Talking more about financial literacy month!
November is financial literacy month! I’m doing my part to help people improve their financial literacy this November. Throughout the month I will be talking about many finance topics to help you build your financial literacy! Be sure to check out our Financial Literacy page to learn more about the topics we will cover in the month of November!
This week I’m talking with Graeme Hamilton, a Licensed Insolvency Trustee with Spergel, to talk about debt and how to improve your financial situation in 2020.
Guest: Graeme Hamilton, a Licensed Insolvency Trustee with Spergel,
Don’t feel like watching? Find the full transcript below!
What exactly is a Licensed Insolvency Trustee?
Chris: [00:00:01] Welcome, everybody. Today, I’m joined by Graeme Hamilton, Licensed Insolvency Trustee at Spergel. Now, Graeme for the last 10 years has been working with individuals, businesses, households to solve pretty complicated money and debt problems. Graeme, thanks so much for joining us today.
Graeme: [00:00:21] Thanks, Chris. Good to be here. Good to see you.
Graeme: [00:00:25] Well, listen, November is Financial Literacy Month, and I think this is a really timely conversation. At the best of times. Debt can weigh heavily on households and it’s a really important conversation. But I think especially now with the backdrop of the pandemic job loss we’re all living through this, debt is creeping up on households, creeping up on businesses. And I think it’s important that our viewers know what options are available. So, Graeme, I want to ask you a couple of questions about what you do specifically with the most fundamental question. What exactly is it that a licensed insolvency trustee does?
What does a Licensed Insolvency Trustee do?
Graeme: [00:01:12] Right, or LIT so it used to be known as a trustee in bankruptcy. And what they do is they are the only people that are able to access the Federal Bankruptcy and Insolvency Act, which is the legislation that, as you said, individuals, households and firms can access to restructure their debt, restructure their affairs. And the spirit of the legislation is one that’s guided by fresh start and forgiveness, as opposed to, you know, being punished for what is often an honest and unfortunate person just coming through difficult times.
Graeme: [00:01:54] So we are the ones that a business or a person called and we are licensed by the federal government. We have our own body that regulates us and we work on rehabbing people with those challenges through some of the tools that we have access to under the act. It is bankruptcy and or insolvency that we work with. And, you know, we’re here to really get people back on track to whether they’ve had job loss, a divorce, health care issue. Hopefully, they’ll get their forgiveness and a fresh start and move on. And come back. Come back. Come back fighting.
Chris: [00:02:45] Yeah, I love that term. Forgiveness and refreshes evidence of refreshing. Fresh starts and forgiveness. The double F. Yeah got it. Yeah.
Financial Literacy is important
Graeme: [00:02:58] I mean if you think about it right, you guys just speaking with it being Financial Literacy Month, so many people just struggle with making a budget. It doesn’t matter what your income level is, it’s not the easiest life skill to do. And I know that they’re trying to emphasize numeracy more at the school level so that someone finishing high school will know how the credit card works. What how does interest work? How do I go from like, why should I not be getting maybe a payday loan? Right.
Graeme: [00:03:29] So. I think it’s it’s good. I think the right thing is that we’re the ones if you were to call nine one one for your wallet, we’re on the other. Right. And I think that’s right. That’s our role. But it’s really to help. Right. We’re not judging because so many people use it, use our services. It’s really just what’s the situation? How can we help right now? Not like you did what you. So that’s that.
Chris: [00:04:02] Appreciate that. Yeah. There’s a lot of emotion tied up with debt as a mortgage broker. We’re talking about money as well. It’s a very personal, intimate matter. And so I think it’s important that as professionals when we’re guiding, you know, there’s a certain amount of empathy, I find, that’s really required to understand how people have found themselves in situations, not judge and then unravel it. Of course.
Helping clients make financial progress
Graeme: [00:04:28] Yeah, yeah. That’s often a scab or a scar from some other kind of life. Right. So most people that we work with, we understand, first of all, who you owe money to and how much. But then we have to kind of go a little deeper and say, so what happened? Was it just budgeting or did something happen? Often are our regulator does keep track of the causes and it’s often some unfortunate, unforeseen event. And it’s just these things. This is. 2020, right? All right. A little more sensitive to the unforeseen and unknown, right?
Chris: [00:05:07] Yeah, so true. Graeme, let me ask you because there are varying degrees of debt problems varying from the credit card that you just can’t seem to get on top of to full-blown maxed out on everything. So at what point would somebody need your services? Who where does debt start to become a problem for somebody?
