A True Debt Story
This is the true story of a man who lost his business and fell deep into debt. We asked him to tell his story. These are his words which we've left unedited.
There were many low points for me as I slowly accepted that my company, which I had managed for four years and owned for just one, was going bankrupt.
As I stared out through my glass doors at my employees, a terrible sense of anxiety took hold of me. My business would go bankrupt. Not next month or even next week. It would happen tomorrow.
The worst was the moment when I realized it was going to drag me personally down with it. The magnitude of my situation became clear to me through an email from my bank.
My staff carried on a few feet away with business as usual, oblivious to my circumstances, as I read it.
The bank, which provided me with my operating line-of-credit, informed me that I had until Friday to bring my account back in line, which meant an injection of $45,000. It was Wednesday.
Out of time and options
The consequence for not doing so meant my account would be suspended and my access to funds would disappear instantly. I was further informed that my account would be handed off to a special accounts manager in Calgary who would aggressively pursue repayment.
“You won’t like that experience,” was how the email concluded.
Three months earlier I had taken out a second mortgage on my home to free up $70,000 in working capital. Then, by terrible coincidence, my two largest clients each deferred their spending by a full quarter.
Rather than build the company’s assets, my investment was needed to cover the shortfall instead. I had staff salaries to pay in two days. I had office rent to pay in two weeks. My accounts receivables were pretty much exhausted.
Bankruptcy & birthdays
I hadn't taken a salary myself in three months and, separated with an unemployed wife, I had two households to pay for. As I stared out through my glass doors at my employees, a terrible sense of anxiety took hold of me.
I knew my business was about to go bankrupt. They didn't yet know it, and along with the financial disaster I was facing personally, I also realized I was about to send eight other people out into unemployment. Not next month or even next week. It would happen tomorrow.
I foolishly thought this was rock bottom, that having to lose my company and lay off all my staff was the worst of it. But I had no idea how deep this hole actually went, and over the next few months I was to discover how much more miserable things could get for a businessman personally tied to his business.
I was going to lose my home.
I was going to lose my reputation.
I was going to lose my job and my income.
I was going to lose my life savings, my daughter’s education savings, my retirement plans.
Worst of all, I was going to have to deal with the mountain of debt that had accumulated as I bankrolled my company through the poor months. There was the five-year office lease. The six-figure accounts payables. The $90,000 line of credit. My mortgage, my wife’s rent, my daughter’s school fees. My hydro, Internet and cell phone bills. My credit card balance.
There was major debt everywhere I looked and no respite in sight.
It was Wednesday. I was a successful marketer with a decent reputation, a well-known business, a lifetime of savings, a healthy outlook on life and a handle on my future. In two days, that would all be gone.
My staff would be laid off; the media would get wind of it and it would end up on the front page of the business section in the local paper; the bank would send their henchmen in; my creditors would start circling; my personal account would bleed out; I would be officially – and publicly – ruined.
I remember closing my office door and hiding out of view of my staff. I dropped to the ground and broke down. I was about to turn 50.
When I realized that my business was going bankrupt and my debts were wildly beyond my ability to repay, I did what many people do, I suppose. I panicked.
I set about trying to liquidate whatever I could in an inadequate attempt to resolve some of the debt. I offered creditors service in lieu of payment. I asked for time. I negotiated dubious arrangements to keep the creditors placated.
It was all a drop in a deep bucket. I realized I didn’t know very much about dealing with debt so I went online. I don’t know what I was looking for: answers, advice, or commiseration.
I would go online at 2 or 3 am, during those hours when my anxiety prevented me from sleeping. During the first months after my business ceased its operations, my bed became a place I avoided at all costs.
When I read about the impact a bankruptcy would have on my life and credit rating, I felt sick. I wanted to avoid it, but I didn’t see any other way forward.
I couldn’t bear to lay there with nothing but my thoughts so I sought distraction. And information. I was fishing around for a way forward.
Bankruptcy seemed like a vice to me, a concrete bunker that would save me but would provide cold comfort in doing so. I did the math. I calculated. I suspected that bankruptcy would be my only option so did a lot of reading about that.
When I read about the impact a bankruptcy would have on my life and credit rating, I felt sick. I wanted to avoid that at all costs, but I didn’t see any other way forward.
