Many, many times in the years that I have been a Licensed Insolvency Trustee in Toronto I have met people who had very little understanding of how credit works, especially consumer credit. In fact, when I started my trustee business one of the first persons who came to work for me had almost zero knowledge of how credit worked. Having had years of experience in the consumer credit field, I found that interesting. But as I later discovered, this was a much more common situation than I thought. I guess that’s where Debt Counsellors in Toronto, or elsewhere, come into the picture.
For some reason Debt Counselling as a preventative measure is not provided in high schools, or anywhere else that I can see. But since debt, or at least consumer debt, or consumer credit, is such a prominent part of modern society, maybe we should all try to understand it a bit better.
Historically consumer credit is a rather recent innovation. Before the Second World War it basically didn’t exist. In the 1920s and 1930s it was pretty hard for the ordinary working person to get a loan for anything. A person could perhaps get a mortgage loan to buy a house, with at least a 25% down-payment. But if a family wanted to buy a washing machine they either paid cash, or they bought it on the lay-away plan; i.e. they paid a certain amount every week to the appliance store and when they had paid the full price of the machine, the store would deliver it. If a person needed $300 cash he probably went to a pawn shop. It was practically impossible to get a loan from a bank, unless they already had a lot of money, so they probably didn’t need it anyway. A contradiction, I know.
So really, in those days people didn’t need much in the way of Debt Counselling.
But then after WWII was over and the millions of men who had been in uniform returned to normal civilian life and started families and so forth, they found that they needed and wanted all kinds of things, from washing machines to cars. After having made the sacrifices the war had asked of them they were in no mood to wait for the lay-away plan. So, as happens in a free market system, a need presented itself and someone jumped in to fill that need. Presto! Consumer Credit.
Companies like Household Finance and Beneficial Finance decided to take a chance on these ordinary people. Instead of only lending money to people who already had money, these companies saw that it might be good business to lend money to people on the strength of their employment – they had an income. Guess what? They were right. Ordinary working people were able to get what they needed now and paying for it later. The Great Big Consumer Wheel started to turn.
Here’s what I mean. Because I have a job and can afford the monthly payments, HFC lends me $1,000 to buy a 1949 Ford. A whole bunch of other people then benefit from this. The car salesman makes his commission; the truck driver who delivered the car to the dealership gets paid, as does the assembly line worker who makes the car, the people who produced the parts to supply the assembly line, the people providing the raw materials from which the parts are made, the designer of the car, the advertising guy who comes up with ad that entices me to buy it, and so on, and so on. They all have a job and an income because of HFC lent me the $1,000. And because they get paid they can could go out and finance a car of their own and keep the wheel turning. They also have a new car of their own.
70 years down the line here we are – a consumer credit society – like it or lump it.
But all that is the good side of this equation; when things go right. It is not too much of a stretch to say that this system allows people like us to enjoy the highest standard of living anyone has ever enjoyed in the history of the world. (I speak here of material standards.) Some of us who have been around awhile can remember what things were like 40 or 50 years ago and can compare that to what we enjoy today. The difference is huge and is due in large part to the practical effect of consumer finance.
But things are never universally wonderful, are they? What happens if a person can’t meet the payments that this wonderful system is built on? What then? Well, that’s when we enter the world of the Debt Counsellor. Consumer Credit, as we just discussed, can be a good thing – if properly handled. But if you don’t know how to handle it. Or if unpleasant changes happen in our life that compromises our ability to keep up. That’s when a Debt Counsellor can help.
When it comes to Debt Counselling there are different kinds of help that can be given. At the basic level, there are straight out budgeting practices that can be learned. How to keep track of our money: the coming and the going out. Always good to know, and very important if they can be applied in time to keep things from going astray.
Then there are habits and disciplines that can be learned which can go a long way towards putting those budgeting methods to good effect, as well as to put us in a position to take better advantage of the credit that might be available to us in the future.
And then there is the kind of debt Counselling that assists in rectifying an already bad situation, when applied in conjunction with legal solutions such as bankruptcy or a consumer proposal. This, of course is the area that Richard Killen & Associates Ltd., in its capacity of Licensed Insolvency Trustee and certified Debt Counsellor can really help. After all, one of the two main purposes of the Bankruptcy and Insolvency Act is to promote the financial rehabilitation of the individual. It is one thing to deal with the debts themselves. It is something else to get the information, advice and training which can prevent a future recurrence of the same problem. That’s where the Insolvency Debt Counsellor can make a big difference.
The Federal Government licenses an Insolvency Trustee to perform many important tasks designed to benefit either or both the debtor and his creditors. One of the most important of these tasks is to provide the debtor with the best opportunity to learn the things he needs to avoid a repetition of the current problems. Most importantly he can learn the skills and habits which will empower him to take control of his financial life and pave the way to a much more successful financial future.
In its role as a Debt Counsellor Richard Killen & Associates Ltd. provides the kind of assistance that are designed to achieve these goals. Like any other successful counselling, success will primarily depend on what the individual being counselled “brings to the table”, as the phrase goes. No one can make someone else learn something. But, with an open mind and a desire to learn and grow, the information we can provide can make the kind of difference that has a huge effect on a person’s financial future.
So though the term Debt Counsellor can sound pretty generic and bland, in the insolvency process, whether bankruptcy or proposal, the effect of the Debt Counsellor can be the most beneficial of all.