In order to file a consumer proposal, you first need to meet with a licensed trustee to see if you qualify for a proposal filing. Your initial discussions can be done in person, via e-mail or over the phone, but eventually, you will need to meet face-to-face with a licensed trustee. When you are ready to proceed with filing a consumer proposal, you need to come to the trustee’s office to sign the necessary papers. The trustee will then electronically send the consumer proposal to the Office of the Superintendent of Bankruptcy and you are under the protection you need from your debts.
You must have the assistance of a trustee to file the consumer proposal. You cannot file it on your own or with the help of anyone other than a trustee. Even though we live in an electronic age, the only one who can electronically file your consumer proposal with the Office of the Superintendent of Bankruptcy is the trustee. That is why we are trained and licensed by the federal government.
Does location matter?
For most people, it’s generally easiest to come to the office closest to where you live or work. At Hoyes Michalos, we have offices throughout Southern and Southwestern Ontario and find that people file in the location of their convenience. They may live in Hamilton, but work in Mississauga; so Mississauga becomes their choice.
That’s at a city level. However, in Canada, does it matter what province you file in?
In today’s economic climate, it is quite common to meet people who live in one province, but are working in another province. What happens then?
Your locality is defined in the Bankruptcy and Insolvency Act as:
a) Where the debtor has carried on business during the year immediately preceding the date of the initial bankruptcy event [filing the consumer proposal];
b) Where the debtor has resided during the year immediately preceding the date of the initial bankruptcy event; or
c) In cases not coming within paragraph (a) or (b), where the greater portion of the property of the debtor is situated.
What this means is that if you work in Alberta for 6 week shifts, but you live in Windsor, Ontario, you would file your consumer proposal in Windsor.
Can I start the process in one province, but finish in another?
That depends.
Let’s say you have a free consultation with us in Toronto and then move to another province before you sign the consumer proposal. You will need to meet with a trustee in the new city you are now living in, to start the process over again.
If you have already filed the consumer proposal with us and then you move to another province, we will continue to administer your consumer proposal. If you have not yet completed your two credit counselling sessions, we can help you find someone local to you to provide those sessions for you.
What are my options if I cannot come to the office?
The legislation states that you have to attend in person to sign your papers. We are unable to accept your signature by email, fax or sending the paperwork to you at home to have you sign it.
If you have a power of attorney and they are authorized to sign paperwork on your behalf, the power of attorney can come to our office to sign the papers for you.
What if I live outside of Canada?
This is a common occurrence, especially in Windsor. Quite often, I meet with people who work in Michigan, but are dealing with Canadian debts. While living outside of Canada does give them a certain amount of protection from their creditors, most people want a plan to deal with their debts and to stop the collection calls.
If you have a power of attorney who lives near one of our offices, he or she can sign the paperwork on your behalf.
If you are able to come to our office and you have a local (to our office) address, you can still file a consumer proposal. We can arrange the consultation over the phone and email you the list of documents we need to proceed. You can then email or fax back to us the necessary documents we need. We will then arrange a time for you to come to our office and sign the consumer proposal paperwork. It is important to understand that in addition to coming to our office to sign the necessary paperwork, you will also have to come back to our office for your 2 credit counselling sessions.
If you neither have a power of attorney or you don’t have a Canadian address, you are not able to file a consumer proposal in Canada. In that case, you may want to meet with a local credit counsellor to see if they can help you negotiate with your creditors, however, they will not be able to provide you any protection under the Bankruptcy & Insolvency Act as only a licensed Canadian bankruptcy trustee can provide those services.
At Hoyes Michalos, more than two-thirds of our clients file a consumer proposal. A consumer proposal is now Canada’s #1 alternative to bankruptcy. If you need debt help, contact us today for a free consultation. We’ll help you determine if a consumer proposal is the right debt relief solution for you.
When it comes to privacy, organizations are required to follow federal and provincial legislation which prohibits the use of personal information in an inappropriate or unreasonable manner. As part of the federal private sector, The Personal Information Protection and Electronic Documents Act (PIPEDA) determines proper conduct by organizations throughout Canada. Differently, The Privacy Act covers the personal information handling practices of the federal government itself.
My guest today is Vance Lockton, Senior Analyst for Stakeholder Relations at the Office of the Privacy Commissioner of Canada. Vance explains that the Privacy Commissioner, Daniel Therrien is an officer of Parliament and reports directly to the House of Commons and the Senate, and is independent of the government in place. Vance details the laws in place for debt collectors, how investigations under the Office of the Privacy Commissioner of Canada are conducted and provides advice for listeners for protecting your personal information.
Privacy laws for collection agents
We’ve talked about collection agents on this show before. We’ve talked about how to stop collection calls and the kinds of strategies that collection agents will use to find debtors. Mark Silverthorn revealed several “dirty tricks” that some collection agencies use to collect on a debt. With that in mind, I ask Vance whether collection agents are subject to any laws when it comes to protecting your privacy.
Vance explains that there are limits on what a debt collector can and cannot do when it comes to protecting a debtors privacy. Debt collectors are subject to PIPEDA (unless regulated by a similar legislation based on province, including Quebec, Alberta and British Columbia) as well as provincial laws such as Ontario’s Collection and Debt Settlement Services Act. Vance details three specific rules that debt collectors are required to follow under PIPEDA:
Get consent for the collection, use or disclosure of personal information;
Protect personal information using appropriate safe guards; and
Only collect, use or disclose personal information for the purposes that a reasonable person would consider appropriate.
However, when it comes to debt collection, there is an exception that says that information can be disclosed without consent for the purposes of collecting on a debt owed to an organization. Vance explains that this exception makes it possible for organizations, such as banks, to send debts to collections. However, he also points out that
the exception doesn’t give organizations carte blanche to disclose any information they wish, to any parties they wish.
Case summary 2004-282 put out by the Office of the Privacy Commissioner, shows one example where a debt collector revealed too much information for the purposes of collecting demonstrates unreasonable use of personal information by a debt collector. Differently, in a separate case summary, although a collector called relatives to locate the person on file, they didn’t reveal any information other than the existence of a debt and the Office found that to be a reasonable use of information. When it comes to ruling on a particular case, Vance explains that context matters and that when it comes to deciding whether privacy laws have been violated will differ based on the details and context of each situation.
What can I do if my personal information is disclosed inappropriately?
Although privacy laws exist, violations of those laws still occur. If you feel that your personal information has been disclosed in a way that goes against PIPEDA , Vance suggests that you visit their website to ask a question to their information staff or fill out their form to file a complaint under PIPEDA so that they can investigate further.
When a complaint is investigated, Vance explains that they are
working to ensure that the organization does have the appropriate practices in place; that they do have the right consideration of privacy and the understanding of privacy.
Following an investigation, Vance points out that having the ability to publish a report and name an organization as having done something negative, typically creates change when it comes to following privacy laws in Canada because most organization don’t want to be in the spotlight for negative behaviour.
How can I protect my personal information?
Although there are laws in place to protect consumers’ and debtors’ personal information, Vance explains that it’s important that we take steps to safeguard our own personal information as well. He offers up four tips that can help to protect valuable information and prevent actions like identity theft:
Exercise caution when giving out your personal information;
Ask questions about how your personal information will be used, shared, safeguarded and why it’s needed;
Don’t give out more information than is necessary, for example, your social insurance number;
Be aware of what’s out there – run a Google search on your name to see what information comes up. If it’s information you can control, have it taken down.
Doug Hoyes: We’ve got a great show for you today with a guest who has a lot to say about the world of debt and finance but he isn’t an accountant or bankruptcy trustee or a financial advisor or a journalist. So, I think it’s going to be a great show with some unique perspectives. So, let’s get started. Who are you and what do you do?
Vance Lockton: So, I am Vance Lockton. I am Senior Analyst for Stakeholder Relations at the Office of the Privacy Commissioner of Canada.
Doug Hoyes: Thanks for being here Vance. What is the Office of the Privacy Commissioner of Canada? What do you guys do?
Vance Lockton: So, the Privacy Commissioner of Canada, his name is Daniel Therrien at the moment. He’s an Officer of Parliament so that means he reports directly to the House of Commons and the Senate; he’s independent of the government of the day. So, the election didn’t change our boss.
We oversee compliance with two acts. The Privacy Act, which covers the personal information handling practices of Federal government department and agencies and PIPEDA, the personal Information Protection and Electronic Documents Act, which is the federal private sector privacy law. And that’s the one that I’ll speaking to during this discussion.
Doug Hoyes: And what is the difference between the Privacy Commissioner of Canada and the Privacy Commissioner of Ontario, or is there such a thing?
