Hoyes Michalos and Associates Ontario Personal Bankruptcy Blog

Back in May I reported on the massive increase in the personal bankruptcy rate in Ontario. I am sad to report that the personal bankruptcy rate continues to jump.

We have just finished the month of June, 2009. June is typically not a very busy month for us here at Hoyes Michalos. Our busy months tend to be March, April and May, as residents of Ontario deal with Christmas bills, tax debts, and other problems.

This year we were very busy in the spring, and we just kept getting busier, and in June we had a record volume month. The number of personal bankruptcy and consumer proposal filings in June at our firm were up 60% over the same month last year. In our history we have never had a 60% volume increase comparing one month to the same month in the previous year.

We also track the number of phone calls we take on our 310-PLAN debt help line, the number of free on-line bankruptcy evaluations that are submitted, and the e-mails we receive with questions at Hoyes Michalos, and in June the volume of Ontario residents asking for our help was also up almost 60% from last year.

Most distressing is that when I look at the rate of increase in both calls and actual filings, the rate of increase is increasing each month. That means the number of people in financial trouble is increasing, and increasing at an ever faster rate. That’s not surprising, given that real estate prices continue to fall, and unemployment remains high. You can analyze the numbers however you want: however you do it, the message is clear: the personal financial situations of the people we meet with are getting worse, not better.

I am a strong believer in doing whatever you can to protect yourself and your family. If the economy continues to worsen, it is likely there will be more job losses, and more people with reduced income, so now is the time to take action to protect yourself. Start by reading our article on Five Tips to Survive the Economic Crisis. Pay down your debt. Reduce your expenses and start saving money. If you can’t deal with your debt on your own, talk to us about your options, including filing a consumer proposal or personal bankruptcy.

Now, more than ever, you must be pro-active, so call us at 310-PLAN (no area code required in Ontario), or complete our free on-line options evaluation so we can e-mail you with detailed solutions, or send us an e-mail to arrange a free initial consultation, and let’s get started.

On May 19 I asked the question: When will the government help the average Canadian? Parliament has passed laws to make it easier for Canadians to make a proposal to their creditors and avoid personal bankruptcy, but they have not implemented these new rules. Why not? I have no idea. I can only assume that the Prime Minister and all of the other federal politicians are more worried about their political futures than they are worried about the plight of the average Canadian, and they don’t want to announce any rules that have anything to do with the word “bankruptcy.”

So, taking matters into my own hands, I sent an e-mail to Prime Minister Stephen Harper, and to Industry Minister Tony Clement asking when the new rules would be brought in to force.

On May 29 I got a response from the Prime Minister, Sort Of, that basically said “we’re working on it.”

On June 16 I received a response from Mr. Clement’s office. Actually the response came from the Director General, Marketplace Framework Policy Branch, Strategic Policy Sector, Industry Canada. (Makes me wonder: perhaps if people in government didn’t have such long titles, perhaps they could actually get something done…..). The response I got was “the government is committed to bringing in these reforms at the earliest possible opportunity.”

You can read the entire letter here.

So here’s my question: The new rules were passed by Parliament and given Royal Assent in December, 2007. It is now June, 2009. What exactly does “earliest possible opportunity” mean? Does the government honestly expect us to believe that at no time in the last 18 months has anyone had time to simply sign a piece of paper to bring in these new rules? The new rules cost the government nothing, and improve the situation of many Canadians, and many creditors. It’s a win-win, but nothing is being done.

I strongly believe that bankruptcy law should be fair to debtors and creditors, and although my letters don’t appearing to be provoking any action, I will continue to fight for fair rules for all Canadians.

Back on May 19 I asked the question: When will the government help the average Canadian?  We are in the depths of a series recession; the federal government has passed new rules that would help the average person, but they have not yet implemented the rules.

If you go bankrupt today the bank can repossess your car, if you have a loan secured by your car, even if your car payments are up to date.  Under the new rules they can’t do that.  There is also a new rule that makes it easier to file a consumer proposal.

