Douglas Hoyes, Co-Founder, Hoyes, Michalos & Associates Inc.

The Office of the Superintendent of Bankruptcy just released bankruptcy statistics for the months of September and October, 2011, and the results showed that bankruptcies are down considerably from last year. For the year ended October 31, 2011, personal bankruptcy filings in Ontario dropped by almost 24%. Consumer proposal filings increased by 7.3%. Combining bankruptcies and proposals, consumer insolvencies are down over 11% from last year. Across Canada the rate dropped by 8%, so Ontario’s performance is better than the national average.

(For information on local results, you can read our commentaries on the results in Brantford, Mississauga, Cambridge, St. Catharines, Toronto bankruptcy, Toronto consumer proposals, Vaughan, and Windsor).

A drop in bankruptcy filings in Canada is good news, right?

Yes, in general, fewer bankruptcies is good news for the economy. Fewer insolvencies implies that more people are working and are able to service their debts, and that’s good news for everyone.

Next question: will bankruptcy levels continue to drop in 2012?

Probably not, for four reasons:

First, when the unemployment rate decreases, bankruptcy rates tend to decrease. That makes sense; if more people are working, more people are making money, so fewer people have debt problems. However, according to Statistics Canada, the unemployment rate dropped to a multi-year low of 7.1% in October, and has been increasing every month since, and in January hit 7.5%. It’s therefore quite possible that the increase in the unemployment rate at the end of 2011 will lead to more bankruptcy filings in 2012.

Second, the average debt level of all Canadians continues to increase. According to Statistics Canada, in the third quarter of 2011 Canadians were carrying debt equal to 153% of their annual disposable income. That’s the highest level in history, and it means if you earn $1, you probably have debt of $1.53. That a huge number, and it doesn’t take a lot of thinking to realize that the more debt we have, the more likely we are to get into financial trouble.

In other words, we now consider high debt levels to be normal. Twenty years ago you were very worried if you couldn’t pay your credit card bill in full each month. Today we think it’s normal to just pay our minimum monthly balance.

Third, we are used to high levels of debt, but the lenders are also getting used to it. TD Bank Chief Executive Ed Clark said at a banking conference on Tuesday that the lender would be reluctant to push someone out of their house if they can no longer afford payments if it was still comfortable with the mortgage. Think about that statement: banks don’t want to foreclose on your house. Great news, right?

Yes, but are banks not pressuring borrowers as much out of the goodness of their hearts? Not exactly. The banks realize that if they were to foreclose on everyone’s mortgage that is one or more payments in arrears, they might own many of the houses in Canada! So, instead, they are willing to work with you, at least up to a point. That’s good, because if they are working with you, you are less likely to need to go bankrupt.

But what happens when your mortgage gets so far behind that the bank can’t work with you anymore? They may waive a payment if you are a month behind on your credit card, but will they do nothing if you are three months behind? At some point the bank must take action, and if they do that in 2012, we could see an increase in consumer insolvencies.

There is a final reason why it is possible that bankruptcy filings will increase in 2012: “debt consultants”.

At Hoyes Michalos we believe you should understand that the debt consultants you hear making wild promises on the radio are not always telling the whole truth, which is why we have written many articles like The Problem with Debt Consultants, Debt Consultants: Why Doesn’t The Government Stop Them?, and Debt Consultants: Some Horror Stories.

The fact is that in Ontario many thousands of people are paying money, right now, to debt consultants to solve their financial problems. These debt consultants have a simple sales pitch:

We can settle your debts for 30 cents on the dollar. Pay us $500 (or whatever) per month, and after three years we will have accumulated the money we need to make a settlement with your creditors.

That sounds great. Unfortunately, most credit card companies won’t wait for three years to get paid. I can guarantee you that Revenue Canada won’t wait for three years to get paid. After a few months of non-payment they are likely to start garnisheeing your wages, at which point the debt settlement plan collapses.