Vance Lockton: There is such a thing. So, there is an Information Privacy Commissioner of Ontario. It’s essentially a jurisdictional difference. So, we oversee commercial activity in the province of Ontario. The Information Privacy Commissioner of Ontario oversees collection of information by health institutions, universities, schools as well as municipal and provincial governments.
Doug Hoyes: Got you, so there is a bit of a difference there. Well, I mean this a show about debt so perhaps we can start by talking how your work intersects with the world of debt. And I’m thinking in particular about collection agents ’cause that’s a topic we’ve discussed many times on the show before. And it’s, I’m guessing, an area that people tend to get upset about and have complaints about. And so, I guess let me start by asking you from a privacy point of view are there any limits or what are the limits on what a debt collector is able to do.
Vance Lockton: In general, debt collectors will be subject to the provisions of PIPEDA, unless the operate in certain other provinces that have substantially similar legislation, such as Quebec, Alberta and British Columbia at the moment. But that act is a principle’s base law that kind of sets out the ground rules for how private sector organizations can collect users and disclose personal information.
So, for example, any organization subject to law, including debt collectors, would generally be required to obtain consent for the collection, use or disclosure of personal information. And they’re required to protect personal information using appropriate safe guards as a list of ten of these principles. And there’s also an overarching clause that personal information may only be collected, used and disclosed for purposes that quote, a reasonable person would consider appropriate under the circumstances.
So, that’s kind of the general principles based that debt collectors are controlled by federally. Now provincially there are other laws that they’d be subject to; Ontario has their collection and debt settlement services act that sets out certain limits. But again, because our office doesn’t oversee that I’m not really in a position to speak to the details of it. But there’s some good resources online for both debt collectors and debtors that set out the principles of that. And I’ll provide a link for that for your show notes.
Doug Hoyes: Yeah, that would be great. Our show notes will be available at hoyes.com, so anything we talk about today we can reference there and people – anybody listening we’re more than happy to have you go there and click on the links and get more information.
So, you used the phrase, I’m paraphrasing a bit here but you said reasonable and appropriate in the circumstances. So, if I’m a debt collector for example, I’m supposed to have consent and I’m supposed to protect whatever private information I get, but whatever I do it has to be reasonable and appropriate in the circumstances. So, can you talk practically about what does that actually mean? So, what would be reasonable and appropriate or what would definitely not be reasonable and appropriate when it comes to private information of people?
Vance Lockton: So, I’ll start with one interesting piece. So, while there’s the general requirement form for consent for disclosure of information, there is actually an exception with our law specifically speaking to debt collection that says that information can be disclosed without consent for the purposes of a collecting of a debt owed to the individual to the organization. So, again, that’s what kind of allows banks to disclose information to debt collectors and things along those lines. Again, that exception doesn’t give organizations carte blanche to disclose any information they wish, to any parties they wish.
And just kind of by way of example we’ve got – one of the things that our office does is publish what we call case summaries. So, just kind of interesting points of law, we put them on our site, it’s priv.gc.ca and I’ll kind of give some links to specific cases here.
An example of kind of the overstepping that we’ve seen is, case summary 2004-282 and we kind of saw that a bank, this happened to be a bank, was calling and complaining this company just to ask in order to start a process of garnishing this person’s wages. But during those calls the bank’s collectors disclosed again much more information than was necessary for that purpose. So, we were given evidence of a voicemail recording that was stated – I’m paraphrasing now – I don’t know what type of company you’re running but given the complainant history of not paying bills I can’t really say I’m surprised by your lack of professionalism.
So, we – hearing things like that, our assistant commissioner at the time recognized in her findings that the debt collector has to be able to disclose some information to an employer when seeking to, for example to garnish a debtor’s wages. But here the bank had gone too far. So, I mean they had revealed the debtor’s payment history, the amount of money owed, the fact that the debtor’s credit card was suspended from future use. And we kind of said none of those pieces were necessary to match the purpose of starting to garnish this person’s wages. So, that’s kind of where we will be looking is, what is the purpose for making a call or making a particular disclosure and is that reasonable first of all? And then second of is the information that’s being revealed beyond that which is necessary to serve that purpose?
Doug Hoyes: So, if I’m a debt collector and somebody owes money and I want to garnishee somebody’s wages, obviously I’ve got to go to court and get a judgment and everything; I can’t just do it. But I mean let’s assume that I’ve done that, I’ve got a judgment I just don’t know where the employer is, I think I found the employer. So, I can phone up the employer and I can say, does so and so work here?
Vance Lockton: Right.
Doug Hoyes: That would be reasonable and appropriate in the circumstances to ask that question.
Vance Lockton: Right and again we have to say just given our roles and oversight body we can’t give, in essence, advance rulings on a particular matter. I mean we kind of have to say it, as I keep saying, the context matters. So, it’s hard to speak in generalities. But yeah, something like that. We’ve seen cases where again, on our site we can point to cases where we kind of say a bank has a customer who’s loan has gone into default. They can’t find him so they call his ex-wife and they call his ex-wife’s lawyer and they call his daughter. Just again, all in an attempt to find this or to be able to locate this individual and again they didn’t reveal anything beyond the existence of a debt and obviously the fact that it relates to this person. And we kind of found that to be reasonable. We kind of said that’s a reasonable amount of information to have disclosed for the purpose of trying to find this person.
Doug Hoyes: So, trying to find a person is one thing, but where in the case you sighted they went over the line was where they started disclosing more information than necessary, such as the guy hasn’t made his credit card payments for years and his credit card’s been suspended and that’s not necessary to track the person down, and therefore, that’s not reasonable in the circumstances.
Vance Lockton: Right.
Doug Hoyes: So, what is the penalty, then? So, let’s say I’m a consumer who has been aggrieved by what you just talked about. I do owe money to a bank and I haven’t paid, but that particular bank has called my employer and released a whole lot of information that they shouldn’t have. What steps should I as a consumer then take?
Vance Lockton: So, if you visit our website there’s right on the front page of our website there’s a link that says “need our help?” And on that site there’s contact for both our information centre if you just want to raise – ask a question to one of our information staff. And there’s also a link to file a complaint under PIPEDA. So, there’s a simple form to fill out that you would just describe the issue that you’re having describe why you feel that there was a problem with the particular disclosure that was made and we would then investigate the matter.
Doug Hoyes: And really yours is, I would characterize it then, as complaint driven organization?
Vance Lockton: Yes, we are a complaint driven organization. We do have the ability to have Commissioner initiated complaints as well. So, if there is an issue that comes to our attention that we haven’t directly received a complaint about, we do have the ability to have our Commissioner initiate a complaint. But generally 95 or more percent of our complaints are ones we receive from individuals.
Doug Hoyes: Which kind of makes sense because it’s impossible for you to be out there watching every single thing that goes on in Canada; you’re not Big Brother, people have to bring these things to your attention in order for you then to take action.
So, I do what you say, I go to the website, priv.gc.ca, I click on either English or French and I click on the need our help button, I fill out the complaint form. Your organization then would investigate it and then let’s take this case that you quoted, the bank obviously was in the wrong. Well, that’s what you decided, your organization decided, so, what happened to the bank, then? What was the upshot of it?
Vance Lockton: So, what happens next at that point, once we’ve issued our findings, we have the ability to go through a few steps. So, what we’re trying to do through our findings and through the complaint process in general, is come to a resolution. So, we are working to ensure that the organization does have the appropriate practices in place; they do have the right consideration of privacy and the understanding of privacy.
Then in the case that we cited there wasn’t a lot of follow up that happened, partially because the debt collectors in question no longer worked for the bank by the time the complaint was finished. However, there is the option, with any report actually, to then take action through the federal courts, whether that’s attempting to recover damages if damages can be established or enforce changes, enforce recommendations that we’ve made. So, the follow up for us, the follow up that we have available at any complainant has available, is immediately federal court.
We’ve also seen a number of instances where our reports are used by individuals if it’s established that they’re aggrieved, that they’ve taken that as a piece of evidence in a small claims court action or in an attempt to reach a settlement independently with the organization that has aggrieved them. Again, those aren’t formal mechanisms; those are just kind of things that we’ve seen happen in the past.
Doug Hoyes: And I would assume that a lot of the success you have is really in the category of moral suasion. That by highlighting this as an activity that isn’t appropriate, I suspect when you go to a big Canadian bank and say hey your collectors are doing that, they’re response is probably to say you know what, that isn’t right, you’re right, we’re going to stop doing it.
Vance Lockton: Right and that is kind of our strongest power. And one of the things that are able to do is we almost have the potential for what we’d call a marketplace impact of we have the ability, following a complaint the commissioner is able to publicly report on the personal information practices of a public or private sector organization. So, should we determine that it’s in the public interest for individuals to understand that this is how this organization is treating personal information; we have the ability to again name – publish the file and name the organization.