I estimated the costs. I summarized my assets and debts relentlessly; hoping in vain that simply looking at the figures would suggest a solution. I just didn’t have any knowledge of debt assistance in Canada.
I turn to the bankruptcy trustees
Eventually, this lack of knowledge led me to sit down with several bankruptcy trustees to discuss my situation.
The first trustee reviewed my financial situation and my initial solution, which included selling my condo and liquidating all my assets, and suggested bankruptcy would be a better option given the amount of money I owed, which on paper was already around $200,000 plus an additional $250,000 in my office lease.
He asked me to come back to him with a more detailed plan. When we reconvened to review the plan a week later, he concluded again that bankruptcy was a viable option and then presented me with an invoice for $267 for the second visit!
I sought a second trustee’s opinion (you can see I was quite ignorant about the role of the trustee in the bankruptcy process. I stupidly believed they worked on my behalf).
This trustee gave me a more sympathetic hearing, but never once mentioned options I may want to consider beyond bankruptcy. And now I know why.
I remember going home after the meeting and noticing I had nothing to feed my daughter for dinner that night.
By this point, I was down to raiding the coin jar for food money, but the coin jar was also done now. I did what any 50-year old would do in this situation. I called my parents and asked for some money so I could buy some food.
You want to talk about rock bottom?
That’s where it was. I never expected to be in such a situation in my lifetime. I wanted to help look after my parents, and here I was having to call on them.
My parents had always been proud of my achievements in advertising. I had worked around the world, saved hard and built a successful career. And it had led me to this. When I wasn’t wallowing in self-pity, I was back online reading.
I decide to finally file bankruptcy
There was a lot of advice about debt and how to file bankruptcy, most of it repetitive to the point where I would see word for word duplication. I sat there in my dark room, my daughter sleeping a few feet away, reading and reading and reading.
It took me a few weeks to come to the conclusion that I would have to go the bankruptcy route, which would constrain my cash flow for between 3 to 8 years and destroy my credit rating.
Let me tell you, those were lonely and difficult nights. I would watch my young daughter sleep, so beautifully oblivious to my predicament – and by extension hers.
I had let everyone down, no one more so than my child, who was about to experience life without the financial security and ready money she had always enjoyed.
I resolved to begin the bankruptcy proceedings and so made an appointment to see the trustee again.
A friend offers some advice
On the day before the appointment, I received an email from a friend of mine with a recommendation to contact a debt restructuring firm called 4 Pillars.
“You may not have to lose everything you think you are going to lose. Talk to these guys.”
I made a note to call them the next day.
My first month had taken a real toll on me. I had lost about 15 pounds, primarily because I was drinking alcohol instead of eating food.
But I had no appetite for food. My stomach was in knots from the moment I woke up until the next time sleep thankfully claimed me.
I face lawsuits, debt collectors, and remain sleepless. A new path appears from an unlikely place.
I was about five weeks into my financial meltdown when I finally went for medical help. I was lucky to find the services of an older family doctor, a man who had seen his share of life’s miseries.
He listened to me quietly as I described my situation. I was existing on 2-3 hours of sleep a night. I wasn’t eating. I was emotionally fragile and physically a wreck. He weighed me at 149 pounds.
That was down from my usual weight of 160. He spent about 40 minutes with me, allowing me to talk everything out, unloading my fears and anxiety. It was a cathartic session.
He was a tremendous person to come across at that stage in my life. He gave me something for the anxiety and a few sleeping tablets to use when I was alone and my daughter was with her mom.
And he prescribed a diet for me and an exercise plan, which really amounted to me going for a few runs a week. Rest, food, exercise.
My creditors sue me
After I left the doctor, I went home and found a man waiting for me outside my apartment. He asked for me by name, and when I identified myself, he handed me an envelope. I was being served.
My bank was suing me in BC Supreme Court to recover their line of credit. I retreated to the shell of an office I continued to use as I negotiated my way out of the lease.
There was nothing in the office now but a single chair and desk. It depressed me immensely to be sitting alone in the ruins of my company on a daily basis; a place that just a few months ago had so energized me.
The debt collectors
The phone rang all day.
Creditors, one after another after another. I had long since called everyone I owed money to and asked for time to try and resolve my debt issues, but it was several months down the track now and people were getting impatient for their money. I understood that completely.