My prediction for 2012: we will do hundreds of bankruptcies and consumer proposals for people who paid thousands of dollars to debt consultants only to realize they got scammed. Why are bankruptcy numbers down? One reason is because instead of filing bankruptcy, many people are paying debt consultants. Those people may well need to go bankrupt in 2012, so when those people enter the system, bankruptcy filings will jump.

(This is an easy prediction for me to make, because in the last two months the professionals at Hoyes Michalos, myself included, have met with over 100 people who are currently in plans with debt consultants, but now they realize they need to file a consumer proposal or go bankrupt).

So what does this mean to you: Don’t be a statistic.

If you realize that your debt consultant isn’t helping you, give us a call. If you have a lot of debt, try to deal with it on your own. Here’s my advice on the easy way to budget:

Or, to find out all of your options, give us a call at 310-PLAN, and we’ll arrange a no charge initial consultation to help you deal with your debts, so let’s get started.

Back to our record levels of debt: The average Canadian owes $153 for every $100 they earn.

Think about that.

If you have a job where you take home $30,000 per year, and if you are the average Canadian, you owe about $46,000. In fact, according to Statistics Canada, household debt per person in Canada is $46,100, which is 1% higher than it was three months ago, and 5% higher than it was a year ago.

Think about that.

If you are average, you are carrying 5% more debt today than you were carrying a year ago.

Did your pay go up 5% this year? Probably not. According to Statistics Canada, average hourly wages were up 2.4% in the last year, but that’s just the average. If you work through a union your wages were only up 1.5%, and if you are a temporary worker your wages only increased by 1.0%.

Perhaps the news isn’t all bad? Perhaps we have more debt because we borrowed to invest, and our investments went up in value, so even with higher debt we are actually better off?

Nope.

Household net worth per person fell 2.5% in the last three months. That’s a big drop. Even worse, in 2010, when we released our study on Joe Debtor: The Profile of the Average Bankrupt, the average bankrupt owed 2.2 times his annual income in debt.  As of today, based on our own proprietary data, our debt is now 2.4 times our annual income.

Is there no good news? I suppose the fact that for the twelve months ended August 31, 2011 total personal insolvencies in Canada are down 9.7%, and personal bankruptcy filings are down 16.7%, is good news. However, the bankruptcy rate increased significantly in the past, peaking in 2009, so this year’s drop is just a drop to still very high levels. The unemployment rate in Canada has dropped since the peak in 2009, which is good news.

However, it’s no surprise that 2009 was both the peak in unemployment and bankruptcy filings in Canada, so those two statistics are related. The unemployment did rate did increase in November, so if that trend continues we could see higher bankruptcy rates in the future.

Here’s my point: We are carrying more debt than ever before, and debt is bad. If you want to know why, Ted Michalos and I discussed that on the radio as well (and this clip is under two minutes):

Debt reduces your cash flow each month, and if you are trying to pay interest on debt you don’t have money to save for your children’s education, or retirement, or anything else. If you have debt, your resolution for 2012 should be: get out of debt.

You can get out of debt by making a household budget and cutting expenses. If you have more debt than you can handle, credit counselling, a consumer proposal or even personal bankruptcy may be required. Try our debt options calculator to see which option may be right for you, but above all, make a plan and start today.

Debt problems do not go away on their own, so the sooner you start, the sooner you can be living debt free.

First, the good news. The total number of insolvency filings are down.

In the first six months of 2010 in Ontario there were 28,944 personal bankruptcies and consumer proposals filed. In the first six months of 2011 that number dropped to 26,473, a drop of 9%.

In all of Canada the overall decrease was 8%, so Ontario is representative of the national average. However, here’s where it gets interesting:

In Ontario personal bankruptcies in the first six months of this year decreased by 23% (from 17,314 to 13,406). That sounds like great news for the economy, but that was counter balanced by the increase in the number of consumer proposals filed, from 11,630 last year to 13,067 this year, and increase of 12%.

