.

Jillian Taylor-Mancusi  4:14  

Right, exactly. You don’t want your house burning down. You need the insurance on your house. 

Wayne Kay  4:19  

I know and it’s super expensive. So when someone comes in to you and chats about – they’re in a situation, cash flow is non existent. You look at all of these possibilities. And then you say – do you maybe find some ideas on where they can change that? Is it the house? Is that the car? What is it – definitely cards?

Jillian Taylor-Mancusi  4:43  

What we’ll do when we’re meeting with somebody is we’re going to go through not only who they owe money to and how much but how much income they have coming in from any sources, whether it’s regular income, or disability or social assistance, or whatever the case may be. We’re also going to look at what their expenses are. 

So everything – do they have to pay child support or maintenance or alimony? If they have medical costs? Are they self employed, and they’re not really taking what their net income is when they’re coming in to talk to us because they haven’t taken off all those employment related expenses. 

We also want to look at how much their rent or their mortgage is. How much are their utilities? Same thing with a car, we’re going to sit down, we’re going to look at how much each of those things cost, and see if there’s any way that we can budget them out of a situation. For example, if cash flow is just really tight, and they’re looking at something like a Bankruptcy or Consumer Proposal is there anywhere that we can suggest that maybe they can cut some of their expenses. 

In a Bankruptcy or a Consumer Proposal, there’s also two mandatory financial counseling sessions. In one of our sessions, we talked about how much different things should cost on average. So how much you should be setting aside for things like savings and insurance, how much you should be putting aside towards your house payment. You don’t want to be house poor as they call it out there. Right? So those are all things that we’re going to look at to try and get you back on track.

Wayne Kay  6:07  

Okay, perfect. And then what’s the next thing they worry about?

Jillian Taylor-Mancusi  6:12  

Their credit rating? Will their credit rating be damaged?

Wayne Kay  6:16  

I thought that was going to be it. Because as you’re going through, I was saying, I’ll bet you they’re probably worried about the credit rating, but you’re in a bad credit situation anyway. So why are they worried about that? What would be the proper question? 

Jillian Taylor-Mancusi  6:28  

The proper question should be – don’t ask about your credit rating. For that reason, exactly. You have a bad credit rating already. There are steps that you can take to improve your credit. But a credit rating is only really important when you want credit. So if you’re a person, for example, who’s found themselves in financial difficulty, because of a credit card spending problem – well, you shouldn’t have any credit cards. You should pay cash or pay with your debit card for things. And then it really doesn’t matter what your credit rating says, If you’re going to be paying cash for these things,

Wayne Kay  7:00  

Very good point, we worry about what everybody else thinks. And that’s probably where Bankruptcy’s negative, really negative feeling towards the word is, that oh my goodness, everybody’s going to know that I’ve had to declare Bankruptcy.

Jillian Taylor-Mancusi  7:14  

Right, exactly. It is people that are very concerned about what others think. And you know, that this thing of ‘Keeping Up with the Joneses’, what do the Joneses have? Well, will my credit rating be affected? Well, maybe your credit rating should be affected so that you’re not obtaining too much credit.

Wayne Kay  7:32  

Exactly. And it’s very easy. Everybody wants to give you credit, and all of a sudden, you have three or four cards. And if you use this card at this one store, you end up getting, you know, these extra points, but all of a sudden, it just creeps up and up and up. Because something happens in life, that knocks you off your feet. 

And suddenly you’ve got three or four different credit cards. And as you were talking about all the other things piling up, oh, my goodness. So we can’t worry too much about the actual credit rating. As you said, nobody knows what anybody’s credit rating is. I didn’t even know what mine was until I think, maybe last time you were on. We talked about things and I went and checked, but I had no idea.

Jillian Taylor-Mancusi  8:15  

On that note, it is important to know what your credit rating is. So every once in a while, you might want to just give it a check or get a report because in case you’re the victim of fraud or identity theft. You want to make sure that there’s nothing on your credit rating that isn’t right. But other than that, credit rating is only important when you want to obtain credit.