No-one at the government can tell me why these rules are not yet in force, so I took matters into my own hands and sent an e-mail to the Prime Minister’s office.  That was 10 days ago, and I’m pleased to report that I finally got a response.  Here it is:

Dear Mr. Hoyes:

On behalf of the Right Honourable Stephen Harper, I would like to acknowledge receipt of your e-mail regarding bankruptcy legislation.

Please be assured that the statements you made have been carefully reviewed. I have taken the liberty of forwarding your e-mail to the Honourable Tony Clement, Minister of Industry, so that he too may be made aware of your comments.

Thank you for writing to the Prime Minister.

M. Bourque
Executive Correspondence Officer
for the Prime Minister’s Office
Agent de correspondance de la haute direction
pour le Cabinet du Premier ministre

Okay, so it’s not much of a response, but obviously the Prime Minister and his staff have other issues to worry about.  (No, I don’t know what’s more important than the economy and the welfare of Canadians, but I’m sure he’s got something on his mind).

The saddest part of this story is that to implement these two new rules would cost the government nothing.  Debtors would be happy.  Creditors would be happy because they potentially would collect more money.  It’s a no-cost win-win, but the government isn’t listening.

I’ll keep trying, and post any further responses I may get.

The federal government has passed two laws to help people in financial trouble, but for some unknown reason the government refuses to bring the laws into force.

Bill C-55 makes it easier to file a consumer proposal, and was given Royal Assent on November 25, 2005, and Bill C-12, which makes it easier for bankrupts to keep their cars and house, was passed and received Royal Assent on December 14, 2007. Even though these laws have received Royal Assent, they are not yet in force!

Yes, you read that correctly. Almost three and a half years have passed, and laws designed to help people sit there gathering dust.

What’s the government waiting for? I have no idea.

We all know that we are currently in a very severe recession . Every day I meet with honest, hard working people who have had their hours cut back at work, or they are laid off, and they worry about having their car repossessed and their house foreclosed. They are using credit to survive, and they can’t afford it.

Numbers don’t lie. Last year, and so far this year, we are seeing a massive increase in the number of personal bankruptcies in Ontario. There is a feeling of hopelessness during these tough times; we don’t know when the economy will recover.

The average person with significant debt does not want to go bankrupt. They want to find a way to deal with their debts. That’s why many people want to file a consumer proposal. A consumer proposal is great alternative to bankruptcy. You offer to repay some of your debt, and if the creditors agree, the rest of your debt is wiped out. It’s a “win-win” situation: you deal with your debts without going bankrupt, and your creditors get more money than if you went bankrupt.

Here’s the catch: you can only file a consumer proposal if your total debts, not including the mortgage on your house, are $75,000 or less. If your debts are more than $75,000 you can only file a proposal under Division 1 of the Bankruptcy & Insolvency Act, which is more complicated, more costly, and less likely to be successful. For many people with bank loans, credit cards, lines of credit and car or truck loans, the $75,000 limit is simply not high enough.

The good news is that the government recognized this, and in December, 2007 passed new consumer proposal rules raising the limit to $250,000. I strongly support this new rule, and Ted Michalos and I even went to Ottawa last year to testify before the Senate Banking Committee about the importance of consumer proposals. (You can watch our testimony by clicking on the video, or you can go to our Senate Video page to see our entire testimony).If you want to read it, you can read the transcript of our appearance on the Senate of Canada web site. Here is an excerpt from my introductory remarks:

• Mr. Michalos and I and our bankruptcy trustees spend each day meeting with people in financial distress. These are real people who, in many cases, have lost their jobs, gone through a marriage breakup or suffered through an illness; and after these personal tragedies, they are faced with insurmountable debt.
• These are not bad people. We believe it is important that when parliamentarians draft bankruptcy legislation, they remember that real people are affected.
• The only obvious amendments that will make the insolvency process better for debtors are the new exemption for certain RRSPs, the new rule that prevents a lender from cancelling a security agreement simply because a bankruptcy or a proposal has been filed and the increased debt limit on consumer proposals.
• We believe that the debt limit for the filing of a consumer proposal being increased from $75,000 to $250,000 will encourage even more people to take advantage of the consumer proposal option, and we strongly support that amendment.