In the first six months of 2010, 60% of filings were bankruptcies, and 40% were proposals. In the first six months of this year it was much closer to a 50/50 split. What’s going on here?

Two things have changed:

First, back in 2009 the bankruptcy laws in Canada changed, making bankruptcy in Canada more expensive for some people due to the new surplus income rules, while at the same time encouraging the filing of more consumer proposals.

Since Ted Michalos and I founded Hoyes Michalos back in 1999 we have always encouraged consumer proposals as an alternative to bankruptcy; the rest of Canada is starting to catch up, and is start to realize that in many cases a consumer proposal is a better alternative. Here’s why:

If you file bankruptcy, you are required to provide copies of your paystubs each month, and if you have surplus income as defined by the government, you pay more, and your bankruptcy lasts longer. That’s not a problem in a consumer proposal; once we negotiate a deal with your creditors, that’s it. No wonder people like consumer proposals.

Second, as the economy improves and incomes increase, consumer proposals (for the reasons noted above) become better alternatives to deal with your debts. If the economy continues to improve, it’s likely that the percentage of consumer proposals filed will continue to increase.

However, a word of caution: the percentage of consumer proposals filed has dropped as the year has progressed. In the first three months of this year there were actually more consumer proposals filed in Ontario than bankruptcies (6,586 to 6,567). In the second quarter bankruptcies were higher (6,839 to 6,481). Does that mean the economy is fading?

Perhaps, but we will have to wait a few more months to know for sure. In a bankruptcy you lose your tax refund, so if you are expecting a tax refund you may choose to wait until you get it for last year before filing (so you only lose one year and not two). That tends to cause an increase in bankruptcy filings in April, May and June.

How many proposals and bankruptcies were filed in your city? I’ve compiled a list of all of each commentary from all Hoyes Michalos team members, so click on your city to find out more:

• Barrie – Consumer proposals are on the rise in Barrie
• Barrie – Good news – bankruptcy rate drops in Barrie
• Brampton – Consumer proposals and bankruptcy filings decline in Brampton
• Brantford – Bankruptcy rate drops, consumer proposals way up
• Brantford – Consumer proposals in Brantford up
• Cambridge – Bankruptcies drop, consumer proposals increase in Cambridge
• Cambridge – Why people in Cambridge care about how many people file Bankruptcies and Consumer Proposals?
• Cambridge – Consumer proposals on the rise for 2011 in Cambridge
• Chatham – Consumer proposal filings up
• Hamilton – Bankruptcy rate in Hamilton declines
• Hamilton – Bankruptcy rate declines in Hamilton
• Kitchener – Waterloo – Consumer proposals on the rise
• Kitchener/Waterloo – Consumer proposals increase
• Kitchener – Waterloo – Bankruptcies down, consumer proposals up
• London – The changing tide: More consumer proposals, fewer bankruptcies
• London – Are the number of people filing for bankruptcy in London finally coming down?
• Mississauga – Bankruptcy and Proposal Statistics in Mississauga
• North York – Bankruptcy and Consumer Proposal Statistics in North York, Ontario
• Sarnia – Bankruptcies down, but more Consumer Proposals in Sarnia
• St. Catharines – Niagara Newsflash – More people filing consumer proposals than bankruptcy
• Toronto, North York and Scarborough – Bankruptcy Statistics Released
• Toronto – Feeling Alone?
• Toronto – Am I alone? The stats clearly show that you are not alone
• Windsor and Leamington – Bankruptcies Drop
• Vaughan – Bankruptcies are down and Consumer Proposals are up in Vaughan
• Vaughan and Woodbridge – Bankruptcy rate down, consumer proposals up
• Windsor – Bankruptcy filings down in Windsor
• Windsor – Consumer proposal filings up

Here are some articles on statistics in Canada:

• Consumer Proposals Increase Again in 2011
• Ontario Bankruptcy Statistics
• Bankruptcy Canada Statistics

And finally, for more on consumer proposals, this consumer proposals site is a feed of articles from around the web. We will continue to monitor events, and post new updates as further information becomes available.

