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Avoid Personal Bankruptcy After a Job Layoff in Calgary, Alberta

March 5, 2015

News of a job layoff can be quite devastating, regardless of the reason for it. Layoffs of groups of employees, at a time, is no less stressful as there are more individuals that will be seeking employment at the same time. What’s important is how you react to this event. Several steps to take after a job layoff are outlined here.

Notify Family and Friends

Being laid off can be devastating and notifying your family and friends of the layoff can also entail much stress and anxiety. Giving notice, however, and keeping the communication channels open will help to keep you from feeling helpless or alone. Having the emotional support from those who care most about you can help you on the road ahead; it takes unemployed workers typically nine months to find employment even though nearly two-thirds are willing to switch to a new line of work to find a new job, according to Statistics Canada.

Review Your Options for Income Replacement

When you receive a termination notice, review the terms and assess your available options, such as severance package. Consult a labour lawyer if needed or conduct your own research to ensure that the employer is meeting their obligations to you. Determine the likelihood of obtaining reasonable alternative employment with your employer and if there are opportunities at a competitor firm. Visit your nearest employment insurance office and speak to staff there to apply for employment insurance benefits if you meet the eligibility criteria and are unable to secure employment.

Review Your Total Debt and Monthly Expenses

Assess your available income sources against your total debt and monthly expenses. Examine your bank account transactions and credit card statements. To get a clear sense of your monthly expenses, take an average of the past year’s household maintenance expenses, food and transportation expenses, child care expenses (if any), personal expenses, including fitness, recreation, gifts and vacations, and any other spending, including alcohol and tobacco (if any) to estimate your total monthly expenses. If you have other income sources, assess how long you could manage to stay afloat without incurring more debt. Assess the monthly cost if current spending patterns continue while you are unemployed.

Make a New Budget

Determine how much spending you need to cut in order to make ends meet until you are reemployed. Preparing a new monthly budget which cuts out as much discretionary spending as possible is recommended with each expense revised to a lower amount if possible.

Cutting back is a common sense strategy for debt management, and often the most viable approach, for most individuals after a layoff. It will be difficult financially for a period, but this period of reduction is a short-term measure until you are working again. Tips on how to cut back are coming in another blog soon

Notify Your Creditors

If you cannot pay what you owe, it is recommended that you notify your creditors immediately of your situation. Your creditors won’t know you were laid off unless you notify; they will assume that you are not being responsible and have become a bad risk. You can provide each of them a letter outlining the reason for your letter, your employment status, your intentions on the debt, your willingness to pay what you can, your request for interest relief, your offer of a settlement amount, your request for the creditor to hold off passing the account to collections. Attach a photocopy of what you are collecting (e.g., pay stub/slip) and your monthly expenses sheet.

If your creditors are already calling you, talk with them openly and candidly about your work layoff instead of trying to ignore them. You can still send them a letter explaining your situation and supporting documents outlining your layoff, income and expenses. Creditors are often flexible when they are aware of changes in your life that make repayment of your obligations difficult.

Seek Out Employment Opportunities

When conducting your job search, keep in mind that family and friends can help you to build your network. In fact, nearly seventy percent of the unemployed find new jobs through friends and relatives. If you can utilize all the resources available to you, including resume help, retraining if needed, and improving your computer skills, you will improve your chances of finding work quickly and get back to financial health. Looking optimistically at the job opportunities and experiences available from your layoff that you otherwise would not have considered will help you stay grounded.

When considering a new work opportunity, be careful of scams that could set you back financially. Warning signals of fraudulent business include promoters who operate from a postal box, ask for money up front, offer high starter earnings, fail to disclose the total costs involved in an advertisement, or provide a name but not the address and contact information of a satisfied customer. Be wary of get rich quick schemes and high income sales positions with no experience necessary. Also concerning are companies you cannot find information about and postings offering full-time income for part-time work, often at home. Some work-at-home plans ask you to buy instructions, materials and sometimes your own equipment (e.g., sewing machines), with promises to purchase the work created if the quality meets their standards. Jobs offered overseas can require you to pay high travel costs and accommodations. Envelope stuffing jobs are another scam which requires a fee upfront and then directs you to place the same advertisement that you answered, with the company address being a postal box or your own address.

Find Creative Ways to Raise Cash or Obtain Services

If anyone owes you money, try to collect it now that you need it returned. Sell your skills for extra cash (e.g., preparing taxes, tutoring students, giving music or dance lessons) or to barter services (e.g., you paint your friend’s place and your friend babysits for you on needed occasions). Sell old valuables you no longer use, such as baby furniture, freezer, power tools, musical instruments or photo equipment. Sell off luxuries such as a second car, a boat, fur, or unused jewelry. Rent out a room for a period to a post-secondary student or a foreign exchange student for extra income.

Manage Your Stress

It is best to talk with someone about your finances before your job loss and financial worries cause you escalating stress. Stress from job loss typically ranks as high as major illness, after death of a spouse, divorce or going to jail. Most people identify themselves through their employment, which makes losing a job all that more difficult emotionally. Be sure to keep your nutrition and fitness level healthy at this stressful time. You may also want to visit your family physician to talk about what you are experiencing, to monitor your mental health. Your physician may be able to refer you to community resources and programs that are helpful, including those available through your local health department.

Borrow Funds or Liquidate Assets as a Last Resort Only

If you cannot manage to adjust your lifestyle by reducing spending in accordance with your available income, you need to determine if there are other short-term viable options that can work concurrently with your new budget. Borrowing may be necessary from your personal line of credit, from a bank loan, or from family. If you borrow, you need to determine up to what amount you can borrow, over what period, and what the repayment terms are. Be aware that debt consolidation plans only extend the repayment period of your debt, which may help you manage your cash flows, but manage debt in the short-run only.

Or, you may determine that liquidating assets, such as registered plans, are necessary to live on. Both of these two options – borrowing and liquidating – can be treacherous paths, however, causing additional future financial havoc and so you may want to speak with a professional before considering taking such steps.

Professional Advice

At any time, you may wish to speak to a professional about how to manage your debt or how your current financial plan is working. You may learn cost-cutting strategies you never thought of previously. A professional can help you get back on track financially. At Hudson & Company Insolvency Trustees Inc., we offer multiple services and can discuss your options with you, including consumer proposals which are becoming more popular. There are no consultation fees from speaking to a representative at our firm. We are available to help you.

Depending on what service you select, we can handle your finances for you, notify your creditor of your layoff and financial situation and try to negotiate better terms for you. Each creditor has their own criteria to determine how they can assist you but most have some flexibility in how they will approach your situation. As bankruptcy trustees or proposal administrators we can legally represent your interests. We may be able to obtain more favorable results for you with your creditors than if you tried negotiating on your own. We offer personal and commercial bankruptcy as well as other services at our offices, in Calgary Alberta. Call us at Hudson & Company Insolvency Trustees to learn more about personal bankruptcy in Calgary, Alberta. 403-265-HELP (4357)