Doug Hoyes: And that’s what really brings them more into line, I guess, rather than having some federal court case on it. If I’m a big bank I don’t really want my name associated with something negative. So, I’m probably going to come into line and it’s kind of marketplace regulation I guess, is what it really is. You don’t have to use the courts as much just putting it out there. So, that’s probably a very good model I would think.
I want to ask you about another court case or maybe not a case one of your case files, good old 2015-002, which is referenced on your website. In this particular case there was a company that operated a website and if I understand correctly they republished Canadian court decisions, tribunal decisions, that sort of thing, which contained people’s personal information. And your organization had some issues with what they were doing. Are you familiar with that case and do you have any comments on it?
Vance Lockton: I am. I – funny enough I happened to be the investigator on it.
Doug Hoyes: So you’re very familiar then.
Vance Lockton: Yeah. So, with that case the organization was collecting court documents from what we’ll call more legitimate legal sources and republishing them online. And the primary difference between what they were doing and what some of these other legal sources were doing is that they were allowing those documents to be indexed by search engines.
So, it kind of change the accessibility as opposed to somebody having like a legal researcher kind of going to one of these sites and trying to find case history on a particular issue. Now we are seeing issues where individuals could be just doing a quick search for their own name or search for the name of a friend or what have you. And all of a sudden within the top few results of their site they were seeing their bankruptcy file listed or a custody case or a divorce hearing. A lot of very kind of sensitive interactions with the court system were being published. And to top that off we had this organization that was saying, well if you don’t like that you can pay us a fee and will take that page down off our website so that it no longer appears in the search results.
Doug Hoyes: Blackmail.
Vance Lockton: Yeah, yeah. We try not to use the blackmail, extortion term but it’s kind of – there’s this implication that we try to make that’s essentially what it was.
Doug Hoyes: Well fortunately, I got my own radio show here so I can say whatever I want you see. I’m not limited by any specific rules. So, and the point is, I guess, this was publicly available information. So, if I knew where to look for it I could find it. And your example of a divorce case, so we’re arguing over splitting of assets, child custody, whatever, so a lot of facts have to come out as a result of that. Obviously those are court records the court has them. But that’s totally different from then putting them in to a place on the internet that Google can index them.
Vance Lockton: Right. And we recognize there’s a legitimate reason for these documents to be published in the first place. I mean there is strong rationale for having open courts that publish their decisions so there is that level of transparency and oversight for courts. The Canadian judicial council itself actually said in its rules for making those publications they said the intent isn’t to associate that with search results for an individual’s name. We’re trying to create court transparency; we’re not trying to saddle an individual with all the details of his divorce or bankruptcy for a memorial.
Doug Hoyes: Yeah and so what you’re saying is there’s a big difference between information being published online and information being published associated with my name, online.
Vance Lockton: Right. So, there is a differentiation within our legislation of what’s called publicly available information. The term probably doesn’t mean what most people think it means. So, there are again exceptions to the collection use and disclosure requirement for consent when we’re talking about publicly available information. But that term, that publicly available information, only refers to, very strictly defined to generally things that governments have published so court records or phone book records of things like that. First of all, there’s a limited definition of the term and second of all the exceptions of how that information can be used only apply when that information is used for a purpose consistent with that for which it was initially published.
Doug Hoyes: Got you. Well, that’s very interesting. I’m going to take a quick break here and I’d like to come back and ask you a bit about how social media fits into this. So, we’ll take a quick break and I’ll be right back with Vance Lockton, you’re listening to Debt Free in 30.
Let’s Get Started Segment
It’s time for the Let’s Get Started segment here on Debt Free in 30. My guest today is Vance Lockton, who is with The Office at the Privacy Commissioner of Canada.
So let’s talk practically, then. What advice would you give to consumers regarding keeping their information private? Obviously there’s a whole bunch of information out there, all over the internet. You can’t keep everything private, but what are some basic general principle advice you would give people to keep your information private?
Vance Lockton: So, I think that’s actually a very important question. I was kind of looking through some of the back issues of this show and I kind of saw your episode 57 as far as I saw was a guy, Blair Demarco-Wettlaufer, who introduced the two of us. And he kind of made the point that even if there were limitations on what debt collectors could do, it doesn’t necessarily mean all agencies are going to follow those; I’m assuming he wasn’t talking about his own agency. But we’ll kind of just give him that one.
So again, I think it’s very important that individuals do take steps to protect themselves while our office works towards ensuring organizations comply with privacy laws. So, we have a number of resources available for individuals on our site and I’ll give a few links to those like our fact sheet on identity theft. But a lot of our advice almost comes down to just that level of caution that individuals should have. And that individuals shouldn’t be afraid to ask questions. I think one of the best protections you can really have is if you’re asked to provide personal information, ask how it will be used, why it’s needed, how it will be shared, how it will be safeguarded. Don’t give out more information than is necessary. And be particularly careful about your social insurance number ’cause that’s a very important key to your identity. So, it’s limiting as much as you can that kind of flow of information is going to be kind of the best possible first step.
The second step I would say is, you know, a lot of – it’s interesting we’re not necessarily talking sophisticated industry specific tools that are being used to locate people. Often it is Google, it is Facebook, so all I have to say is log out of your accounts or go to a library computer or something like that and do a Google search for your name or your name and your city or various combinations like that and see what comes up about you. If it’s information you’re not comfortable with that comes up, if you’ve posted it try to take it down. If somebody else has posted it, ask them to take it down. If it’s on a website, you don’t know who’s posted it, ask that website to take it down.
So, kind of going through those steps and just kind of being very aware of what’s out there about you and not being afraid to ask questions about how your information is used and simply making those requests saying you know what website, I’m not comfortable with that information being up there, would you mind taking it down? There are a lot of reasonable people in this world who will make that decision and say yes, that’s fine, I understand that I’ll take it down for you.
Doug Hoyes: Well and you’re right a lot of the stuff that’s posted I posted it myself. So if it’s something in my Twitter feed or something then I can obviously take it down. And you’re right show 57 was the one where we had Blair Demarco-Wettlaufer on and he is a collection agent who he did explain how he uses things like Google to find people. So, it is pretty basic stuff that leads people to us and that’s why you got to be aware of the obvious stuff. You did mention social insurance numbers and that’s something you shouldn’t give out. A social insurance number is only for the benefit of the Federal government. Am I correct on that, that’s what it exists for?
Vance Lockton: Right. So, it essentially exists as a reference for the Canada Revenue Agency. So, the idea is basically that is the primary reason why a bank they have to request your social insurance number, things like that is they’re doing reporting to Canada Revenue Agency.
Again, we don’t get – we have our guidance about – for organizations about collecting social insurance numbers and things like that. Unless for us, we’re kind of saying for organizations, unless you can establish that you have a clear legislative need to be collecting that information, then it needs to be either not collected or very clear that it is optional for that information to be collected.
Doug Hoyes: Yeah if I’m filling out a cell phone contract, that has nothing to do with Revenue Canada, taxes, anything like that. Probably something I shouldn’t be divulging. Obviously, if I’m going to the bank to open a bank account and they’re going to be paying me interest, which is going to be taxed, then obviously they have a need for it. So, I think you’re absolutely right, ask questions, that is probably the most basic advice there is. And if we all did that a lot more frequently we’d probably be able to stay out of a lot more trouble. I really appreciate you joining me today, Vance. Thanks very much for being here.
Vance Lockton: Thanks for having me.
Doug Hoyes: Thanks for being with me. That was the Let’s Get Started segment here on Debt Free in 30. I’ll be back in a moment to wrap it up.
Doug Hoyes: Welcome back, it’s time for the 30 second recap of what we discussed today. On today’s show Vance Lockton from Office at the Privacy Commissioner of Canada gave us some examples of the meaning of the phrase reasonable and appropriate in the circumstances as it relates to the privacy of personal information in Canada. That’s the 30 second recap of what we discussed today.
I was glad to have Mr. Lockton on the show today because he shared an interesting perspective on how information you may think is private may be used by various organizations, including bill collectors. I completely agree with his advice. Whenever anyone asks you for personal information, ask how it will be used and don’t ever give out more information than is necessary. A social insurance number, for example, is an identifier number for Canada Revenue Agency. So, there is never a reason to give your SIN out over the phone to anyone. It’s private information and you should keep it private to protect your identity.
That’s our show for today. Full show notes are available on our website, including links to everything we discussed today, so please go to our website at hoyes.com, that’s h-o-y-e-s.com for more information. Thanks for listening. Until next week, I’m Doug Hoyes, that was Debt Free in 30.
