59 – What Kind of Debt Counselling Does a Licensed Insolvency Trustee Offer?

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. Today we’re going to talk about the kinds of debt counseling that Licensed Insolvency Trustees offer. 

We’re going to learn about the type of counseling that an LIT can offer, when it actually happens. We’re going to talk about these two different sessions. What happens in those two sessions? And do you get a certificate or something at the end of it as well? 

We’re going to learn all about debt counseling with our Licensed Insolvency Trustee today, Daniel Maksymchak from LCTaylor, Licensed Insolvency Trustee with offices in Winnipeg and Kenora. Welcome to the show, Daniel.

DANIEL MAKSYMCHAK  0:50  

Hi Wayne, it’s good to be back. How are you?

Wayne Kay  0:51  

Good. Is the industry staying even keeled? We’ve been going through a lot over the last few years. I’m kind of wondering how things are going to play out in the next little while.

DANIEL MAKSYMCHAK  1:05  

Yes, I think we all are. I mean, it hasn’t turned out what you would expect through the pandemic with the job losses, in that there was actually a significant decrease in insolvency filings, which seemed kind of counterintuitive. But recently, with the world getting back to normal and rates rising, there’s definitely been an uptick nationally in the insolvency filings here.

Wayne Kay  1:27  

And they’re saying, from what I’m hearing anyway, things could be changing in the next year or two. We’ll have to wait and see. So I think this is almost the perfect time to be talking about debt counseling, and teaching people maybe there’s something they can do at this point, to save themselves from getting into real financial trouble coming up a little later on.

DANIEL MAKSYMCHAK  1:49  

Yes, that’s the goal, right? Preventative medicine – try and stop things before it gets to the point where people need an insolvency filing or one of those more drastic measures. 

Wayne Kay  1:59  

Now debt counseling is something that’s offered through LITs. Can you talk us through what that looks like?

DANIEL MAKSYMCHAK  2:07  

Sure. Debt counseling can come in many forms. If you think about the basic definition of counseling, it’s basically giving professional advice to someone.  So when it comes to debt counseling, that would be giving professional advice about debt, which is basically the reason that it exists. 

Debt counseling can really come in, in two stages. There’s kind of the informal debt counseling that happens when people pick up the phone and call and they say, look, I’ve got debt, it’s too much, I don’t want to deal with this anymore. What can I do? And then at that point, the LIT sets up the free consultation, and they go through the person’s situation and suggest ideas as to how to rectify that situation with respect to the person’s debt. So that’s counseling, right there –  providing advice, suggestions, things that the person might not have thought of that could be used to resolve their debts quite possibly, outside of an insolvency filing,

Wayne Kay  3:04  

Are there any generalizations that you can make regarding that first session with people? Are there certain things that you see automatically that a lot of people have an issue with financially?

DANIEL MAKSYMCHAK  3:17  

Usually, by the time people are calling in LIT, they’ve, for the most part, looked at their budget and tried to trim the fat that they can to free up more money to put towards their debts monthly. They may have spoken to their bank already about the possibility of a consolidation loan or getting their interest rates lowered, or something that makes the debt more manageable and easy to pay off. So then it comes into the other options that are out there, kind of statutorily. You’re talking usually of a Bankruptcy or a Consumer Proposal. 

But that said, there are a lot of times where their first call is to us, before they’ve talked to the bank or before they’ve really looked at their budget. Then we sit down and we go through the situation of that person and review their budget. Is there anywhere where you can cut back? Maybe there’s some ideas to trim your costs so that you can free up more money each month to put towards the debts. Or maybe the fact is that you have too many debts to too many different places. And you might benefit from a consolidation loan or speaking to your bank about rolling multiple debts into one that’s easier for you to manage at a lower interest rate. So all of that, I’d consider to be counseling as well. 

But then if they do need to go and actually file something, be it a Bankruptcy or a Consumer Proposal – through that process, there is a mandatory requirement that they attend two financial counseling sessions. And this is more formalized debt counseling where the government actually sets the curriculum and requires that the LIT cover certain things with the debtor in an effort to make sure that the debtor – the proposal or the Bankruptcy is hopefully a one time filing for that person. It provides some rehabilitation, the government calls it, so that they are losing the debts and moving forward without the debts. They’ve also hopefully learned what went wrong the first time if it was something within their control, and are going to move forward. Hopefully not do those same things again, so that that’s their one and only Bankruptcy or Consumer Proposal filing in their lifetime.

Wayne Kay  5:18  

So in a way, there’s three sessions that you actually go through. The initial one of introductions and finding out what they can do. And then if they take the next step, then there’s two. Can you walk us through those two sessions? You said, they’re actually quite regulated in a way that the government says, Here’s what we want you to learn in these sessions. So let’s walk through that.