There were times when I couldn’t answer the phone, and many days when I let the phone just ring and ring.
The postman brought the mail. Another lawsuit. Half a dozen collection agency notices. Late arriving invoices. I added them to the black list.
A bit of hope
I did as my friend suggested and called the 4 Pillars debt consultant. I talked to a guy named Benjy Houser who arranged a meeting with me for a face-to-face discussion.
He suggested he come to my office, with one of the 4 Pillars partners, who specialized in corporate debt restructuring. I had no idea what to expect and wondered if this was a legitimate business.
The first bankruptcy trustee I had met – the one who charged me $267 that I didn’t have – had advised me to be wary of debt consultants. I was very naive and didn’t realize he was protecting his own interests.
Nothing good had happened to me for months until the pair from 4 Pillars came into my life. One of the first things they said to me upon reviewing my financials was that I should not go bankrupt and I wasn’t going to lose my condo.
Consumer Proposals and scams
They told me about an option called a Consumer Proposal, which protects me under the Bankruptcy and Insolvency Act and would allow me to make a cents on the dollar offer to my creditors, reducing my debt by as much as 80%.
This was astonishing news for me. I didn't know if it was a bit of hope or a complete scam.
I listened carefully to everything they had to say, then went and did my homework on Consumer Proposals, reading everything I could find online.
As I started to read and research about consumer proposals and other debt options, I realized how little I really knew about debt. I had thought that bankruptcy and financial ruin was my future. But I was still cautious, even if this was a small bit of hope that things might get better.
The tide begins to turn
I have no hesitation in recollecting that the evening after I met these two 4 Pillars guys, I was able to fall asleep at a decent hour for the first time in at least 2 months.
The tremendous stress of the past few months was finally being given some respite.
I knew there would be plenty of anxiety still as I navigated the churning waters I had steered myself into. I would not be able to pay everyone, and few would get the full value owed to them. I had failed spectacularly in a very public company.
But I was finally moving forward with a plan.
And it was that sense of having a course of action, one that wasn't leading me to my ruin, which finally turned the tide for me.
I get an unexpected offer, file my Consumer Proposal, and take the first steps away from desperation.
Because my business closure had played out in the local newspaper, I didn’t have the luxury of pretending things were fine.
My family and friends rallied behind me, but the nights were still endless, dark and unforgiving.
My over-extended line of credit, which had served as my working capital for the past year, had quickly resulted in a lawsuit from my bank.
Since I was forced to close my company’s doors, my own income had disappeared at a time when I couldn’t have needed it more.
So while I worked on the proposal, I quietly floated out my skills for contract hire.
An unexpected job offer
Most of the other businesses in my industry had reached out to me in the past month with words of sympathy, invariably followed by questions about what my existing clients would do for marketing support now that my business was closed.
I had a few loyal clients who let me know they would wait for me to get myself established again – so there was a definite value I could bring to a new company, but I was damned if I was going to give it to anyone who came to offer condolences and play for my clients in the same breath.
At about this time, I was offered a job in a small BC town. The owner of the business was versed on my predicament and offered me a large signing bonus, which he knew I would find hard to resist, given my requirement for money.
It wasn’t a job I wanted but I travelled to the town, let his sales pitch sink in and did all the mental calculations that would enable this move to a smaller job with less money in a tiny market that froze over 6 months of the year.
With money the only thing I could see, I told him yes. I immediately regretted my decision.
When I say immediately I mean within about 5 minutes of making it. It was a defeatist decision and only really served my interests to disappear. A few weeks earlier I would have been nothing but thankful for the lifejacket this job offered me.
Silencing the collection agencies
While searching for a new job, I had received more than a dozen collection agency notices from across the country and my office phone rang all day without cease.
Dealing with this stress was the first thing my 4 Pillars consultant, Benjy, tackled. Within a week of hiring him, he had prepared a letter to my creditors, which outlined my situation and the path forward.
My first obligation would be to any credit I was tied to by means of a personal guarantee. Several days after this letter was sent, the phones stopped ringing.
It was miraculous. Soon the collection agency notices would slow down too.
I work on my consumer proposal
While he tackled the short-term pain of anxious creditors, Benjy began working on my consumer proposal.
