A flood of letters came through Dana Copper's* mail slot and skated across the floor of her front hallway. The 32-year-old self-employed web designer kept her gaze on her computer screen, trying to ignore them so she could complete a project she desperately needed the money from. Dana knew the letters were from collection agencies. She also knew that this one project wouldn't erase her mountain of debt. "I felt like such a failure," she says.
Dana's debt – totalling just over $60,000 – began with a business line of credit and one personal credit card. Later on, she signed up for an additional credit card that offered travel points, and soon she also got a loan for a new car. At the same time, Dana's small business was not as lucrative as she had hoped it would be. A combination of some legitimate business purchases, a couple of trips (charged to her line of credit), the car purchase and high-interest credit cards fuelled Dana's financial crisis. Dana knew she was in trouble. She asked for a consolidated loan from her bank to pay off the majority of her debt at a lower interest rate. But she didn't qualify. So she turned to a family member for help on creating a budget. This didn't work either, because she was self-employed and paid sporadically by clients. "I would get larger sums of cash when contracts were fulfilled that were dispersed among my debts," she says. But then there would be lag times of weeks, even months, in her income. The reality was Dana simply couldn't pay her bills on time, and her debt wasn't going down.
Last February, Dana asked a trustee in bankruptcy (a professional licensed by the Office of the Superintendent of Bankruptcy Canada) for advice. "I went to her, freaked out, armed with a list of questions," says Dana. "Thankfully, she educated me on my options and let me decide which was more realistic." The following month, Dana decided to declare bankruptcy.
Reality check
Last year, more than 115,000 Canadians took the same step as Dana. This year, there has been a 35 per cent increase in the amount of bankruptcies, and that number is still growing. These stats include what's known as a consumer proposal, or what the experts call "bankruptcy light," in which you work with a trustee who negotiates a payback schedule between you and your creditors.
Sadly, many Canadians are just one step away from bankruptcy, says Robert Powell, a chartered accountant, chartered insolvency and restructuring professional, and a trustee in bankruptcy for financial company AC Poirier and Associates Inc. in Saint John, N.B. A layoff, an inability to claim employment insurance, a divorce or separation, or a failed business venture is all that separates many of us from bankruptcy.
"I never thought I'd be this busy in my career," says David L. Smith, a trustee in bankruptcy with Bromwich and Smith Inc. in Calgary, a city which was, up until quite recently, booming and the job-creation capital of Canada. "We see people living paycheque to paycheque," adds Leo Wynberg, a trustee in bankruptcy in Toronto. "So many people are just one or two paycheques away from disaster."
Page 1 of 3 -- On page 2, learn what alternative measures other than bankruptcy may be viable for a person in financial crisis.