It makes sense why if you carry a balance on your credit cards you must give up your credit cards when you file bankruptcy or a consumer proposal. Credit card debts are included in the bankruptcy, so the credit cards are also cancelled.
There is no sense in continuing to struggling with minimum payments because you want to keep the convenience of a credit card. It is possible to eliminate credit card debt by filing a bankruptcy or consumer proposal.
But what happens if you have a credit card that has no balance owing? Are you still required to surrender that card?
The short answer is yes.
Section 158(a.1) of the Bankruptcy & Insolvency Act states that a bankrupt shall:
deliver to the trustee, for cancellation, all credit cards issued to and in the possession or control of the bankrupt
The law is clear. You are required to surrender your credit cards, whether or not there is a balance owing.
Why does this law exist? Should it not be up to the credit card issuer to decide whether or not you can keep a credit card with a zero balance owing at the time of your bankruptcy?
Yes, it should be their decision, and that’s the point. The trustee is required to notify all creditors of the bankruptcy, so if the zero balance credit card is not listed, the lender may not immediately be notified of the bankruptcy. As a result, if you use your credit card, they could end up lending to someone who is bankrupt without even knowing it. That’s not fair, because they were not given an opportunity to make their own decision.
But what if you need a credit card while you are bankrupt, for travel, or work purposes, or to make on-line purchases, or to book a hotel room? Doug & Ted talk about how you can manage without a credit card during bankruptcy:
Ted: It’s almost impossible to live in our culture without a credit card. So if you’re speaking with anyone, a credit counsellor, debt consultant, a trustee, one of the things you want to ask them is, ‘how am I going to re-establish myself? How am I going to live?’
Doug: ‘If I have to travel, if I have to go with my son’s hockey team and book a hotel, how am I going to do that if I don’t have a credit card’. It’s a valid concern. My advice is well, while you are bankrupt or in a consumer proposal it’s more difficult to have a credit card, so what you’re generally going to want to do is have another family member for example get a credit card and put you on as a supplementary cardholder, you can get a prepaid credit card.
Ted: Prepaid credit cards is like a gift card. You go load it up with money it looks just like a Visa or a MasterCard and you can use it the same way. It’s not a great solution long term but it will immediately get you the credit card that you want. The better solution is something called a secured credit card. Where you put money on deposit, the lender will give you a credit limit on your credit card equal to what the money is you have on deposit, as long as you make your monthly payments the deposit is intact. Usually within 18 to 24 months they release your deposit back to you and so not only have you still got the credit card, but you’ve got money from the savings now returned to you in 2 years that you can use for something else.
Doug: There are always strategies to deal with whatever the issues are, but you’ve got to focus though on is the big picture. The big picture is you’ve got a huge amount of debt that you’re not able to service, and so by filing a bankruptcy or a consumer proposal you can get rid of that debt, that’s what gives you the ultimate fresh start.
First, you could ask your spouse, a family member or a friend to get a credit card with a small credit limit and add you as a supplementary borrower. The primary borrower is responsible for the card, so you want to be sure the card is paid in full each month.
Second, you could get a secured credit card or a prepaid credit card to use in emergencies. Some lenders require you to be discharged from bankruptcy before they will lend, but in some cases it is an option.
Ultimately, there are no secrets. Even if you “forget” to disclose a zero balance credit card to your trustee, the credit card probably appears on your credit report, so if any of the other creditors look they will probably see the card and start asking questions, so the best course of action is to surrender all credit cards.
If you are struggling with debt, contact us today for a free consultation. You don’t have to decide right away but getting a debt assessment will help you find options that can give you a fresh financial start.
Thirty years ago no-one had a cellphone. Today, almost everyone in Canada over the age of 10 has a smartphone for on the go and cable and internet service at home. So do you lose those services if you file a consumer proposal or bankruptcy?
Are you up to date on payments?
The truth is the answer doesn’t boil down to technical legal interpretation of how debts are treated in bankruptcy, but rather, individual company policy. While neither Rogers nor Bell have published an official policy that I know of, I have had informal off the record conversations with a number of Rogers employees and here’s what each one of them has said:
If you are up-to-date on your payments, and if you want to keep your existing service after filing bankruptcy, you can keep your service.
This was not always the case. Many years ago we found based on our experience that it was Rogers’ policy to terminate your service if you filed bankruptcy. However, as we all know, company policy can change.
Here’s some background information:
A creditor is someone to whom you owe money. If your Rogers bill is due the 15th of the month, and you go bankrupt on the first of the month, you owe for the service that you won’t be paying for until the 15th of the month. The same is true for your hydro bill, your gas bill, and even your monthly rent.
In the past, Rogers would cancel your account and then you would have to apply to open a new account, and it would be up to Rogers to decide whether or not to give you a new account. Because you were bankrupt they considered you to be a higher risk, so they could choose not to reactivate your service or they could request a security deposit as a condition of resuming that service.
So what changed?
Rogers realized that that was a lot of work for no good reason. By terminating your account you would simply go to Bell or TELUS or some other provider, and Rogers would lose a customer, forever.
That’s why today if you are up to date with your payments, Rogers doesn’t even consider themselves to be a creditor in your bankruptcy. They don’t even want to be notified of your bankruptcy. If your payments are current they generally won’t file a proof of claim with the bankruptcy trustee.
That just makes good business sense. You are not in arrears, you want to keep your service, and Rogers wants to keep you as a customer, so everyone can carry on as normal.
Can you include Rogers in a bankruptcy or consumer proposal?
Yes, if your service was already cancelled, or if you wish to cancel your service, Rogers can be included in your bankruptcy, just like any other creditor. In fact, based on our data, approximately 97% of the time that Rogers appears as a creditor in a bankruptcy it’s because the service was already terminated.
Perhaps you have the most expensive cable package and you can no longer afford it. If you go bankrupt you can cancel the service and all cancellation charges are included in the bankruptcy.
NOTE: If you plan to cancel your service, cancel it before you file for bankruptcy. They will send you a final bill that will include any cancellation charges. This bill becomes a debt from before you filed, so if you want to cancel your service, plan to do it before you go bankrupt so that all cancellation and other charges are included in your bankruptcy. It’s important to ensure repayment of this debt to avoid collection on a Rogers bill.
What if I want to downgrade my service?
Perhaps you are on an expensive contract and want to downgrade your service when you go bankrupt. You can call Rogers and ask for special treatment. It is my understanding that they have a special customer care group that will work with you, and based on your situation, they may be able to switch you to a less expensive plan. There are no guarantees, but your chances of successfully negotiating a revised arrangement with Rogers are increased if you contact them immediately upon filing bankruptcy and explain your situation.
What’s my advice?
At Hoyes Michalos we view consumer proposals and bankruptcy filings as a fresh start. Getting out of debt is the first step. However, your financial problems may be caused, in part, by expenses that are too high, so reducing your cable, cellphone or internet service may be a wise decision for your future as well. Now is the time to make a personal budget and determine if cost cutting is in order.
If you decide to keep your existing service, if possible you should ensure that your payments are up-to-date before you file. That’s the same advice I would give you with all of your monthly expenses like rent, utilities and insurance. If you are up-to-date it is likely that you can keep your service.
Finally, don’t take my word for it. While I’m passing along information based on what I know today, I don’t speak for Rogers, I don’t determine their policies and as we all know, policies do change. If in doubt, give them a call, explain your situation, and work with them to decide on your future service options.
If you are struggling with late payments and overwhelming debt, we can help you eliminate your debt and start fresh. Contact us today for a free, no-obligation consultation. We’ll review your creditors with you including any utilities or service and explain how these will be affected.
Ontario increases protection for cars, furniture and houses effective December 16, 2020
Ontario is bringing into effect increased thresholds for items that are protected from seizure by a person’s creditors, even when they file for bankruptcy. The law that is being updated is called the Execution Act and it sets out the value of exemptions for things like clothing, furniture, tools of the trade and your car. In other words, it defines what assets you can keep when you declare bankruptcy in Ontario.
Ontario Protects A Portion of Home Equity
As of December 1, 2015, section 2(2) of the Execution Act states that states that the debtor’s principal residence is exempt from seizure if the debtor’s equity does not exceed $10,783. However, Section 2(3) states that if the equity exceeds $10,783 the principal residence is subject to seizure.
What This Means For People Filing Insolvency
Under the pre-December 1, 2015 rules, if you had equity in your house, your bankruptcy trustee was required to “realize” on that equity. (In simple terms, “equity” are the funds generated after a house is sold and the mortgage and all other selling expenses are paid). So if you had $5,000 in equity, you could perhaps arrange for a friend or family member to “purchase” the equity in your house from the trustee, so you could keep your house.
In most cases, if you have equity in your house, a consumer proposal is a better option, since you can make a plan with your creditors to make payments over a period of time as long as 60 months so that you can keep your house.
