Decoding the First Insolvency Counselling Session
When a person or pair submits a consumer proposal or an insolvency declaration, the Bankruptcy and Insolvency Act necessitates the completion of two financial counselling sessions with a Licensed Insolvency Counselor.
1. Unpacking The Need for Counselling
Several individuals initially express doubt about financial counselling, questioning the need for their involvement. They may view it as a penalty for incurring excessive debt or feel embarrassed requiring external help for monetary management.
This is absolutely a misunderstanding.
As a part of the financial recuperation of a bankrupt or consumer proposal debtor, financial counselling offers a safe non-judgmental platform to learn innovative methods to handle finances, acknowledge the required changes to achieve financial objectives, and prevent reverting into the same cycle of unmanageable debt.
The financial repercussions, both in monetary terms and impacts on one’s credit report, are significantly greater for subsequent bankruptcies and consumer proposals. Financial counselling is a proactive step to help evade these damages.
2. A Peek Inside a Counselling Session: The Case of Simon and Molly
Simon and Molly are a hypothetical couple who recently filed for joint bankruptcy. Their debt issues began when Simon lost his job. Being the sole breadwinner in the family, the couple started using credit cards and lines of credit to cover their living costs. Their story begins just before their first financial counselling session.
Simon and Molly are anxiously waiting in the lobby. Neither of them knows what to expect. They’re both worried, stressed, and have been struggling to get their household budget back on track. When their counselor Joan enters the room, she offers a friendly greeting and directs the couple to a meeting room where she provides them with a counselling booklet.
3. Breaking The Ice
“How are you both today?” Joan begins, with a smile.
Simon and Molly give each other a glance and then look back at the counselor. “We’re overwhelmed. And nervous,” Molly confesses. “We have no clue what’s in store today. We don’t even have our budget in place.”
Joan’s compassionate smile persists. “Don’t worry,” she reassures. “You’ll get there. That’s what this process is all about. Let’s start with a quick review of your file.”
4. Delving into Money Management
Joan revisits the budgeting worksheet that she’d asked Simon and Molly to fill out before their first meeting. With the couple committing to put more effort for the next meeting, Joan offers tips and techniques to make the process less daunting. She questions them about the methods they have previously used to manage their expenses and offers suggestions for creating a more structured and sustainable budgeting strategy.
5. The Art of Setting Financial Goals
Joan then focuses on effective financial goal-setting strategies – elucidating how financial goals will strengthen their ability to manage money better, how to set clear and attainable short- and long-term goals, and how to use their budget to measure their progress and achieve success.
6. Understanding Shopping and Spending Habits
Joan cautions Simon and Molly.
“Budgeting and money management skills are the foundation for your financial success,” she explains, “but whether you achieve your goals or not will ultimately depend on how closely your actions align with your plan.”
She gives practical examples of how quickly unplanned expenses can derail a budget, and reminds Simon and Molly about the dangers of impulse purchases.
7. Recognizing Warning Signs of Financial Difficulty
“Financial troubles rarely happen overnight,” Joan warns as she passes Simon and Molly a sheet of paper. It’s a list of financial red flags. She asks them to read it over and identify anything they believe may have contributed to their bankruptcy.
8. Navigating The World of Credit
“It’s been a struggle to adjust to only using cash,” Simon admits. “Without credit to fall back on, we constantly feel like we’re on the verge of collapse.”
Joan immediately sympathizes with Simon’s point of view but is also quick to temper her compassion with a word of warning: “Credit is a financial tool designed for a specific purpose,” she says. “And that purpose is never to offset an unbalanced budget.”
9. Looking Ahead
“Do either of you have any questions before we wrap up for the afternoon?” Joan asks.
“I don’t think so,” Simon responds.
“You’ve given us a lot to think about,” Molly echoes. “I’m sure we will have several the next time we meet.”
10. The Journey Continues
Stay tuned for the second installment where we’ll continue with Simon, Molly, and Joan during their second counselling session. They’ll learn contributing factors to insolvency beyond their budget, how to rebuild their credit, and helpful resources that can prevent future financial difficulties.