As I mentioned in my introductory remarks, there is another rule that would help debtors. Under current law a bank or leasing company can repossess your car, even if your payments are up to date, simply because you went bankrupt or filed a proposal. Under the proposed new rules they can’t repossess simply because you went bankrupt. That’s important, because many people want to continue making their car payment while bankrupt so they can use their car to get to work.

Here’s my point: the federal government has passed last to help people, but they haven’t implemented them. Bringing these laws into force will cost the government nothing. Creditors will get more money under the new rules, so they would be happy. People in financial trouble would also be happy, since they would know that a plan is in place to deal with their debts. It’s a win for everyone if the new rules are implemented.

I’m just one person. I have no friends in high places that I can call on to influence the government. But I’m doing my part. In addition to testifying in Ottawa last year (at my own expense), I have also written to Industry Minister Tony Clement, and to Prime Minister Stephen Harper.

I have yet to receive a response, but when I do I’ll immediately post it here, so stay tuned.

The personal bankruptcy rate continues to grow. 2008 was a record year for personal bankruptcies, and 2009 has started at an even faster rate of growth, according to statistics just released by the Office of the Superintendent of Bankruptcy.

Consumer bankruptcy filings in 2008 increased by over 16% in Ontario in 2008. For the twelve months ended March 31, 2009 personal insolvencies increased by over 25% in Ontario.

Comparing the first three months of 2009 to the same period last year, personal bankruptcies in Ontario are up by 38%, and consumer proposals are up by 48%, for an overall growth rate of 41%.

Comparing March 2008 to March 2009, personal bankruptcy in Ontario was up by 60%, and consumer proposals increased by 67%. Overall the personal insolvency rate in Ontario was up by over 62%.

Here are the growth rates for various cities in Ontario for the first quarter of 2009, as compared to the first quarter of 2008:

• Toronto +39.9%
• Hamilton +47.2%
• St. Catharines - Niagara + 23.1%
• Kitchener +36.0%
• Brantford +38.7%
• Guelph +49.1%
• London + 62.5%
• Windsor+39.5%
• Barrie + 61.5%

The statistics are clear: personal bankruptcies in Ontario continue to increase at an ever faster rate. Despite what you may hear in the media, there is no sign of an economic recovery yet when you look at these numbers. Times are tough, and they will continue to be difficult until the economy truly recovers.

What should you do? Read our five tips to survive the recession. Reduce your debt. Cut your expenses and live as inexpensively as possible.

If you have more debt than you can handle, call us at 310-PLAN, or send us an e-mail and we will explain your options, and help you make a plan to deal with your debts. You are not alone.

You know that you are having financial problems, and you have decided to call a bankruptcy trustee and you are pretty sure that you are going to file for personal bankruptcy. There is just one more question you want to ask:

“How long will it take for me to be able to get credit again?” The fact that you have filed bankruptcy will be noted on your credit report and will remain there for a minimum of six years after you have been discharged from bankruptcy. If it is your first bankruptcy, you will be eligible for an automatic discharge nine months after you file, if certain conditions are met and all of your duties are completed. At the point of discharge your debts are cleared and you have no more obligations to your creditors or to the bankruptcy trustee who was administering the estate. It will be six years from this point that the mark will remain on your credit report.

If you would like to do something to get out of debt that might be less damaging to your credit rating, you could consider a consumer proposal.  In a consumer proposal you offer a deal to your creditors to pay back some, but not necessarily all, of what you owe over a period of up to five years. A proposal will be noted on your credit report for three years after you are done making the payments, so if the proposal takes four years to complete, it will be on your credit report for about the same length of time as a bankruptcy.