Graeme: [00:05:37] Yeah, I think it’s when you are again, it starts with your budget and you are not paying down anything more than the minimum monthly. You’ve got a problem because you look at the back of those credit card statements and they say, you know, it’s going to take you 6-7 years to chip away at this, that if you don’t. So. So if someone is carrying multiple debts and they’re not paying down more than the minimum monthly payment, they’re just going to be treading water and they’re not going to be reducing it. And that’s the first warning sign.
If and if you’re then having to use your credit card every month. So that’s kind of where we look at, you know, just grandma’s advice. Are you making more? What are you able to balance your income and expenses if they’re using credit? And then with that say, do you have something either that you’re putting away for retirement or you’re putting to pay down your debt? And if you’re not doing either of those things, usually there are going to have to call us. Right, because interest moves one way.
Treatment or Preventative?
Chris: [00:06:46] Yeah, yeah. Graeme, let me ask you, are you providing services, preventative services upfront where if somebody finds themselves in that situation, that they can start to get guidance from you and the Spergel team?
Graeme: [00:07:04] Yeah, so we I mean, first of all, our intake or the front end, everything is free and confidential, right? So someone is calling us and we’re going through.. I use this medical analogy. We’re really doing a quick financial physical.
So you’re doing it’s not like we’re auditing them or asking for extensive information, but we want to kind of hit those points of what do you do?How big is your household? How much money do you have? What’s your read? Who you owe money to? And then it maybe when we’re doing a diagnosis, they don’t need our services. There are so many people that I’ll speak to every week that I’ll say you don’t need me. Right. You need to do this, this or this. So we’re not doing budgeting coaches. But, you know, for example, there’s credit counselling. Right?
There are some really great people that we work with where they don’t need to access our services. They just need someone to sit down with them and say, OK, so let’s look at your budget. So. Right. And we work with whoever calls us, even if they’re not eventually an end-user of our services. Right. Right.
Help is out there for anyone struggling with debt
Chris: [00:08:14] That’s really helpful. I think that’s really important to understand is that there is help out there for anybody who’s struggling with that, because, again, going back to the shame, to the emotional aspects of it, it’s kind of something you bury in the closet and don’t talk about openly. I know myself being a mortgage broker. We’re doing private mortgage financing to consolidate debts. And usually, when they’re talking to us, it’s about two years, two years of suffering and when the problem could have been solved much earlier on.
Graeme: [00:08:48] Yeah. And that’s know we work with a lot of people that kind of they tiptoe around it and it takes them a long, long time. And that’s fine. I mean, we work with so many different personality types. There are some people that call us and say, you know, I wanted to be in something yesterday and that’s fine. But then there are people that just take a lot of time. But the people that have to do something aren’t doing themselves really any favors because the interest just keeps rolling around, like if you’re already at that point where you are in trouble.
Graeme: [00:09:26] The best advice is to just kind of contact us and then proceed with a good pace and not, you know, maybe call us every six months because what the insolvency system works under the confines of time. So whether you’re doing some kind of a settlement with us or you’re filing bankruptcy, they’re all day driven. So if you’re in bankruptcy for nine months, it’s nine months, you may as well start that process. And a lot of these. Settlements are structured over six month payments, so then why not start the countdown, right?
Chris: [00:10:07] And actually, that’s a really good segway because I wanted to ask you about what tools are at your disposal. I guess there are varying degrees depending on the circumstances of your clients. But really, what tools are at your disposal to solve some of these debt problems?
An Insolvency Trustee has tools to help
Graeme: [00:10:25] So the first I think, as I said before, we do, we do a diagnosis. So first of all, in order to access our services, you need to meet the legal definition of someone that’s insolvent and not as someone that owes at least a thousand dollars and basically has more debt than assets and can’t meet their obligations as they do. So if someone calls me that says, you know, I have equity in a home and I’ve got credit card debt, but the skew is off, then I’m going to send them to someone like you that’s a mortgage broker.
I would say, look, you have a solution within the equity in your home that you can work with a mortgage broker, access that equity, take out your high-interest consumer debt, and you don’t need to do a filing with me. You’re going to, you’re going to lose your equity, but you don’t have to do an insolvency filing. At the same time, there may be somebody that, you know, has really high income and they’re just not great at budgeting and they have a really manageable amount of debt. It may be two credit cards with two creditors. They can figure out a plan where they may not need to access our services.