DANIEL MAKSYMCHAK  5:41  

Sure. They’re regulated in the sense that the government has certain topics that they want to be discussed with the debtor, and to make sure that certain things are covered. But from those kinds of basic pieces of the framework, the discussion can really go anywhere, depending on what’s more unique to that person’s situation. 

Some of the topics covered are money management, budgeting, and how to rebuild your credit. Those are kind of the very broad topics that the government asks the LIT to discuss with the individual. But people have different ways of budgeting. People already have budgets, in some cases. Some people have different goals going forward as to what they wish to do with their finances. It’s kind of a framework, but the discussion can really go anywhere. 

So there are those two sessions. The first one is done, usually very early in the Bankruptcy. It’s required to be done within 10 and 90 days of filing the Bankruptcy or the Consumer Proposal initially. And then after that is done it’s really up to the debtor, what would they want to get out of it.

If they come in and they have a bunch of questions –  they’d really like to improve their budgeting and their money management skills, then the session can last for quite a while because the person is engaged. They really want to learn and take advantage of this session. 

There are some times where the people are filing for reasons beyond their control. Something that there wasn’t anything that they did with respect to their budgeting or extravagant spending or anything like that. It was based more on perhaps an illness or something that was totally outside of their control. So those money management and the budgeting conversation might be less relevant, beyond the scope of establishing the importance of maybe having an emergency fund or something like that. But so there’s frameworks to cover, but generally, it’s pretty wide open.

Wayne Kay  7:41  

Okay, so the first session covers that –  what about the second session? Is the first session more of what went wrong? And how do we stop that from happening again and then the next one is, okay, we’re going to look into the future, the crystal ball. And if you were to have your dream life, how are we going to achieve that?

DANIEL MAKSYMCHAK  8:00  

Yes, that’s a fairly good way to put it. I’d say that between the two sessions, the broad theme of the first session is identifying the issues that lead to the insolvency in the first place. And then the second session is moving beyond that and reestablishing your life post filing. Things like rebuilding your credit, after filing. Obviously, filing a Bankruptcy or Consumer Proposal is a negative thing to your credit. So often people are interested in Okay, I want to put this behind me and improve my credit going forward. What are some ways that I can do that?

That’s something that the trustee is happy to speak with them about. In the case of a Bankruptcy, they’re having to provide a budget each month to the trustee. So on that budget, they’re clearly laying out how much they’re making and where the money’s going. In the second session they’ve had a few months into the Bankruptcy, so you have some evidence and documentation as to what their budget is. You can speak to them about what they’d like to improve and what goals they have going forward in order to have a better life post filing.

Wayne Kay  9:08  

And so when it all comes to an end, and counseling is done, do you get a certificate of some sort?

DANIEL MAKSYMCHAK  9:14  

There used to be a certificate – used to call it a counseling certificate. In recent years, the government changed the terminology and now it’s called a report on the counseling and I’d say that this is probably more accurate. It’s not a certificate in the sense of something that you frame and put on your wall like you would a professional certificate or something like that. It’s more just recognition that you’ve completed these sessions as are required by the insolvency legislation and that requirements in order to get your discharge or your certificate of full performance.

In the case of a proposal, it has been met and the trustee and the debtor both sign it and verify that the session was done to the standard required by the Office of the Superintendent of Bankruptcy and that both parties were satisfied. The counseling, hopefully, had its desired effect. And then that’s filed and that requirement is met. The person has had that rehabilitative component to their insolvency filing.

Wayne Kay  10:15  

So as an LIT, how do you feel about the debt counseling? Is that something you enjoy doing?

DANIEL MAKSYMCHAK  10:21  

It is. As a trustee myself, I’m more involved in the initial consultation upfront when they call an LIT. Then they have the first call, disclosing that they have financial difficulties and wondering what can be done about it. And that’s just kind of a completely open-ended conversation as to what the person’s situation is like, and what can hopefully be done with it. 

That is kind of the reason, I’d say, myself personally, and probably most LIT’s enjoy the job so much. You’re meeting people. You’re hearing what issues they’re facing, and you’re helping them and coming up with a plan to solve those issues. That they emerge financially stronger, so that for the rest of their life, they’re not burdened by these financial constraints that they currently have. 

And then when it comes to the sessions during the insolvency itself, typically those are handled by specialized counselors at the LIT firms who are very good at helping to create budget plans with the debtors, and provide ideas on how to reconstruct your credit post filing. All LITs are required to have the necessary expertise to do those as well but we find that it’s very beneficial to have someone who’s very specialized in those topics to conduct those counsellings. We find that usually that’s the best outcome for the debtors as well.

