Trustees in Bankruptcy are very cynical about articles in the media about bankruptcy. In most cases the articles have glaring errors. In the few instances where we find a well researched and even handed story we are very pleased — and surprised. An article that appeared on May 8, 2006 in The Province, a daily newspaper in Vancouver, was particularly bad. The only excuse there is in this Internet age, for not having a well researched article, is apathy and/or laziness. This article prompted me to write a letter to the editor.

May 9, 2006.

To the Editor of the Province

Re: The article by Inez Dyer published in the Province on May 8, 2006 entitled Bankruptcy is the last resort

I am writing to complain of the disservice the captioned article did for people facing severe financial difficulty and looking for solutions. Most people trust the information published in newspapers and accept articles as containing accurate and authorative information. The article by Inez Dyer betrayed that trust by presenting an article that was poorly researched and rife with misinformation and errors.

My comments on the article are as follows:

ERROR #1: Province article, paragraph # 2: “While the bankruptcy is discharged in as little as nine months, the hit to your credit lasts seven agonizing years.”

This is a correct statement but is NOT even handed as the author fails to point out that the person facing bankruptcy no doubt has such poor credit that their credit rating is already as bad as it can get. Bankruptcy will not make it worse.

ERROR #2: Province article, paragraph # 3: “During that time, no bank, credit-card or finance company will be willing to extend you credit. If you happen to find a lender, your interest rate could reach 25 per cent or more.”

This is just not true! A person can rebuild his or her credit in as little as two years by following various proven techniques. If a person has established a good history of debt repayment after bankruptcy and has a reliable and steady income and NO DEBT, that person will be able to get credit.

ERROR #3: Province article, paragraph # 5: “One possibility is an orderly payment of debts, a formal arrangement made through credit-counselling services.”

Once again this is just plain wrong! BC does not have an Orderly Payment of Debt Program. It was shut down in 2001 or 2002 after the Liberals took power from the NDP. The provinces with an Orderly Payment of Debt program are Alberta, Saskatchewan, and PEI.

Another serious and misleading comment is that orderly payment of debt arrangements are made through credit counselling services. Once again this is just plain wrong! Credit counsellors DO NOT perform this service. For more about credit counsellors and what they do please refer to this site.

ERROR #4: Province article, paragraph # 7: “With help from a credit-counselling service or on your own, you can try to negotiate a settlement offer with creditors. By outlining the reasons for your financial disarray and proposing a one-time payment to settle your debt — based on a reasonable percentage of the amount owing — creditors may be willing to take it and cut their losses.”

This is misleading and wrong! If a debtor has enough money to make a lump sum payment the creditors will not accept this amount in full settlement of their debts. They would want this amount plus future payments from income. The best and perhaps only chance a lump sum payment has in settling a debt is to have a relative (for example) put up the lump sum payment on condition of the creditors accepting this amount or having the debtor file bankruptcy. This works best if done as a proposal through a trustee.

ERROR #5: Province article, paragraph # 11: “A consumer proposal has advantages over a bankruptcy. It allows you to repay only a percentage of your total unsecured debts without interest and retain all your personal belongings.”

This is misleading as it suggests that people going into bankruptcy do not retain all their assets. People filing a proposal or bankruptcy have exactly the same rights to retain assets. The assets that are kept in a bankruptcy or a proposal are set by the provinces and are given at this site.

ERROR #6: Province article, paragraph # 13: “.. you can declare personal bankruptcy. It must be done through a bankruptcy trustee for a flat fee of $1,800.”

This is misleading and wrong! A bankrupt must make payments based on his income and family obligations in accordance with Surplus Income Standards set by the Office of the Superintendent of Bankruptcy.

In all provinces but Alberta the minimum to be paid over 9 months is $1,665. This can be paid over the 9 months of the bankruptcy.

ERROR #7: Province article, paragraph # 17: “You remain in bankruptcy for nine months, after which you receive a court document called a “discharge of bankruptcy” that must be filed with both national credit agencies (Equifax and Transunion). Your credit rating will once again become R7 and the bankruptcy will remain on your file for seven years.”

More misinformation! The Certificate of Discharge is not exclusively a court document. In the vast majority of cases the Certificate of Discharge is prepared by the trustee at the 9th month.

The article suggests that the debtor must file the Certificate of Discharge with the credit bureaus. In fact, the Office of the Superintendent of Bankruptcy advises the credit bureaus of the discharge of the bankrupt.

Finally, the fact of a bankruptcy stays on a person’s credit bureau report for 6 years after the discharge; NOT 7 YEARS!

This entry was posted on Tuesday, May 9th, 2006 at 7:56 pm and is filed under Canadian Bankruptcy News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.