Posted On: June 14, 2014

Some people assume that if they file for bankruptcy they will have to turn over all their income to the trustee. Not true.

But there are other concerns people have over their income. A question we are often asked is: Will bankruptcy affect my income? Will I lose any of it to the trustee or creditors? The answer is: maybe, but probably not.

The fact is after going bankrupt people often find they now have “free income” for the first time in years. This is because they no longer have a long list of debts to pay every month.

When a person goes bankrupt, they are basically saying they can’t pay all their debts. They may be able to pay their rent and utilities and put food on the table, but they can’t do that and pay their credit cards and other loans. However, the moment they go bankrupt and get under the legal umbrella, those same creditors can no longer demand money from them, so they may actually have money to spare.

Now it is possible that person’s income maight be affected, but only if they are making such a substantial amount every month that, in fairness to the creditors, a portion of their surplus should be set aside for the creditors’ benefit. But this only applies after all the necessities are taken care of, so it is not such an onerous thing and most people have no problem with it. In fact it helps people feel better about having to go through the whole process in the first place.

There is actually a formula for working this out and the trustee will explain it all before you make the decision to file the bankruptcy. It’s just one of the many questions that a visit to the trustee clears up.

Most people don’t necessarily think of it this way, but the process goes directly to  restore your control and give you an empowerment over your own affairs. This is one of the main goals and purposes of the bankruptcy laws.

Posted On: June 13, 2014

It was a perfect storm of personal and professional misfortunes. Bryan was a successful independent marketing communications consultant, well respected in the business with a good network of friends. But in his late 50s he discovered that he had adult attention deficit disorder (ADD), with a host of problems, ranging from an inability to focus to poor organization skills and depression. After years of laboured compensation for the symptoms, he felt the copying structure he had carefully built begin to fall apart.

Then he lost his biggest client. With the onset of a deep depression, he found it harder and harder to do work and make up for the lost income. He started to drain his savings and line of credit to stay afloat.

He took a consolidation loan. The Canadian Revenue Agency called about missed tax installment payments. He had to ask for a personal loan from a friend to pay for a month’s apartment rent. He spent a Christmas without money to buy presents. He missed a bank loan payment.

“It was the lowest ebb in my life. I felt like a complete failure,” says Bryan in his quiet voice. “My parents were alive at that point. They berated me for my financial mismanagement. My father had been a bank manager. He told me that if I went bankrupt I would never be able to get credit again.”

With this sword hanging over his head, and not much hope to propel him forward, Bryan went to an assessment with Richard Killen. He may have gone into the meeting with intense sense of “embarrassment” at winding up in this precarious financial position, but he was soon reassured to learn that his problems were manageable.

After a detailed evaluation of his situation and going through the ins and outs of a consumer proposal versus a bankruptcy, Bryan felt the latter  would best suit his situation. The instability of his income at the time would have made it difficult to commit to the monthly payments a consumer proposal would demand. But the most important thing was that the decision was his to make. This helped put him back in control of his financial life – a luxury he had not experienced in a long time.

Almost immediately Bryan felt a surge in spirits knowing that the burden of debt would be lifted. “It was this huge sense of relief,” he recalls. “I was told by Howard that when the phone rings, just to give them his name and number, and he would take it from there. When the bank called the next week, they were very matter of fact and nice about it when I told them. It was just business for them.”

Filing for bankruptcy in 2003, Bryan was able to keep his car, since he used it for work purposes, as well as his personal assets. And he didn’t have to pay any portion of his income to creditors, since it fell under the legal threshold set  in the Bankruptcy and Insolvency Act.

During the bankruptcy, he attended the mandatory credit counselling sessions held at Richard Killen & Associates. At the same time, he underwent treatment for his ADD, getting it under control with therapies that included learning the complex body motions of the martial arts.

Nine months after filing for bankruptcy Brian was discharged and able to make his life anew. What about his father’s dire prediction that he would never get credit again? “Evenbefore I was discharged, credit card companies were calling me and offering me credit.  I applied for a Royal Bank Visa after discharge and have never missed a payment,” he says.

Since then, Bryan has gone from strength to strength in his life. The return of his self-esteem has enabled him to rebuild his business. He has co-founded a company that will create  a smartphone app to help kids with ADD. He is poised to take his third-degree black exam in karate. He has downsized and simplified his life to better protect him from financial vagaries and to minimize the disorganization associated with ADD.

Bryan adds with pride, “It’s a great feeling to get your life back and become a fully contributing member to society again.”