Wayne Kay  11:45  

So if somebody’s listening to the show and they haven’t reached the point yet where they want to make that phone call. Because there’s always this negative feeling, I think that they don’t want to be judged. And we talk about this all the time on this podcast that you’re not, you’re never judged for making a phone call. 

And in fact, most of the time when people make that phone call, they say, Man, I wish I’d made that call so much sooner. I just would have felt so much better about actually having a proper direction to go with my debt, as opposed to it just continuing to snowball. Which it does, it just gets worse and worse and worse. 

So let’s talk briefly to the person who has not made the phone call yet. What are some things that when it comes to basic budgeting? Walk me through that. Let’s do one of these sessions right now about the things that people need to do.

DANIEL MAKSYMCHAK  12:35  

Sure, the first step that they need to do when they’re considering a call to an LIT – a necessary step, is to look at your budget. If your expenses exceed your income, then that’s not sustainable.And that might be because your debts are so high that now your cost of servicing that debt is just too high of an expense and it’s surpassed your ability to meet your income. That’s the first step, you need to review your budget and see if that’s the case, and you’re servicing your debt to such an extent that it’s taking up too much of your income. That’s a clear sign that you need to talk to us so that you can do something about that debt – to get those debt payments lower if not eliminated, so then you’re using your current income to meet current expenses not to pay the expenses of the past.

So that’s the first thing and if you’re thinking that that may be the case, or you think that you’re close to that situation, by all means call in LIT. There’s no cost for that free consultation. Like I’ve said, there’s no commitment, there’s no pressure, there’s no judgment or anything like that. It’s just a chance to sit down either literally in an LIT’s office or figuratively on the phone or over a videoconference and go through your situation and find out what thoughts an LIT can share about your situation. We see many many situations just like yours or similar to yours and we can share that experience with you and you can definitely benefit from it at no cost or no obligation to yourself.

Wayne Kay  14:10  

Right so that’s step number one, then some other advice.

DANIEL MAKSYMCHAK  14:14  

Some other advice would be to talk to your bank about debt consolidation – if it is something that’s definitely possible as long as you can seek terms that are in your best interest. If you have multiple debts and it’s just getting away from you, definitely see if you can consolidate those into a single payment or get your interest rate down to something that’s manageable. 

Then look at your budget and reassess your budget based on what you may have been offered and say okay, is that manageable or if it’s still not then that’s really when you need to talk to another because it’s going to get away from you. 

And as you said, Wayne, it snowballs. Either your debts are getting bigger because you’re having to borrow money to pay your current expenses or you’re spending money to service that debt and you’re just keeping afloat. Meanwhile, months and years of your life are going by and hundreds or thousands of dollars of payments are going towards the debt. And at the end of the day, you might be filing a Bankruptcy or a proposal anyways. And that money will essentially have been lost during that time. 

Wayne Kay  15:17  

Very good point. Do you find most people are up on how much money they have coming in, and how much they have going out?

DANIEL MAKSYMCHAK  15:23  

To be honest, of the people that we see, unfortunately not. A lot of people have a good sense of how much is coming in. They see their paycheque coming into their bank account, if they get direct deposit. Or they see their actual paycheque physically, and they know how much they’re receiving for their income. But they don’t really know where it goes. 

In today’s society, there’s not that much cash shelled out. For most people. It’s usually on a debit or a credit card, just a kind of invisible transaction. And it’s not until you really dig into it that you find how much money you’re spending on coffees or lunches or something like that. That’s the real eye opener. Going through a budget can really help because a lot of people don’t know that.

Wayne Kay  16:03  

I think that’s the first place for people to start, because it’s always amazing to me, how many people actually don’t know that information. I’m guilty of it as well. I like to spend cash and then all of a sudden, if we want to start tracking where your money goes, you go oh, wow, I can. I’m surprised I spent that much money in restaurants this month. So it’s really a great place for people to start, as well. Any final words of advice you want to share with us regarding debt counseling?

DANIEL MAKSYMCHAK  16:29  

It’s beneficial. Why not talk to an LIT? Why not talk to an expert about your situation and get advice – you’re not in this alone. There is this profession called LITs regulated by the federal government who exists to help people who are in debt and want to escape that debt so that they’re not burdened with it for the rest of their life. So there’s nothing to be embarrassed or ashamed about. There’s no commitment, just pick up the phone and call. There’s nothing to lose. 

Wayne Kay  16:59  

I love it. Daniel, thank you very much for being on the show and sharing all this great information.

DANIEL MAKSYMCHAK  17:02  

Thanks for having me. Wayne. Nice to speak with you again.

Wayne Kay  17:05  

Well, my guest today, Daniel Maksymchak and you can learn more or schedule that free consultation we’ve been talking about with LCTaylor Licensed Insolvency Trustees. Just go to the website, 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 debtmatters.ca Thanks for listening.