After December 1, 2015, a trustee will not be able to seize your principal residence if the equity is $10,783 or less. So, if you have $8,000 in equity, the trustee cannot seize it, so you could go bankrupt and not pay your bankruptcy estate anything for that equity.
However, if the equity is greater than $10,783, the trustee must realize on the equity, so again a consumer proposal is often the preferred option if you want to keep your house.
Consumer Proposals and House Equity
When a person files a consumer proposal, the amount they are required to offer their creditors is based in part on how much equity they have in their home. This new $10,783 protection will reduce the amount of equity available to the creditors by up to $10,783, so it may result in lower proposal payments.
It should also be noted that this exemption is for a principal residence, not investment property or a second property such as a cottage or vacation home.
Existing Exemption Limits Increased
In addition to adding a home equity limit, existing bankruptcy exemption limits in Ontario are being increased. The new limits under the Execution Act will be as follows:
PRE DECEMBER 1, 2015
AS OF DECEMBER 1, 2015
Necessary and ordinary apparel – $5,650.
Necessary clothing – no limit
Household furniture, utensils, equipment, food and fuel – $11,300
Household furnishings and appliances – $14,180
Motor vehicle – $5,650
One motor vehicle – $7,117
Tools of the trade $11,300 (farmers $28,300)
Tools of the trade $14,405 (farmers $31,379)
Personal property prescribed by the regulations – no amount prescribed, therefore $0
Principal residence – no amount prescribed, therefore $0
Principal residence – $10,783 seizure restriction, not an exemption
It is important to remember that in addition to these exemptions, most life insurance products are protected under the law, as are funds held in an RRSP for more than 12 months.
Exemption Regarding Jewelry and Non-clothing Possessions May Be Removed
In addition to changing the prescribed limits, it is important to note that the language of most exemptions is also changing. Some changes will have little affect and serve to clarify exemptions already in place. For example the new act specifically states ‘one’ motor vehicle rather than a motor vehicle.
The Execution Act now states that there will be no exemption limit for necessary clothing. However the wording has been changed to exempt ‘necessary clothing’ rather than ‘necessary and ordinary apparel’. It has been general practice in a bankruptcy that, under the previous legislation, reasonable jewelry such as a wedding ring and small personal accessories would be included as ordinary apparel and as such most trustees considered these assets to be exempt from seizure. The narrowing of the wording in the new provision may serve to limit a bankrupt’s ability to exempt personal items from seizure. Despite the addition of wording around ‘personal property’ the new changes provide no prescribed list or limit amounts for this category and this may mean that, at present, no such exemption exists.
It is our position that bankruptcy is meant to be a fresh start and should not be punitive. It does not seem reasonable to require a bankrupt to surrender small personal items of jewelry, such as a wedding ring or family heirloom. In addition, in most cases, the recovery value of these assets would be minimal, significantly below the original ‘retail’ value.
Our approach, pending clarification of the legislation or the inclusion of additional prescribed items, will be to include the value of assets such as jewelry, toys and other small personal items as part of the monthly base cost payments made by bankrupts into their bankruptcy which means that for those with basic jewelry, with little realizable value, the cost of bankruptcy remains unchanged with us. In the meantime, we have contacted the Attorney General to request that basic personal property, like a wedding ring, be exempt from seizure in a bankruptcy.
If You Have Home Equity Does A Consumer Proposal Still Make Sense?
Prior to the new legislation, consumers with significant unsecured debt could safeguard their home equity by filing a consumer proposal and offering the equivalent ‘value’ to their creditors as part of their settlement terms. Does the new home equity exemption mean that consumer proposals no longer make sense if the equity in your home is less than $10,783?
Consumer proposals will still be a better solution for many individuals, especially those with surplus income payments in a bankruptcy. In fact, prior to these changes, 42% of all homeowners who filed a consumer proposal had no equity in their home. In addition, similar legislation protecting homeowners equity has existed for many years in other provinces across Canada and proposals have continued to increase in popularity in those provinces due to other inherent benefits of a consumer proposal over other debt relief options.
To get a complete assessment of your situation, and what may be protected under the law, please arrange for a no charge initial consultation with a local, licensed Hoyes Michalos trustee.
It’s Financial Literacy Month here in Canada and to kick it off I’ve invited retired math teacher of 30 years, educational speaker and publisher, Dave Mitchell to the show to talk about whether we should be teaching financial literacy in the high school classroom. Dave and I go back and forth about whether teaching financial skills to students who won’t use it for many years is productive, or whether we need to focus on teaching skepticism instead.
The Education Goal Is About Planting Seeds
I ask Dave whether there is a point to teaching things like RRSPs, RESPs and investing to high school students who will most likely forget the information once they leave high school. Dave explains that although we don’t always remember the exact formula or details of a lesson, having a basic understanding that it exists, is enough. He points that
I think what you’re doing, Doug, is planting a seed. And if you introduce students to this and you spend a little bit of time, you discuss it, you look at it, analyze it and you give them a sense of confidence that they actually have a grip on it, then later in life, they may not remember specifically how to do those calculations in detail, but as you well know with things like YouTube…I think you can really fly with some of these things.
Dave’s point is that if you give students the confidence to understand a concept, they can reference things like the internet later in life to remember how to do it, and therefore, you’ve planted a seed that has lasting effects. In his experience, Dave asserts that
I’ve just seen too many lights come on over the the time that I was teaching in the classroom and students saying thank you for showing me this because I have an understanding now.
Students Should Learn To Be Skeptical
My personal opinion is that the most important thing that we can teach students in high school is to think critically and to be skeptical. If students have the ability to ask questions, do their research and avoid taking information at face value, those skills will help them in their financial future.
Dave agrees with me that it’s important for students to check facts and ask questions and tells me about one student who went with his parents to purchase their car. In the classroom they had learned how to calculate car payments and when the salesman told his parents how much the car would cost each month, the student decided to run the numbers for himself. It turns out that the salesman’s calculations were off and the student ended up saving his parents $15 a month over the course of their payment term.
Dave explains that because the student learned how to do the calculations in school and he was able to think critically about the information being given, “he knew how to figure it out [and] that knowledge was power to him”.
Are We Doing Enough?
We established that teaching students to think critically and to be skeptical in the real world are important skills to learn. But are we doing enough?
Dave points out that
…it would be important for people involved in education to have, to continue to have, a good overview and a look at what’s in the curriculum from time to time, and then saying, are we keeping up? Should we be adjusting? Should we be doing more? And my feeling is we could probably do even more.
I believe that teaching financial math is important. Learning how to calculate interest and understanding concepts like compound interest are necessary for figuring out loan payments and the kinds of debt that they students will inevitably take on as adults. That way, even if students forget how to calculate interest, they may remember why it’s important to do the calculations and can fill in the gaps using sites like YouTube or Khan Academy. Dave believes that giving students the confidence to learn financial concepts in school will allow them to use tutorials on these kinds of sites to teach themselves the calculations that they may forget and take responsibility for their own ongoing education, for the rest of their lives.
Listen to the full show for more information about:
How to calculate a loan payment.
What financial concepts are currently being taught in high schools.
Why financial literacy is important.
Read the full transcript with Dave Mitchell below.
Do you think we should be teaching financial literacy in high schools? Does it matter that students might forget how to do the math or is it most important that they simply understand that those concepts exist? Let us know your thoughts by leaving a comment below.
Most of the time here on Debt Free in 30 I have guests on that I agree with. I may play devil’s advocate and ask questions that sound like I’m disagreeing with them, but most of the time I’m on the same page as my guests. Not today. Today my guest is a guy I’ve known for many years. He’s a really good guy, really smart but there is a topic we disagree on and that’s what we’re going to talk about today.
As many of you know, November is financial literacy month here in Canada and one of the topics that comes up every year is how should we teach financial literacy in schools? I think that’s the wrong question. I think a better question is there any point in teaching financial literacy in schools? I have two teenage sons; both of them are in high school. And I was once a teenager in high school myself, so I have a vague understanding of what it’s like to be a teenager. If you’re a teenager in high school, you most likely don’t have a full-time job, you don’t have much money and you don’t have access to credit. So, is there really any point in teaching a high school student about RRSPs and RESPs and investing?
I’m not convinced that teaching those concepts to someone who may or may not use them for ten years has much benefit. It’s like learning French, if you don’t use it, you lose it. How many of us took years and years of French in school, but can hardly speak a word of it today? Most of us I bet. And that’s my opinion on teaching financial literacy in schools.
I agree that as Canadians, our level of financial literacy is appallingly low. The facts speak for themselves. We’re carrying record levels of debt. I see an increasing number of people getting payday loans, which are almost always a horrible idea. There’s almost always a better option. And yet people get them. It may be desperation, but in a lot of cases it’s a lack of knowledge about how interest rates work. As a society we lack basic financial knowledge, so teaching it is a good idea.