Douglas Hoyes, CA, Bankruptcy Trustee

It’s true that the number of personal bankruptcy filings in Ontario dropped from 66,935 in 2009 to 56,619 in 2010. That’s over 10,000 fewer bankruptcies, so yes, that’s definitely good news. However, before we start rejoicing at how great everything is, let’s consider three facts:

First, the level of debt we carry continues to increase. As I reported earlier this month, credit cards continue to create a financial abyss for “Joe Debtor”, the average person who files bankruptcy. As long as our debt levels remain at record levels, it’s inevitable that the number of bankruptcies will increase. They may drop for a year or two, but long term they can only increase.

Second, one of the reasons bankruptcies decreased was because the federal government changed the bankruptcy rules in September 2009 to make it more expensive to file bankruptcy if you have surplus income. The new rules also extended the length of bankruptcy, meaning you could now be bankrupt longer. As a result there was a surge in bankruptcies in the month leading up to the new rules, and then a corresponding drop off in the months after. If you compare 2010 to the record year of 2009, it’s not surprising that the numbers in 2010 dropped. However, the number of bankruptcies filed in 2010 is still higher than 2008′s numbers, so the trend remains up.

Third, while bankruptcies fell, the number of consumer proposals filed in 2010 increased substantially. In 2009 20,414 consumer proposals were filed in Ontario; that number increased by almost 16% to 23,619 in 2010.

Again, that’s not surprising. If bankruptcy is now more expensive and lasts longer, it’s natural for more people to file consumer proposals as a way to avoid bankruptcy.

Here’s my take on these results:

I’m pleased that the economy showed a slight improvement in 2010, and I’m pleased that the unemployment rate in Ontario remains lower than it is in the United States, and I’m glad our interest rates remain low. However, we can’t rely on low interest rates forever.

Our world is in turmoil, with protests against government happening in Africa and the Middle East, nuclear power problems in Japan, and of course a federal election in Canada in May. With this uncertainty we don’t know what tomorrow will bring. If this volatility causes upward pressure on interest rates, our debt service costs go up, and the economy slows down, and that’s not good for the average person.

That being said, I am pleased that consumer proposal filings are increasing. I meet with and talk to dozens of people each week, and almost every one of them is happy to avoid bankruptcy if possible, while still dealing with their debts. That’s a positive trend for the future.

To find out how a consumer proposal can help you avoid bankruptcy, read our comparison between consumer proposals and bankruptcy article, and please use our free on-line debt options calculator to evaluate your options, and then contact us to arrange a no charge initial consultation, and let’s get started.

A consumer proposal is a settlement negotiated with your creditors. Here’s a simple example:

Orville and Mary Smith owe $50,000 on their credit cards, an unsecured line of credit, and a payday loan. They have jobs, but cannot afford to make all of their minimum payments each month, and they are falling behind. They don’t want to file bankruptcy, so instead they decide to file a consumer proposal, where they will offer to pay $400 per month for 50 months, for a total of $20,000. If the creditors accept the proposal, they have one affordable monthly payment, and at the end of the 50 months, their debts are officially discharged.

Sounds great! One monthly payment, the calls from bill collectors stop, you don’t have to worry about a wage garnishment, and you get a fresh start! How does it work?

The process starts by contacting the professionals at Hoyes, Michalos & Associates Inc. I suggest you start by completing our on-line, free, anonymous debt options calculator. It only takes a few seconds. If the calculator shows that a consumer proposal may be an option for you, you can e-mail us, or complete our on-line evaluation, or call us at 310-PLAN (310-7526, no area code required in Ontario) to arrange a no charge initial consultation.

At your initial consultation we will review what you own, who you owe, and what you earn and spend each month. Based on that information we will help you decide whether or not a consumer proposal is the correct option for you and your family. (If you want to speed up the process you can download our fresh start application before our first meeting).