So those are the things that we try to do first. Also, consolidation is another thing, right? But again, if someone has not the greatest credit, that may be challenging. So those are the kind of the first solutions without using us, the people that use us. So thankfully, our regulator, the Office of the Superintendent of Bankruptcy, has last year’s stats.
The numbers surrounding personal insolvency
Graeme: [00:12:08] So about 140,000 Canadians in 2019 did a personal insolvency filing. And and the two that you can do is either called the consumer proposal or bankruptcy. So 60% are a consumer proposal, 40% are a bankruptcy. The average debt load, most people owe about $52,000. That’s the average debt number, and it’s about 60% of the people that are doing it are under 50. So so those are the two tools that I have and that Spergel offers to Canadians. And as I said, 60% is a consumer proposal. It’s a structured it’s a structured settlement where you’re paying back a portion of debt to all your creditors.
So we deal with everybody in one basket. Spurgeon’s done. They’ve been around for 30 years. They’ve worked with, I think, over 100,000 Canadians, 3 provinces, 36 offices. So so that to get back to that people feeling shame, we’ve heard it all. It’s rare for someone to have a story that we haven’t heard. And and so so the consumer proposal is is the first thing that we try to see what we can do. It may be that you and I work together on a consumer proposal because there could be someone with equity in a home, but that’s bigger so they can still use your services, top that equity and then do some kind of a restructuring for me where it’s used to settle their high interest consumer debt right without me.
Chris: [00:13:51] Let me ask you a question here in general. What’s what’s the settlement amount for every dollar owed? Is there kind of an average that’s possible?
Graeme: [00:14:02] It depends, right.That’s where the diagnosis comes in because we’re able to put all of your debt with very specific exceptions in one basket. So personal income tax, payday loans, potentially student loans. And so if if if we know who your creditors are, because we’ve done so many, we have a bit of an understanding as to what they’re looking for.
There is no one size fits all in finance
Graeme: [00:14:31] And so it’s not a kind of one size fits all number, like I can’t say if you can hit this target. So it is a case by case basis because some banks are different than other banks looking for.
Graeme: [00:14:45] It’s a democratic process. So the creditors have to respond and vote for it. If we had a simple majority, they’re all bound. So so if you’ve got four credit cards and three of them go along with it. One. Doesn’t dozen to. They’re all bound by this legal process. It’s a better option than bankruptcy, OK, because your credit is not impacted in the same way for a lot of people, there’s the stigma of just the word like there’s just this negative connotation with the word bankruptcy. Those are the two tools that we have. Companies have a few other options. But for today’s discussion, that’s yeah. That’s two tools in my toolkit.
Chris: [00:15:38] You mentioned their taxes, income tax and arguably property tax as well. Is there a special service also provided for anybody that has income tax arrears that you provide?
Graeme: [00:15:55] Well, income tax is a provable claim in either proceeding. So one of the things that we do for people is we make sure they’re up to date with their filing. So if they come to see us and they’ve got I’ve had people not file taxes for 10 years, we will work with them to get that decade of filing done because then it’s going to be extinguished or settled through what the insolvency type that they do with us.
Can an Insolvency Trustee help with tax issues?
An important note is that we can’t you can’t compromise property taxes. So if you are doing if we’re ending up doing some kind of a sale or restructuring with you, those property taxes have to be paid to done in full. Yeah, right. So, I mean, it’s important to note, though, that when you’re accessing our services, it is a legal proceeding. OK, so even though, you know, 140,000 Canadians accessed it last year, it is a legal proceeding. It can involve the courts.
There is there’s all these the majority of the people that do file fall under the guidelines for a real streamlined process. It’s a very efficient process for these honest and unfortunate people, which are some consumer debt issues. There’s rights or some insolvency filings that are extremely complicated. There’s sometimes allegations of fraud or transferring houses to wives for a dollar.
Chris: [00:17:26] Right.
Graeme: [00:17:28] You know, there’s always someone that thinks they’re smart. But for most, like, it’s even though there’s such a large number of firms equipped to handle a real large volume of individuals and households. And I think we’ll probably get to what’s going to happen. Yeah, but, you know, it’s it’s a very normal thing. 5 out of a thousand. So odds are most people know someone that probably accessed the service. And there’s also a phone. 20 – 25% of the people that do it. It’s the second time. So so there are people that will come back and do another consumer proposal or to file bankruptcy again. So. It’s not, as they say, most people know someone that’s used the service. That’s interesting.