I’m just not convinced that teaching it to high school students, who can’t apply it right away, is a useful exercise. But, maybe I’m wrong. I’m not a high school teacher, so let’s ask someone who actually understands the world of high school education. Let’s get started by welcoming my guest. Who are you and what’s your background?
Dave Mitchell: Hi Doug, good morning. My name is Dave Mitchell and I taught high school math here in Kitchener for 30 years at Grand River Collegiate and at Cameron Heights. And these days since retiring from the classroom in 2004, I speak at educational conferences in Canada and the United States sharing ideas with teachers on how to make math more engaging and interesting for students. I also am involved in educational publishing and I have a series of booklets, CD’s and DVD’s, all of which are based around that same theme of making the study of math more engaging for students.
Doug Hoyes: And obviously math has a lot to do with what we’re talking about today. And what I’m going to do is put in the show notes over at hoyes.com, links to all the stuff that you’re talking about so if people are interested in finding out more about what you’re talking about, the stuff that you’ve done, they can find it there.
So, let’s, before you and I get into a fist fight here, let’s start with the basics. What is being taught in schools today? And I understand that you can’t give me an overview of everything that’s taught all over North America. But, why don’t we concentrate on what is being taught in Ontario, which is probably comparable to other parts of the country with respect to financial literacy. What is in the curriculum now to the best of your knowledge?
Dave Mitchell: Well, historically, what happened was the students who were not in the upper academic stream, got most of the financial part of the curriculum presented to them, and the students who were in the straight academic math stream got very little of it, which seemed odd because students, as you know, are always asking the question why should we learn this? What value does it have? And actually the application of math in financial matters is one of the most common, everyday, hands on you can get a grip on it type of things you can imagine. And it’s a perfect response to students. Let’s take an in-depth look at this so you understand the nuts and bolts of financial math calculations, simple interest, compound interest, annuities. How are these things actually worked out? Where do they come from? How are the calculations done?
And my experience was that students loved and appreciated that aspect of mathematics, it was something concrete, something they could get a grab on. And years ago, when we had grade 13, and I’m going back now many years, within grade 13 there was a course called math of investment. And it was one of the best courses in all of high school math for hands on understanding of the way financial calculations are made. And the students who took that course loved it and many of them went on to be – to take studies relating to financial math, accounting and the like, that sort of thing. They were so intrigued by the calculations, the finance of math that they were motivated to go and do it. And sadly, that course got dropped from the curriculum. And I remember thinking to myself, what a mistake, what a mistake.
So, that’s what happened historically. Just checking with a friend of mine who’s a math department head here in town, a week or so ago in preparation for speaking with you today, I found that there is still math finance discussions in the basic math and applied math courses and there is some in the academic math. But probably it would be such that you could argue there’s room for a lot more.
Doug Hoyes: And so, if I’m a high school student, you’re talking about two different steams here, the basic stream and the advanced stream I think is what you’re calling them?
Dave Mitchell: Well, we sort of have a math for everyday life and the terminology changes from time to time. But it’s a math for everyday life, and then applied math, and then an academic math.
Doug Hoyes: So, there’s kind of three different categories to it.
Dave Mitchell: Right.
Doug Hoyes: And so math for everyday life, what are we talking about?
Dave Mitchell: I’m sure there it would be calculations that are fairly straightforward and every day, like how does simple interest work? And there’s an uncomplicated or simple formula for simple interest as you know. And the students would also look at compound interest. And with calculators being the way they are now, it’s fairly straightforward to show a student how to do those calculations.
So, you could say if I’m investing so much money for such a length of time at 10% per annum compounded semi-annually, how much do I end up with? They would also look probably at payments, car payments and the like. And I would think more likely they would work from tables. I’m not sure on that one but I think they would work from tables. Say in the math for everyday life to figure out a rough idea of what a mortgage payment would be or a car payment would be. It wouldn’t be too intricate a mathematical look at it, but it would be enough to get a sense of what these things would turn out to be.
Doug Hoyes: And is that something every student in high school would get or just people in a certain steam?
Dave Mitchell: Well, once again, my understanding there is that certainly in math for everyday life there would be a look at it at a very fundamental and everyday level; in the applied math I believe that’s the case. And in the academic math I think there is a look at it and probably in some cases a more advanced look at it. I know my friend who is the math department head also teaches IB math, The International Baccalaureate Math, and he said there they have quite an in-depth look at the mathematics of the financial calculations for annuities and the likes. So, there they would really be getting into some sophisticated math and they have at least a discussion for, I would imagine, several weeks on how these things work.
Doug Hoyes: So, there is some stuff being taught today. There might not be a huge amount of consistency. It may depend on what program, what courses you’re taking. So, let’s get back to my basic point which is well isn’t that all really kind of a waste of time. So, simple interest, okay I get that. I think that’s a concept you can teach someone and they will remember ’cause it’s not that hard, it’s simple that’s why it’s called simple interest. But what about the more complicated things? When you try to apply those to real life if it’s something I’m not going to be using for years and years and years, is there really any point teaching that?
Dave Mitchell: I think what you’re doing Doug is planting a seed. And if you introduce student to this and you spend a little bit of time, you discuss it, you look at it, you analyze it and you give them a sense of confidence that they actually have a grip on it. Then later in life, they may not remember specifically how to do those calculations in detail, but as you well know with things like YouTube, you can simply search for a tutorial on “calculation of compound interest” for example. And somebody there would present a tutorial that would be a good discussion of how these discussions are made. And if the seed had been planted and now you’ve got the refresher at your fingertips through YouTube I think you can fly with some of these things.
Doug Hoyes: So, do you need to plant the seed? ‘Cause I totally agree with what you’re saying about modern technology and I know, one of my sons in particular, learns all sorts of stuff on YouTube. He’s a visual learner, that’s how he does it and he tells me all sorts of stuff. He’s way over my head, I have no clue what he’s talking about. So, maybe that’s the answer. What we really need in all areas of life is a just in time learning system. So, okay I’m now old enough that I can go out and buy a car, finance a car, well maybe now’s the time then that I go on YouTube, find some videos, learn it and be ready to go. Does it really matter what I learned in high school ten years earlier?
Dave Mitchell: Well, life goes by so quickly. And you can easily miss the boat on something. And let me give you a concrete example. A friend of mine, a fellow who grew up with me here in town, who has had his working career in New York City, after he had established his career and was working for a number of years, he learned by chance that there was an opportunity to put away money from his paycheque on a regular basis into a deferred compensation fund.
And over the years that he was contributing to this, this grew to oh a sum of about $400,000 that he will be able to enjoy and use throughout his retirement. And he said the only way he even knew of the power of this, and the power of say something like compound interest, was not because he had studied it in school. He regretted that he had never even learned about it when he was in high school, but he learned from a friend. Then when he started to investigate what went on when you have compound interest working in your favour, he was astounded and he started telling his friends. And some of them, even though they had only say ten years to go in their working career, started to put money aside and were absolutely amazed at what it produced. And they had the regret that they didn’t know earlier that this was available and the power that it had.
Doug Hoyes: But if he had learned it earlier, would it have made an impression on him? I guess we don’t know the answer to that.
Dave Mitchell: No, we don’t know. But he’s the type where that seed could have made a huge difference for him. And he told me, had I known about this at the beginning of my working career, he said I would have been able to grow that fund into a million dollars rather than $400,000.
So, once again, there are lots of things that one might study in school at any level and you have a hard time connecting A to B. You know, I learned A and therefore I can do B and it helps me accomplish C in my life. However, learning – I think all learning is of value and some of these things that are practical that students seem to be clamouring for, I think that’s a real key to sort of grab hold of them and say look there’s more to this math than just figuring out how to solve a quadratic equation or to solve a geometric series or to understand a geometric series you can start applying it and then look what this can mean over the course of your life. It can make a huge difference.
Doug Hoyes: So, the gist of your argument is, education in whatever form it is, maybe isn’t the end goal, it plants a seed and that seed leads to something else, which leads to something else, which leads to something else, and therefore, you can’t draw a linear relationship to it. So, if we were teaching more of this stuff in high schools, elementary schools, whatever, then at least by the time we got to later life, the light bulb might come on and we might go yeah I have some vague recollection of something like that. And therefore, it does have value. So, I’m taking a much too simplistic view of it is what you’re saying.
Dave Mitchell: Well, I think so. If you start with simple bank accounts and deposits versus withdrawals for young students and how to write cheques, even though cheques are going out of fashion, but you can have quite a discussion even with very young kids about budgeting and that sort of thing and start it off. And then I think by high school age it is appropriate to know the basics of these things that we’ve discussed and at the level at which the student can understand and deal with mathematical concepts, the complexity of what you look at could increase.