Doug Hoyes Explains Consumer Proposals

If you decide to file a consumer proposal, we prepare the necessary documents, and you meet with us to sign them. Prior to filing the proposal, in addition to meeting with one of our client services specialists, you will also meet with one of our trustees, who are also licensed proposal administrators. They will review the process with you, and answer any further questions you may have.

As soon as you have signed the proposal paperwork, and before you leave our office, we electronically transmit your file to the government, so that we can give you your government-assigned file number. With that file number you can direct all calls from creditors to our office. As soon as you file your proposal, we talk to your creditors. In other words, once the creditors are notified of your proposal, the collection calls stop!

By law the creditors have 45 days to vote on your proposal. Each creditor gets one vote for every dollar they can prove that you owe. If 50% + 1 of your creditors vote in favour of your proposal, the proposal is approved, and all creditors are bound by it. That means that even if some creditors vote against your proposal, if a majority in dollar value accept it, the proposal is accepted.

What happens if more than half of my creditors vote “no”?

If more than half of the creditors vote against the proposal, we will contact them to confirm that they understood the terms of the proposal (since the proposal you offered should generate more money for the creditors than if you filed bankruptcy). We will also ask them if they wish to propose alternate terms. For example, if you offered $300 per month for 50 months, they may counter by asking for $300 per month for 60 months. You can then either reject or accept their counter offer.

At some point in 2011 Hoyes Michalos will file our 10,000th proposal, so obviously our longevity indicates that we have a very high success rate when filing proposals. In the vast majority of cases, if the proposal is reasonable, and if there are no unusual circumstances, your proposal should be accepted.

From your point of view, you have two important duties:

First, you will attend two credit counselling sessions. These sessions are designed to teach you some money management techniques, to help you avoid money problems in the future. The first session will occur within the first two months after filing, and the second session will generally occur between the third and seventh month. Each of the two sessions lasts for between 45 minutes and one hour, and they are all private sessions.

Second, you are required to make the agreed upon payment each month. We will set up your payments using our pre-authorized payment system, so your payments will be debited directly from your bank account, so you have no worries about bringing in cheques or making cash payments. We even let you decide the payment schedule. For example, if your proposal is for $400 per month, we can set it up so that you are paying $100 per week (if you get paid weekly), or $200 bi-weekly (if you get paid bi-weekly). I personally encourage weekly or bi-weekly payments, if it matches your pay schedule, because then in a month when you get your extra paycheque, you are making an extra payment in your proposal, and your proposal gets paid off faster.

In summary, for many people a proposal is a great way to have one manageable monthly payment to deal with their debts. If you want a fresh start, to find out more try our on-line, free, anonymous debt options calculator, then e-mail us, or complete our on-line evaluation, or call us at 310-PLAN (310-7526, no area code required in Ontario) to arrange a no charge initial consultation, and let’s get started.

Bankruptcy and Proposal Filings

In 2009 the number of consumer bankruptcies and consumer proposals increased by 31% in Canada in 2009, after growing by over 14% in 2008. In total, 151,712 Canadians filed a bankruptcy or proposal in 2009, the largest number on record by a wide margin. In Ontario, 66,935 people filed a bankruptcy or proposal, an increase of 32.7% over 2008.

An interesting trend emerged in the last three months of 2009: more residents of Ontario have chosen to file a consumer proposal, instead of going bankrupt, primarily due to new bankruptcy rules.

On September 18, 2009 new bankruptcy rules came into force, increasing the cost and length of a bankruptcy for bankrupts with surplus income. The debt limit for eligibility to file a consumer proposal was increased, increasing the attractiveness of a consumer proposal as a debt management option. As a result, there was a spike in bankruptcy filings in the two weeks prior to September 18, as debtors rushed to file bankruptcy to take advantage of the old rules. After September 18 the number of bankruptcy filings dropped, while consumer proposal filings continued to increase.