Chris: [00:18:32] That’s interesting and Graeme. So just a last couple of questions here. I want to wrap it up in the next two or three minutes. But let me ask you, I mean, last year the stock was about 140,000 Canadians use the service. 2020 has been a year unlike any other than in recent history. So with job loss, with the added stresses of the pandemic and shutdowns and economic measures, what are you expecting?
Has COVID-19 increased the number of consumers impacted?
Chris: [00:19:05] Are you seeing your phone lines blow up looking for your service? Are you anticipating that it will? What is your world look like right now?
Graeme: [00:19:13] Yeah, we’re we’re weird word. We’re quiet, but probably not for long. I think during the outbreak, there was a few factors that so we’re down about 50% significant covid started. And there’s really, really psychological reasons why people aren’t picking up. The first one is they were getting most people are getting a check every month from the government. So they were able to get by on two thousand dollars. Second, they were increasing their debt. They weren’t using their credit cards unless they were caught on buying every day. So they weren’t there was really nothing to you couldn’t go to a movie or a concert or a restaurant or take there. You couldn’t increase the debt load.
Also, you could request amnesty from your mortgage and your credit card, right? So you didn’t get didn’t see those numbers go up for the six months. And then the last most important thing is no one was calling or contacting you saying you owe me money, repay us. So the collection agencies and the courts and the banks, they kind of did a big pause for the last six months. So that’s why the numbers are down. I think we’ll probably see a trickle over the next couple of months or the last month for twenty twenty and then twenty twenty one is going to be all these people that would have in a normal cycle annually. They’ll have either done it or they’ll be they’ll be getting ready to do it in the in the first probably quarter of 2021.
Chris: [00:21:06] Very interesting to hear that cyclical nature. And yeah. I mean it’s been in many ways the last six months have been perhaps not what we expected, and that could be that the patient is on life support, come to the drugs, feeling good. But eventually that they come down is going to be pretty hard.
Chris: [00:21:28] And yeah. And it’s interesting as well.
Graeme: [00:21:32] Yeah, it’s a big pause. And I think it’s it’s scary. Like, it’s not it’s not it’s not a hard thing to rationalize. It’s scary. It’s scary for some people to make decisions.
Graeme: [00:21:45] During especially interesting time, right, so a lot of people may like the other thing, too, is that these downloads haven’t disappeared, right. So we’re still working with this average 50,000 Canadian. And that what’s changed since covid? Nothing. They’re still they’re still holding that fifty thousand dollars of debt and they’ll need to either take steps to do something about it or not. So unfortunately, two thousand dollars a month from the federal government isn’t going to help you with a fifty thousand dollar consumer debt limit. So, yeah, and it’s inevitable. But I think, you know, 2021, 2020 was when the businesses were restructuring. I think 2021 is where we’re going to see the employees of those businesses restructure. So I think that’s the way it’s going to go.
Chris: [00:22:41] Interesting. Graeme, as I really appreciate your candor and on the subject and your insights and I think very appropriate for Financial Literacy Month and really appreciate your time. And as we wrap this up, Graeme, can you just share a little bit about if somebody thinks they want to get in touch with you or and needs that service, can you let them know how to how best to reach you? What the next step would be?
How to get in touch with Graeme?
Graeme: [00:23:09] Absolutely. So we do have a #4321 we’ll put you immediately through to somebody at Spergel that will field your call, get your details and then line you up with the right geographical place. Like as I said, we have thirty six places in three provinces, so there is someone in your neighbourhood that can help you. So that’s probably the first thing is #4321 . And then Spergel.ca S P E R G E L. ca that’s you’ll also be able to look at where in the three provinces we can best assist you.
So that’s probably the first step. As we say to people, the consultations are free and confidential. So it’s not it doesn’t take much to pick up the phone and talk to us for about 15 minutes and then we can kind of gear our advice to you. So that’s the first step right on the ground.
Chris: [00:24:11] Graeme, That sounds like a really warm and open invitation. So anybody who’s watching this, please do reach out to Spergel. And Graeme Hamilton, thank you so much. Again, I really appreciate it, sir.
Chris: [00:24:26] Yeah, good. Very good. So that wraps it up. My name again is Chris Molder from Tridac Mortgage on the Danforth in Toronto. Do you have any questions or concerns you can visit TridacMortgage.com, Google my name, Google Graeme’s name. You’ll find us. We’re very transparent. We’re there. Thanks again, Graeme.
Graeme: [00:24:45] All right. Cheers. Goodbye.
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