This was the cents-on-the-dollar offer I would make to the companies my business owed money to. He required detailed financial records and I was kept busy pulling all the documents together.
It was good to be busy in a way that was working towards my rehabilitation. Benjy gave me precise instructions about how to manage my remaining capital, so I kept as much for me and my evolving circumstances as possible.
With a bit of support and Benjy in my corner, I was feeling less desperate and more focused on making good long-term decisions for myself. Benjy helped here as he was able to offer an outside perspective and kept reminding me that my decisions had to serve my long-term gain, not just my short-term pain.
That became my mantra over the next few months, and it gave me the presence of mind to say no to the easy cash this job represented and make my rehabilitation a process rather than a single desperate act.
Things began to look a little brighter.
The final steps. I reach the end of my debt journey and begin towards a new challenge.
In March, I had to close my advertising agency and let all my staff go. My business debts were too significant to proceed. I went through a spectacular two meltdown as a result.
It was July now and I had managed to secure a position working at one of the other major marketing companies in town, so money began to slowly trickle in to cover off the day-to-day expenses and bills that had been long neglected.
I was back to eating regular meals again and the sound of the telephone ringing or a knock on the door no longer sent me scurrying for cover.
More importantly for me, July was the month where Benjy (my specialist at the Victoria BC 4 Pillars office) helped me file my Consumer Proposal with the bankruptcy trustee.
I had spent the previous few months begging and borrowing from anyone I thought could spare some cash, so I could offer my creditors a lump sum payment on my debt, rather than spread out the payments over several years.
The purpose in paying it off at the outset was to increase my chances of the Proposal being accepted and to speed up the process of rehabilitating my credit rating.
Facing my credit rating
I had reconciled myself to the impact a poor credit rating would have on my life.
Tied to my business’s debt, I was going to feel the repercussions for several years. I was nearly 4 months clear of the day when I had to let all my staff go and inform my clients and my community that my business had run aground.
I was no longer experiencing the crippling anxiety that had characterized the first few months after the closure. I still weighed under 150 lbs, but it was no longer from a lack of appetite but from a lack of time to eat.
I felt that the winter was over. It was a hard summer but I was at least moving forward.
Waiting on my consumer proposal
One day towards the end of this month, Benjy called me to let me know the Proposal had been sent to my creditors and they had a few weeks to vote for or against it.
A non-vote would register as acceptance of the terms. I sweated out those days, as I imagined my guaranteed creditors, including 3 banks, would push back.
Miraculously, there was no push back and my Consumer Proposal was accepted. How did I feel? I felt relieved, naturally. And I felt guilty too.
The relief is easy to imagine. I was financially exhausted but my debts had been resolved according to the law, and my creditors had no further claim over me.
But there was a sense of shame as well because I had walked away from a number of unsecured creditors, small businesses like myself who were out of pocket the debts my company owed them but was unable to pay.
Several of my creditors called me up to officially forgive my debt to them. That touched me enormously. A few others continued to email me looking for compensation.
One would do so for over a year, despite the lack of any legal claim. And I can’t say I blame him. I might have felt the same way had I not had the experience I did.
A new start from debt
At the start, my business had gone under and I faced bankruptcy. It was a hard road and changed me.
When a business in debt goes down, many people suffer. That’s not something my Consumer Proposal could eliminate.
However, with my Proposal accepted and my debt legally resolved, a new process was about to begin: rebuilding my credit rating and my reputation.
Both were going to take time, focus and making the right decisions.
After 4 months of unrelenting negativity, it was time at last to move ahead. I felt ready for the new challenge.
We recently received an update.Read it here.
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- Debt consolidation versus a consumer proposal
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- Bankruptcy in Ontario: how it works
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Get a professional assessment of your debt situation
Your job is to educate yourself.
If you are carrying a large amount of debt, speak to a professional. You can find experts by searching in your city.
We also have offices across Canada, which you can talk to on the phone, email, or meet in-person.
What does an expert know that you don’t?
They will teach you about debt restructuring options such as debt consolidation, consumer proposals, informal proposals, and how to approach your creditors with a restructuring offer.
They will also be able to analyze the type of debt you carry and educate you on the right choice for you.
You can sometimes reduce your debt with restructuring, get out of debt by creating a solid budget and for others, bankruptcy might be the right choice.
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