In Ontario in 2009 there were 46,521 consumer bankruptcies, and 20,414 consumer proposals. Bankruptcies increased by 28.5%, but consumer proposals increased by 43.3%.

Why did bankruptcy and proposal filings increase by record amounts in 2009?

Obviously the recession has caused great financial hardship. As the unemployment rate increases, so too does the growth in personal insolvency filings. The unemployment rate in Ontario rose through the first half of 2009, peaking at 9.5% in May, so the growth in consumer filings is not surprising. (In Canada, the unemployment rate rose from 6.1% to 8.3% during 2009). However, high unemployment is only one reason for the high bankruptcy rates in 2009.

Residents of Ontario continue to borrow at record rates, and in 2009 household credit per person in Canada reached a record level of $40,207. After five consecutive years of double digit growth, the rate of growth for household debt finally slowed to a comparatively low growth rate of 7.8%. However, given the tightening of credit markets and the continuing recession, growth in debt of 7.8% is still a worry for the Canadian consumer, and no doubt contributed to the growth in insolvencies.

While household credit per person grew by 6.4% in 2009, personal disposable income grew by only 0.6% in the first nine months of 2009. This means that, by the end of the third quarter of 2009, Canadians were carrying household debt of 140.8% of their personal disposable income, the highest level in history. This means that for every dollar a Canadian earns, they have $1.41 in debt. Two years ago Canadians carried $1.28 in debt for each dollar earned.

This is a worrisome development for all Canadians carrying debt, because it’s not only the level of debt that is a problem, but the cost of carrying the debt. While consumer debt has continued to increase, consumers have benefited from historically low interest rates. Unfortunately, low interest rates mean Canadians have continued to borrow, leading to record levels of debt. As long as interest rates remain low this may not be a problem, but if interest rates increase, Canadians will be unable to service their debt. This week the government announced that the economy is improving, so it is likely that the Bank of Canada will start to raise interest rates later this year. If that happens, the cost of carrying debt goes up, and more Canadian will experience financial problems.

The message is clear: excessive personal debt is a ticking time bomb, and unless Canadians take steps to deal with their debt, an increase in interest rates or a further reduction in employment will lead to a continued trend of higher personal insolvencies.

For many debtors this is the first time in their lives they have experienced debt problems, and they don’t know where to turn for advice. They are embarrassed to talk to family or friends. Unfortunately many debtors are now turning to unscrupulous debt consultants, who charge a fee and then simply refer the debtor to a bankruptcy trustee. We strongly urge debtors to investigate their advisors before paying anything. Confirm that they are licensed by the federal government, or a provincial agency. At Hoyes, Michalos & Associates we do NOT charge any up-front fees; no reputable trustee charges an up front fee. More information is available in this article on Debt Consultant Scams.

For more information on personal bankruptcy statistics for 2009 see our article bankruptcy statistics for 2009 and 2008, with detailed personal bankruptcy statistics for major cities in Ontario. Our Bankruptcy Trend Report: 2009 contains our detailed analysis.

If you are treading water, trying to service your debts, please call our 310-PLAN help line (no area code required anywhere in Ontario), or contact us by e-mail, or complete our free on-line evaluation, and we will review your situation and help you make a plan to deal with your debts; we will do our best to help you avoid becoming a bankruptcy statistic.

Douglas Hoyes, Bankruptcy Trustee

As predicted in previous posts, there was a massive increase in the level of personal bankruptcy filings in Ontario and Canada in September, 2009. Here are the numbers:

In September, 2009 in Canada there were 12,305 personal bankruptcies filed, a 47% increase over the same month in 2008. In addition, there were 3,160 consumer proposals filed, for an increase of 39%. Not surprisingly, the personal bankruptcy rate in Canada increased by more than the consumer proposal rate due to the new bankruptcy rules that came into force on September 18, 2009. There was obviously a rush by Canadians to file before the new rules were implemented.