Wayne Kay  8:37  

Okay. All right. So that’s another one. What’s the next question that people ask?

Jillian Taylor-Mancusi  8:42  

Will my Bankruptcy or my Consumer Proposal affect my spouse? Well, isn’t that a great question? That is a really good question. And there’s another way of looking at that, in my opinion. So no, it won’t necessarily affect your spouse. But you can make it affect your spouse, and I think in a good way.

For example, in a Bankruptcy every month, you have to fill out an Income and expense report. And what that income and expense report says is how much money is coming in and everywhere you’re spending it and you submit that to the Trustee every month. 

We’re looking at it for different reasons. We want to know what your income is to make sure you’re making the right payments. And we want to make sure that you’re not drinking or gambling with your money because we don’t want an addiction problem. And we want to make sure that if you do that we get it dealt with. 

But why I think it’s important to include your spouse and that is because that’s really going to give you an idea on where your family money is going and where your family expenses are going. Because the first step in budgeting is knowing where your money is going. 

So if you can get 2,3,4 monthly income expense statements put together as a family, then you can really start to budget. And when you start to budget your money, well your money is going to go a long way. And you’re going to see where you’re spending your money and your focus is going – see where you’re spending your money. And you know what, you can even get your kids involved in keeping track of where they’re spending money. Because that’s a really good tool that they don’t teach in school.

Wayne Kay  10:09  

Yes, absolutely. That’s it. I don’t know why they don’t, because so many people get into financial trouble, and just don’t know what to do with money.

Jillian Taylor-Mancusi  10:18  

Actually, it’s a funny little story. My daughter filed her income tax this year, and she’s just become an adult. And she owes. And she’s like, why don’t they teach me in school about this? Oh, there’s a lot of things they don’t teach in school that are really important life skills.

Wayne Kay  10:38  

Well, and that’s one of the things, most people are living paycheque to paycheque. They’ve done studies right across the country. And it is unbelievable how close people are to having a major financial disaster. And all of a sudden, something like that comes up, maybe you’re self employed for a little bit, especially with what we’ve gone through for the last couple of years. 

Then you find out you owe, maybe you owe money back to the government, maybe you took a couple of CERB payments, maybe that you didn’t do the right to tax forms, and then suddenly, you have to pay back $2,000. That can throw a lot of people off track.

Jillian Taylor-Mancusi  11:13  

Right, exactly. Because then they haven’t budgeted for that amount. That’s where I kind of go back to where I think it’s really important to know where your money is going – know if there’s somewhere that you can trim a little bit if you have an unexpected expense. 

Or maybe you’ve been putting money aside, 2% to 5% of your income should go towards your savings. So that you have a rainy day fund. For something like your income tax, or your hot water tank going or in Winnipeg, we have very bad potholes right now. You can knock the wheel alignment out of your car. 

Wayne Kay  11:46  

Yes, absolutely. That stuff does happen. So when you do a Consumer Proposal or Bankruptcy and you’re married, does it affect it? The question is, does it affect my spouse? But is it individual or is it per couple? What are you dealing with?

Jillian Taylor-Mancusi  12:06  

Most of the time, it’s individual. You can file jointly. And it really depends on the kinds of debts that you have and whether or not they’re similar.

Wayne Kay  12:14  

Can you explain more to me about that, because I would think that a family debt problem is a family problem, not an individual problem.

Jillian Taylor-Mancusi  12:24  

Right. So when you’re just looking at the debts, and when a couple comes in, not all debts are the same, just because you’re together. So for example, Mary might have a Visa card where John has a MasterCard, and then they’re joint on the line of credit. So Mary doesn’t necessarily really have to file a Bankruptcy or Consumer Proposal, depending on her situation. 

