What Are The Alternatives To Consumer Proposals and Bankruptcy?
Acknowledgement: Many thanks to Karen Adler, CIRP, who reviewed and improved this series of posts. Karen is a federally-licensed Trustee in Bankruptcy with Rumanek and Co.
Karen has contributed to the educational materials and development of the national CIRP Qualification Program for trustees, and conducts seminars on bankruptcy and consumer proposals for CAMH’s Problem Gambling Institute.
Today we continue the dialogue with Jordan Rumanek who is a licensed Trustee in Bankruptcy and Administrator of Proposals whose firm Rumanek & Company Ltd. processes well over a thousand insolvency files each year in the GTA. We want to talk about some of the alternatives we keep hearing about on the radio, or reading in the magazines. “Government approved relief programs etc.”
Ross: There are some businesses that promote alternatives to bankruptcy or consumer proposals. Should people be considering these other approaches? If not, why not?
Jordan: I know about these people as I see and hear their advertising as well. Their message sounds quite compelling, and I totally understand why debtors might be attracted to their message. Some call them debt settlement companies.
Debt settlement is a negotiation process with creditors, and results can’t be guaranteed. Creditors are not required to participate, and the debt settlement companies are not required to follow through to the end. The only way to ensure all creditors are included, and that all debts are addressed, is through a formal consumer proposal.
In Canada, if you are struggling financially, a consumer proposal provides a far more effective way of addressing outstanding debts. There is immediate protection from creditors, it deals with all creditors on a consistent basis, has a regulated and fully disclosed fee schedule, and the process is overseen by government licensed and supervised professionals. These other businesses are informal and not approved by the court. Please be very careful.
If you are in financial difficulty and are considering using a debt settlement company to deal with your debts, you should be aware the Ontario Government’s Ministry of Consumer Services is warning consumers to exercise caution when considering a contract for debt settlement services. You can also read this story published in Maclean’s magazine earlier this year.
Ross: Do you believe there are many more people out there that should be using your services, but for whatever reason do not?
Jordan: I think some people have a misconception they will lose their home if they file for bankruptcy, and many have never heard of a proposal. You do not lose your home, and bankruptcy is not the only option. We need to educate consumers of the options available to them.
Jordan: If your wages are being garnisheed see a trustee. If you are using one credit card to pay another credit card, see a trustee. If you are receiving telephone calls from collection companies more than once a day, call a trustee. If you do not know what to do about your debts call a trustee.
Ross: What do people tell you is the most difficult part of the bankruptcy process?
Jordan: For most people, the hardest part is making that first phone call. They feel it is an admission of defeat, and that all of the balls they had been juggling are falling to the ground. Trustees and their staff are very sensitive to these feelings, and we do our best to provide information and understanding. Remember, that first call is often the first step to a fresh start and a future free from the crushing burden of debt.
- Using Home Equity Loan & Mortgage Refinancing to Pay Off Your Consumer Proposal Early
- Interview with a trustee (I) – when to consider a consumer proposal or bankruptcy
- Interview with a trustee (III) – working with a trustee is not just for low income people
- Interview with a trustee (IV) – alternatives for homeowners, and what else can you keep?
- Interview with a trustee (V) – alternatives for failed business owners