And I’ve just seen too many lights come on over the time that I was teaching in the classroom and students saying thank you for showing me this because I have an understanding now.
And I had an example of a grade 13 student, once again this is ancient history, but here’s what happened: we had looked at how to calculate mathematically the amount that a car payment should come out to each month, you know, given all the parameters. So, this student went along with his mom and dad when they were looking at purchasing a car. And the salesperson said okay here are the conditions and your monthly payment should work out to $250 a week and this was a while back. So, the student hauled out pencil, paper, had the calculator and went through the calculation and said no it should be $15 less a month. And the person, who was the salesperson, said no, no, no I’ve checked in the table here and my calculation is correct. So, the student was firm about this and the fellow went back to his tables and said I’ve made a mistake, you’re correct. So, the student came in the next day and was so happy to report that he had saved his parents $15 a month over the course of the payment schedule for this car. And he knew, he knew how to figure it out, that knowledge was power for him.
Doug Hoyes: And it was something that was applied really quickly. So, well okay let me throw a different concept at you, then. I agree that understanding how to do the math is important. And understanding, you know, the difference between simple interest, compound interest and those are mathematical concepts. But I think what’s even more important is the ability to think. And I think the illustration that you gave, just illustrated that. The student was sitting there and he was skeptical. He didn’t say oh well this salesman knows what he’s talking about so I’m going to just keep my mouth shut, he must be right. The student in fact said the exact opposite. Well, let me double check.
And so, I think if I was designing a financial literacy program in school, yes I’d want to teach them math, but even more importantly I would want to teach skepticism. And I don’t know if that’s the word for it or not but not taking things at face value. When I’m looking at a proposal from a salesman on a loan, I should have the wherewithal to ask questions, question assumptions and whatnot. Am I right on that?
Dave Mitchell: I would certainly agree. And in general, I would hope that education produces a healthy amount of skepticism in the sense that one does not take something without thinking it through and perhaps checking facts. And with the availability of the internet, now checking facts and figures, that’s so much more readily available than it was years ago. But yes, no you’re certainly correct on that. I would argue that’s part of it.
Now I have a very interesting anecdote too about a personal situation that happened years and years and years ago when – my wife and I have three children and they were all very young. We had somebody selling insurance come to the door, knocked on the door. And I ended up having about a three hour discussion with this person and the family allowance cheque, he had a plan. Take this family allowance cheque and deposit, it was either all or some of it, every month and here’s how much money you would have by the time your student reached age 17, 18 to go to post-secondary school.
And I looked at the calculations and they weren’t making sense to me. So, I did what my student had done, hauled out the calculator, took a pencil and paper, made the calculation and he was incorrect. He was incorrect. And he said, no, no, no I’m correct. Here are my tables, it says right here, this is what the result is. And I said, no you’re interpreting your tables incorrectly. And I showed him why he was interpreting the tables incorrectly. He was inadvertently adding an extra year to the calculation. Just the way the tables were set up, it wasn’t fraudulent, he was just mistaken. And when I showed him the mathematics of why it worked, he was amazed. And this was a young person at the beginning of his career and I said have you not studied this aspect of financial calculations? He said no.
So, I spent the next two hours volunteering to teach him. I didn’t have to do it. I just wanted to do it. And he thanked me when he left the door. I didn’t end up taking him up on his offer, but I felt kind of good because I thought well, for the rest of his career; at least he will be interpreting his tables correctly because he knows the math behind it.
Doug Hoyes: And that’s pretty important. Well, so just to conclude then what you’re saying then is, yes this is important and even though it may not flow all the way through life, specifically in that format, you’re planting a seed at the educational level and if that also leads to a healthy skepticism that’s a good thing. And that’s really what we need in our school system.
Dave Mitchell: Yes, I would agree with that and I would also think that it would be important for people involved in education to have, to continue to have, a good overview and a look at what’s in the curriculum from time to time. And then saying are we keeping up? Should we be adjusting? Should we be doing more? And my feeling is we could probably do even more.
Doug Hoyes: There’s always more than can be done ’cause the world does change very quickly. That’s an excellent note to wrap up the segment. Dave, thanks very much for being here.
Dave Mitchell: You’re welcome Doug, thank you.
Doug Hoyes: Thank you. I’ll be back with the next segment right here on Debt Free in 30.
Doug Hoyes: It’s time for the Let’s Get Started segment here on Debt Free in 30. Every expert agrees that the level of financial knowledge in Canada could be better. That’s obvious from the massive level of debt that we carry, both as a country and as individual Canadians. I suspect that every one of us, myself included, has made bad financial decisions and often the cause of those bad decisions is a lack of financial knowledge. So, perhaps teaching financial concepts is a good idea.
So, what’s my opinion on how we should teach financial literacy in high school? As I said at the start of the show, I don’t see a lot of point in talking about retirement savings with a high school student. However, I do think there are two areas where high schools should devote some time to educating students. First, financial math. Understanding interest and compound interest is critical if you want to have any hope in later life of understanding how much interest you’re going to pay on that loan you want to get to buy a car or a house. So, I’ve asked Dave Mitchell to come back. And Dave, I’d like you to give us a quick illustration of how you can do a really rough estimate of what I should be paying on the loan. So, let’s assume I’m sitting there at the car dealership. It’s a used car, it’s $10,000 and the salesman tells me it’s going to be a loan, 10% interest, I’m going to pay it off over five years. Now I can’t do that amortization schedule in my head, but I’d like to get at least close to know ballpark wise what it’s going to be. So, walk me through how you would kind of think that through?
Dave Mitchell: Right, well we try to come up with a benchmark and then work from there. So, if we have $10,000 a year. Sorry –
Doug Hoyes: $10,000 in total is the loan.
Dave Mitchell: Yeah, $10,000 in total is the loan. And we’re paying that off over five years then our principle is $2,000 a year. So, the 10,000 divided by five gives us 2,000 a year. So, if we want to calculate a monthly figure, divide that 2,000 by 12 and we get about $167 a month, just in the principal.
Doug Hoyes: And that makes sense, okay 10,000 divided over five years. I mean really you’re taking 10,000 divided by 60 okay $167 a month. Okay, so I know my payments going to be at least $167 a month but obviously I’ve got to pay interest as well.
Dave Mitchell: Yeah, then we’ve got the interest component. So, just for the sake of simplicity if we look at 10% on $10,000 is $1,000 to cover a one year. And if we divide that by 12, that’s $83 a month. So, if you take $167 and $83, we’re up to $250 a month.
But as we know, that’s higher than what you’re actually going to pay because you’re going to be paying this off monthly. And each month when you make a payment, part of that payment is principal and part of that payment is interest. So, we know that the monthly payment has to be less than $250. And now it’s easy to go to the computer and search for an amortization schedule or an amortization calculator or a loan calculator and check out the numbers and I believe you’ve done that.
Doug Hoyes: I did that and the actual number is $211.
Dave Mitchell: Right, so things are making sense. We know it can’t be $250 or higher. It’s got to be less than $250. $211 seems reasonable and I think what people could do is once they’ve got that sort of benchmark upper limit of $250, they could on their own, go to the computer and do a search for an amortization calculator or loan calculator and punch in the numbers. But they’ll have to know how to apply those numbers properly.
So, they’ll have to know their principal is $10,000; their interest rate is 10% per annum or per year. That’s likely compounded either semi-annually or quarterly, and they’ll have to know that. It could be compounded monthly, but I would guess semi-annually or quarterly, probably. And they’ll have to know how long they’re going to – what the amortization period is rather, so, in this case, five years with monthly payments. And that’s what you did and that’s where you came up with – with the help of the computer of the $211 per month.
Doug Hoyes: Yeah and so what we did was a rough estimate while we’re sitting there in the dealership and then we can kind of verify it later. And I guess that’s kind of my point and that’s why I think the second thing you have to teach in school is skepticism. Stated more simply, we should teach students to think and not just blindly accept whatever the person selling us the loan tells us.
So, when you go into that car dealership to buy a car and the salesman says, yeah no problem, we can put you in this car for only $300 a month, do you know what questions to ask? You should be asking what interest rate am I paying? How long is the loan for? What other fees am I paying other than interest? Are there pre-payment penalties, late fees? What happens if I miss a payment? We focus too much on the monthly payment, often, and forget to ask the important questions.
It’s common now to be able to get a seven or eight year car loan. That’s crazy if you’re buying a used car that may only last for three years. You need to be skeptical and ask a lot of questions to make an informed decision.