Here’s the scary part: for the twelve months ended September 30, 2009 the bankruptcy rate in Canada increased by 36%, and for the three months ended September 30 the personal bankruptcy rate increased by 41%. So the rate increase for twelve months is 36%, for three months it’s 41%, and for one month it’s 46%. That shows that the bankruptcy rate is increasing at an ever faster pace. That’s bad news for the Canadian economy.

In the last twelve months in Canada 148,378 Canadians have filed an insolvency proceeding (116,295 personal bankruptcies and 32,083 consumer proposals). That’s record, by a wide margin. That compares to 100,552 in the same period in 2007, and 108,807 in 2008.

In Ontario, the statistics are equally grim: In September there were 5,007 personal bankruptcies filed (the first month ever over 5,000), an increase of 49% from last September. Proposal filings were up 36%.

The government doesn’t publish statistics by city each month, but we know that in the last three months personal bankruptcies were up by 41% in Toronto, 39% in Hamilton, 55% in Kitchener, 39% in London, and 44% in Windsor.

We will continue to analyze the numbers, but the message is clear: the recession is not over, so now is the time to consider your options and reduce your debt, so that you can survive the continued recession.

Not surprisingly, the government’s electronic filing system felt the strain, and it was down from late Thursday night until 8:30 am today, September 21. In other words no-one was able to go bankrupt on Friday September 18, the day the new rules came into force. By my estimate Thursday was also the busiest bankruptcy day in Canadian history, with over 1,700 individual Canadians filing bankruptcy, which again is more than three times a normal day’s volume. The irony of course is that Friday was the slowest day in Canadian bankruptcy history: with the government’s system down, no-one filed bankruptcy.

What does the future hold? I have three predictions:

First, I believe that personal bankruptcy filings in Ontario, and consumer proposal filings, will remain at record level for many more months. For the twelve months ended July 31, 2009, the most recent period for which statistics are available, there were over 140,000 Canadians that filed a consumer proposal or bankruptcy. That’s a 32% increase over the prior twelve months, so there is no doubt that the economy is still in very bad shapes, and insolvencies will continue at a high level. If I had to make a prediction I would predict that filing will be in the range of 150,000 per year for at least 2009 and 2010. After that, they may decline slightly if the economy improves, but significant declines won’t happen until our debt levels decrease.

Second, I predict that the percentage of consumer proposals filed will increase. Under the new rules, in a first bankruptcy if you have more than $200 in surplus income, the length of a bankruptcy is increased to 21 months (from nine months). That means the cost of bankruptcy is higher, so many people will choose to file a consumer proposal as an alternative to bankruptcy. I have always supported consumer proposals as an alternative to bankruptcy, so that will be good news for many people.

My third prediction is that I will be spending more time looking at calendars and doing math. As noted above if you have $200 per month of surplus income, on average, during the first six months of your bankruptcy, the bankruptcy is automatically extended. The surplus income calculation is relatively easy if you are paid a fixed salary, or get a pension, since your income doesn’t change each month. But, if you are paid weekly or bi-weekly, your income changes when you have a five or three paycheque month. As a trustee I now must look at the calendar to see when you will have those extra paycheque months. If you have one of them during the bankruptcy period it may not increase your average surplus income, but if you have two or three of them during the first six months of your bankruptcy, your surplus income may be pushed over the $200 per month limit, causing an increase in the length of your bankruptcy. The entire Hoyes Michalos team of trustees will be working extra hard over the next few weeks to become familiar with the math necessary to help you estimate your future income, including your extra paycheque months.

We are in for challenging times ahead, but our commitment remains the same. We will review your options for dealing with debt in detail, and help you understand the implications of your decision. The math may be slightly more complicated, but our goal is to help you find the solution that works for you, so contact us today, and one of our professionals will be pleased to meet with you to help you get a fresh start.

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.

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.