It is also important to consider  whether you really want to be seeking credit soon after your bankruptcy or proposal. A lot of people tell me that they need a credit card because they cannot save money, but this is the wrong reason to get a credit card. I always tell people if they are unable to save at least $100 a month, getting credit is not a good idea for them. Credit cards make it too easy for people to spend beyond their means. You need to make sure you know how to manage your finances so that you do not end up in debt again.

If you would like to learn more about filing bankruptcy or a consumer proposal and how these will affect your credit report, contact a bankruptcy trustee from Hoyes, Michalos & Associates by calling 310-PLAN, or by sending us an e-mail or completing our no obligation bankruptcy evaluation form,  and one of our professionals will be happy to speak with you, answer your questions and set up an appointment at one of our Ontario offices near you. Failing to make the payments on your debt is not going to help your credit report either, so let us help you create a plan to get rid of your debt and have a fresh start!

The number of personal bankruptcies continues to grow at an ever increasing rate. The number of people who filed for bankruptcy in Canada in 2008 was the highest number on record. Consumer bankruptcy filings in 2008 increased by over 16% in Ontario in 2008. Statistics for cities in Ontario can be found on our Ontario bankruptcy statistics page.

The bad news is that the the number of consumer bankruptcies filed continues to increase at an ever increasing pace. In the twelve month period ending February 28, 2009, consumer insolvencies in Ontario were up almost 18% over the previous year, according to the Office of the Superintendent of Bankruptcy. That follows an 18% increase for the twelve months ended January 31, 2009, so the rate of increase is not slowing. As I write this March statistics have not yet been released, but I expect them to also be up.

At Hoyes, Michalos we monitor call volume on our 310-PLAN bankruptcy help line, so I know that volume is up. In fact, April saw the biggest increase in call volume since January (based on a comparison of this month to the same month last year). Our call volume increased by 26% in February, 34% in March, and by 54% in April. That tells me that there are a lot of people who are in financial trouble, and are looking for help.

Part of that growth is as a result of people who can no longer afford to keep their homes, and can’t sell them because the house value has declined to below the amount owing on the mortgage. Obviously job loss is a factor, as the unemployment rate continues to increase.

Our message continues to be the same: if you are struggling with debt, give us a call at 310-PLAN, or send us an e-mail and we will explain your options, and help you make a plan to deal with your debts. You are not alone.

A significant number of the people who call our 310-PLAN information line, or who complete our free bankruptcy evaluation questionnaire or who e-mail Hoyes Michalos with questions, are asking a simple question: How can I get a debt consolidation loan? The concept behind a debt consolidation loan is simple: you get a loan at a low interest rate and use the money to pay off all of your high interest rate debts, like credit cards. Sounds like a plan, right?

Yes, if you have good credit, and the ability to repay the loan, a debt consolidation loan may be a good idea. Unfortunately if you have a lot of debt, you may not qualify for a debt consolidation loan. Or you may qualify, but only with a co-signer, which means someone else is now liable for the loan if you don’t pay. With a slow economy everyone’s job is at risk, and if you lose your job you may not be able to repay the loan, so it’s very risky asking a family member or friend to co-sign on your behalf.

There is, however, an even bigger problem with debt consolidation loans: A debt consolidation loan does not reduce your total debt. If you owe $50,000 on five credit cards it’s great to replace those five monthly payments with only one payment on a loan, but you still owe $50,000! Your total debt level remains unchanged. Lowering the interest payment is great, but unless that frees up enough cash to allow you to repay the loan in a reasonable period of time, you may not be better off; you may simply be trading one debt for another.

What should you do? Start with some research. There are many great resources on the internet, such as this debt options calculator (it’s free, and takes less than 30 seconds to complete). Other debt consolidation loans information resources can help you assess your options. We have an article discussing the advantages and disadvantages of a debt consolidation loan. Talk to your bank to see whether or not you qualify for a loan.