Maybe she’s fine with paying her visa card and her line of credit, but John’s MasterCard is far greater than he’s able to pay plus, maybe he has a tax debt on top of that, and a vehicle loan, etc, etc. So he has a far more substantial debt load than Mary does. So perhaps John should be filing the Bankruptcy or the Consumer Proposal where Mary may not be in that same situation.

Wayne Kay  13:18  

Interesting. Okay. That’s good to know. I’m learning as we go. That’s what the beauty of this show is. Okay, any final wisdom regarding that topic?

Jillian Taylor-Mancusi  13:27  

It really depends on your relationship with your spouse. Some people just don’t share that information. Some people have separate bank accounts. Maybe your spouse doesn’t need to know, that’s between you and them. 

Wayne Kay  13:37  

Very interesting. And final one, because we’re doing the five important Bankruptcy questions, the ones that you get asked the most often and that one is….

Jillian Taylor-Mancusi  13:48 

Will my employer find out that I’ve gone bankrupt? Now, Bankruptcy is public record. So if somebody wants to go on to the government website, and I think it’s $8, they can pay and they can search your name to find out whether or not you’ve gone bankrupt. But most people aren’t going to do that. Most people don’t really care that much if you filed for Bankruptcy or not, to be perfectly honest. 

But one of the issues is when an employer could find out that you’ve gone bankrupt if you have a garnishment order. So what that means is you owe somebody money, they go to court and they get a judgment against you. Now, once they get that judgment against you, they can go back to court and get something called a garnishment order. And with a garnishment order, they can garnish 30% of your gross wages. Now, once they get that order, they serve it on your employer, and your employer has to then deduct it from your wages and send it directly to them through the court and then to them. 

Now, if you file a Bankruptcy or Consumer Proposal, there’s something called a Stay of Proceedings that goes into place. And what that means is that nobody can sue you, garnish your wages or take any other collection practices against you. So if you have that garnishment order against you then as you file for Bankruptcy or Consumer Proposal, your Trustee is going to let your employer know, because they want to stop that garnishment. So, in those cases, yes, your employer is going to know. But if you have a garnishment against you, you should be asking, Can you inform my employer so that you can get that garnishment stopped?

Wayne Kay  15:21  

Okay, that’s the proper way to do this. And once again, a lot of worry and stress of what everybody’s thinking, but yes, when you’re in the office, I guess that’s pretty important. So when they do that 30% and they garnish that wage – is there a way to stop that or not?

Jillian Taylor-Mancusi  15:40  

There’s only a couple of ways of stopping garnishment. The first is to let the garnishment continue, and you end up paying it out in full. Or you talk to a Trustee and you file a Bankruptcy or Consumer Proposal so that you can get that Stay of Proceedings, and that will stop the garnishment.

Wayne Kay  15:56  

Okay, perfect. Well, it’s good to know. This is very interesting, the questions that you do get asked and versus the questions they should be asking. They’re very similar, but yet so different.

Jillian Taylor-Mancusi  16:09  

Right? It’s just one little word that can change the whole connotation of the sentence.

Wayne Kay  16:14  

Absolutely. And it seems more of this stress is about what everybody else thinks, as we just mentioned, versus how do you solve the problem? Right, because it’s a major problem. And it’s happening. And I don’t know, you probably heard, but I think they’re saying that Bankruptcies will probably be increasing as we’ve been seeing the interest rates rising and all that’s going on. We may have more financial problems to come.

Jillian Taylor-Mancusi  16:43  

I agree. There’s a lot going on in our post COVID world, if you will.

Wayne Kay  16:48  

Yes, no kidding. All right. Well, thank you very much for coming on the show and explaining all this information. That’s Jillian Taylor-Mancusi, you can learn more, you can schedule a free consultation with LCTaylor Licensed Insolvency Trustee by going to www.lctaylor.com. 

And that’s it for today’s Debt Matters podcast. Make sure you subscribe wherever you get your favorite podcasts from and of course for more information, you can always check out our site at debtmatters.ca. Thanks for listening.