If I was trying to teach skepticism in school, I’d do it with case studies. I just gave you one. You’re going to a car dealership, what questions would you ask? A 16 year old kid in high school is very interested in buying a car, so understanding the math and the skepticism, I think are very practical skills. But that’s just my opinion. I’d be interested in hearing your thoughts so feel free to comment right on the show notes on hoyes.com.
I’ll be back after this quick break to wrap it up. Dave, thanks for being with me today. That was the Let’s Get Started segment right here on Debt Free in 30.
Doug Hoyes: Welcome back, it’s time for the 30 second recap of what we discussed today. On today’s show Dave Mitchell, who has 30 years experience as a high school teacher, said that teaching financial literacy in high school is very important because even if students don’t remember everything they’re taught, by planting the seed of knowledge in high school, Dave believes that we can equip students for success later in life. That’s the 30 second recap of what we discussed today.
So, what do I think of Dave’s opinion? Well, as I said at the start of the show, I don’t see a lot of point of spending a lot of time in high school teaching kids concepts that they will quickly forget. However, I am willing to concede that Dave’s concept of planting a seed does make some sense. If you’re exposed to concepts like compound interest in high school, even if you don’t fully grasp the intricacies of a calculation, it does at least allow you to know what questions to ask.
Dave’s example of the student who helped his parents when they were getting a car loan is a great story, primarily because the student was skeptical. He didn’t just take the salesman word for it. He knew which assumptions to question, he asked questions, he did the math to back up his thoughts and as a result he got his parents a better deal. That’s financial literacy in action, and that to me is the perfect result, a student who understands the basic math but more importantly also knows when to be skeptical and ask questions.
That’s our show for today. Full show notes are available on our website including links to everything we discussed today including some good loan calculators and amortization calculators and links to Dave Mitchell’s website where he has lots of great resources for math teachers and students. All of those resource are at hoyes.com, thta’s h-o-y-e-s.com. Thanks for listening, until next week, I’m Doug Hoyes. That was Debt Free in 30.
Bonus Podcast Only Segment
Doug Hoyes: It’s time for the bonus, podcast only segment here on Debt Free in 30. Our radio show is only 30 minutes. That’s why it’s called Debt Free in 30 and sometimes we have other things we’d like to talk about so we tack them in here at the end in the podcast only section.
So, Dave, let me ask you a question. I’m joined again by Dave Mitchell who was a high school teacher for 30 years and continues to work in the educational field providing resources and teaching to teachers across North America. So, if you were put in charge of the curriculum with respect to financial literacy, what kind of changes would you make? What would you be doing? What ideas, what thoughts do you have on this whole concept?
Dave Mitchell: Well, one thing that comes to mind is the idea of demonstrating to students that you can learn so much of this now on your own by going to a site like YouTube and you could for example search for “simple interest tutorial”. And there would probably be 50 tutorials or more that come up. And some of them will be quite good.
So, even if you know nothing about financial matters and the calculations involved, you can teach yourself. And it doesn’t matter whether you’re a 14 year old student in grade nine or you’re 35 and you’re working and looking at becoming more financially literate yourself. You can teach yourself.
My wife and I wanted to put in hardwood floors in our home and I decided to do it myself. I learned how by going to YouTube. Found a tutorial, watched it about 10 times, knew all the steps and I did it. And there’s a satisfaction when you learn these things for yourself, too. And I think that would be one thing we can do is make sure students understand, and that adults understand, you can learn yourself. The internet opens all these doors.
Doug Hoyes: And that’s maybe something a little new for us. Because when you and I were kids there was no such thing as YouTube.
Dave Mitchell: Exactly.
Doug Hoyes: When we were young adults there was no such thing as YouTube. And it isn’t a natural thing for us. Well, back in the day I’d go to the library to learn something. Well, nobody goes to the library anymore because everything is on your computer for the whole world. And I guess that’s a piece of practical advice then that you’re giving to people.
Dave Mitchell: Right. And it’s not just YouTube, there are other sites. There’s one for example called Khan Academy. And that is a learning site and you can go there and type in virtually any topic and get a tutorial on that topic. So, the doors are wide open.
Doug Hoyes: Yeah and I’m familiar with that site. It’s a fantastic site. My kids have certainly used it. There’s all sorts of stuff there. So, I guess whatever you learned in school, and the people who are listening to this show have probably graduated from school by now, they may have kids or grandchildren in school. Yes, what you learn in school is important. But I guess what you’re saying it’s even more important that you take responsibility for your own ongoing education for the rest of your life. There are resources out there, make use of them.
Dave Mitchell: Certainly and it’s rewarding. The satisfaction you get when you started out not knowing something and you learned how to actually accomplish something.
Doug Hoyes: It’s pretty cool and with something like YouTube or video learning you can sit there and watch. It’s kind of like being in the classroom only you can pause it, skip around and go back and watch it again until you get it. So, it’s a great resource. Great, thanks for sharing that with us Dave and thanks for being with us today. That was the bonus podcast segment right here on Debt Free in 30.
I read with interest an article recently where a judge in Texas ruled that a debtor was required to turn over passwords to a Facebook and Twitter account as part of his business’ bankruptcy. The creditors viewed the accounts as an asset of the bankruptcy; the debtor viewed it as his personal social media accounts.
This begs an interesting question surrounding personal bankruptcy: If I go bankrupt in Ontario, will I lose my Facebook, Twitter, LinkedIn or other social media account? Probably not.
Personal bankruptcy is a conceptually easy to understand process: your assets are sold, and the proceeds are then distributed to your creditors. In exchange, your debts are forgiven.
Of course, in “real life” it’s not that simple. First of all, there are exemptions that allow you to keep certain assets including basic household furniture, personal effects (like clothing), a vehicle valued at less than the allowable exemption limit, RRSPs and tools of the trade, so unless you have some very valuable possessions, you won’t lose them. In fact, the vast majority of people who file personal bankruptcy in Ontario don’t lose any assets because most of what they own fall within the bankruptcy exemption guidelines.
What about a social media account? Is a Twitter or Facebook account an asset in a bankruptcy? Can the trustee seize it?
In theory, yes. If your social media accounts have value, there is no rule that specifically prevents a trustee from seizing those assets.
In real life, the most important consideration is whether or not your social media accounts have any monetary value. Simply put, is anyone else willing to buy them? If all you do is post pictures of your meals on Instagram to your 20 followers, it’s unlikely that anyone would pay anything for that account. It’s an asset, but it has zero value, so your trustee won’t seize it.
But what if you are the chef at a local restaurant and you post pictures of every meal you cook, and you have thousands of followers? That account may have some value. If I was the owner of a competing restaurant I may be willing to pay something to buy that account.
Or not. If the competing restaurant purchased that Instagram account, the chef would no longer post to that account. He would start a new one, which he can start for free, and it wouldn’t take long for his followers to find him at his new account.
But what about a small business owner who tweets about his company’s products, services, sales and other events to a wide audience of customers? Is that account a personal or business asset?
Social media accounts have what business valuators call “low barriers to entry”. Anyone can register a Twitter, Facebook or Instagram account for free. It’s not difficult, and that low barrier to entry reduces the potential value of the account.
It could also be argued that the Twitter account you use to promote your business is a “tool of the trade”, so perhaps it is exempt. I say “perhaps” because no-one has ever gone to court to argue over the value of a social media account in a personal bankruptcy in Canada, so this is merely speculation at this point. In fact, perhaps a social media account is a personal asset, and therefore, is covered by the exemption for personal belongings. Again, this theory has never been tested in court, so this is all speculation.
In addition to being a licensed bankruptcy trustee, I am also a chartered business valuator, so I know that another concept business valuators use is “personal goodwill”. A Twitter account has value because of the person. People follow Justin Bieber because they want to see what he’s tweeting (I have no idea why, but that’s how it works). If Mr. Bieber’s account is taken over by someone else, its value dramatically plummets. Without the person, there is no personal goodwill.
And that’s why, if you go bankrupt, it is highly unlikely that your trustee will attempt to seize your Twitter, Facebook or Instagram account. Your account is based on you, so without you the account would have minimal value.
Social media evolves very quickly. It is likely that a year or two from now other forms of social media will be invented, and they may have transferable value. At the moment, this value appears to only exist for businesses, not people. There are court cases in the United States where a Twitter account used for business becomes an asset of the company, and it can be sold in a bankruptcy. This is somewhat analogous to a website domain name owned by a business. If the domain name has value, it would be an asset in a bankruptcy. If the Twitter account is a source of business, it may also have value to the business.
So, if you use your social media account for business, and the business is sold, your account may go with the business. However, if you are a person, using your accounts for personal use only, it is unlikely that your social media accounts will have any value in a personal bankruptcy.
Debt Relief Experts