If you don’t, or if the monthly payments would be more than you can afford, it’s time to look at other options. For many people a consumer proposal is the perfect alternative to a debt consolidation loan. Like a loan, you make one monthly payment, but unlike a loan there is no interest, and it is often possible to negotiate a settlement with your creditors where you pay less than the full amount owing. Paying $1,000 per month on a debt consolidation loan may not be possible, but paying $500 per month may be possible in a consumer proposal.

Of course that’s just an example; the actual amount the creditors would accept may be higher or lower in your case. A consumer proposal is not right for everyone, but to find out if it’s the right solution for you please call us 310-PLAN (no area code required), or e-mail us today and we will review your situation and help you decide whether a debt consolidation loan, a consumer proposal, or some other solution is right for you.

I was interviewed on Sunday March 29 on CBC Television on their CBC News Sunday program. You can watch the clip of the bankruptcy segment here. As the recession continues, personal bankruptcy in Canada is increasingly in the news. Bankruptcy rates are up, so the CBC wanted to do a story on how bankruptcy affects the average person that files bankruptcy. I have done many TV and radio interviews over the years, but this was the first time I was interviewed with a person who had actually filed bankruptcy (although not with me), so it was a great chance for people trying to decide what to do to actually here from someone who had gone through the process.

I explained the different options available to someone in financial difficulty, and then the interviewers delved into the psychological aspects of bankruptcy.

I explained that the typical person I meet feels embarrassed and “down” as a result of their financial problems. However, after they understand their options, and decide to take action, they start to feel much better. Once they have made the decision to deal with their debts they feel as though a weight has been lifted from their shoulders, and they start to feel much better. They have a more positive outlook on life, and that positive outlook helps them at work and in their personal relationships.

The solution may be credit counselling, a consumer proposal, or a personal bankruptcy; the point I attempted to make in the interview is that there are options, but it’s up to the person in trouble to take the first step and make the call asking for help.

If you are experiencing financial problems, please call our offices at 310-PLAN (no area code required) or e-mail us today, and let’s get started.

The 310-PLAN helpline at Hoyes, Michalos & Associates has been “ringing off the hook” for the last few months, as an ever increasing number of people in financial difficulty place the call for help. As companies lay off workers, and as the real estate market collapses, an ever increasing number of people are in financial trouble. The news media has started to take notice, and is doing a great job of spreading the word that help is available for people with more debt than they can handle.

On February 4, 2009 Ted Michalos was interviewed by the Globe and Mail. The article got a huge response, so the Globe and Mail asked me to participate in a “live chat” event. Readers were invited to send in their questions about personal bankruptcy in Canada, and I gave them instant answers to their questions. The reporter e-mailed me the questions, and I typed my answers and e-mailed them back. The plan was to answer questions from noon until 1:00 pm, but the response was so great we kept at it until almost 2:00 pm. I even got reports that people had trouble logging in to the Globe and Mail’s server due to the high demand.

The questions asked were great, and they did a great job of illustrating the wide range of financial problems people have, but I was also happy to share the wide range of solutions that are also available. You can read all of the questions, and my answers, in the Globe and Mail’s article on what you need to know about bankruptcy. If you didn’t get your question answered, please e-mail us your questions now, and our team will respond as quickly as possible.

Ted Michalos was also hard at work on Wednesday, doing a live interview on BNN, the Business News Network. You can watch Ted discuss the five things to consider before filing bankruptcy on our bankruptcy video page.

I suspect you will see Ted and I, and our other trustees, on the radio, on television, and in the newspaper frequently over the next few months. The media’s job is to cover the issues that matter to Canadians, and at the moment there is nothing more important to most Canadians than the state of our economy. Many of us have more debt than we can handle, and the media is looking for people that offer solutions. We are proud that our firm has a great reputation, which is why the media calls on us for comments.

The good news for you is this: you don’t have to wait for us to appear on TV, and you don’t have to submit your question to a newspaper to get an answer from our experts. Simply contact us today, by phone at 310-PLAN or by e-mail, and we will answer your questions, tell you your options, and help you get a fresh start.