In the first six months of 2010, 208 residents of Cambridge filed personal bankruptcy. An additional 144 Cambridge residents filed a consumer proposal, for total filings of 352 people between January and June of this year. If these rates remain consistent for the rest of the year, that projects to 704 Cambridge residents filing a bankruptcy or proposal this year. How does that compare to previous years?

In 2009, 634 people went bankrupt in Cambridge, and 283 proposals were filed, for a total of 917. (You can see more statistics for other years on our Cambridge bankruptcy statistics page).  That would indicate that we may see a drop of 23% in the number of insolvencies filed this year in Cambridge. Why the drop in filings? The Cambridge economy was slightly better in early 2010 than it was in early 2009. The stock market crashed in late 2008, and that eroded business confidence, leading to the decline in 2009. Today the economy is somewhat improved (as compared to 2009), with unemployment somewhat lower, and interest rates remaining stable.

Attached is a postal code map of Cambridge showing where bankruptcies occur. Not surprisingly, the largest number of personal bankruptcies are in the areas where most people live; the more industrial areas have fewer bankruptcies.

For the economy in general, a declining personal bankruptcy rate is good news. It generally means that more people are working, and therefore they are able to service their debts.

What’s ahead for the balance of 2010?

I believe we will continue to see a decline in the bankruptcy rate in Cambridge for at least the next few months. Interest rates and unemployment remain stable, so no big changes are expected. However, as we all know, that can change quickly. If interest rates begin to rise, or if the impact of the new HST begins to reduce consumer spending in Cambridge, the bankruptcy rate could edge higher towards the end of 2010.

One final comment: the good news is that a greater number of Cambridge residents are choosing to file a consumer proposal as an alternative to bankruptcy. In 2009 just under 31% of Cambridge residents filed a consumer proposal (the rest filed bankruptcy). This year that percentage has increased to 41%. That’s a big increase, and it’s good news because it means more people are choosing to negotiate a settlement with their creditors to avoid bankruptcy.

More than a third of all consumer proposals filed in Cambridge are filed by my firm, Hoyes, Michalos & Associates, so if you are interested in learning more about this increasingly popular alternative to bankruptcy, please call my Cambridge office at 519-622-3773 or 310-PLAN (310-7526, no area code required), or e-mail me today to arrange a no charge initial consultation.

A week earlier Mr. Chevreau wrote an article called No immunity to bankruptcy where he quoted me as saying that between 7% and 9% of all people who go bankrupt through my firm are over 60 years of age.  That’s true, and those statistics hold true here in Cambridge as well.  More information can be found in his blog post on the number of senior citizens  filing for bankruptcy.

I was quoted in the first article as saying:

Hoyes guesses half the seniors he sees choose bankruptcy, although he lays out four less extreme options. He points out that most retirees don’t need to file for bankruptcy because the main reason for considering it is to ward off creditors that threaten to garnishee wages or seize assets. Retirees have no full-time wages, so don’t have significant wages that can be seized. Also, “it is very difficult, if not impossible, for a creditor to garnishee a pension,” Mr. Hoyes says.

I stand by that quote; it is very difficult for a normal creditor, like a credit card company, to garnishee a pension.  However, that’s not the case with CRA, as Sam discovered.

Revenue Canada does not need a court order to take part, or all, of your CPP if you owe back taxes.  They use what is called a “right of set-off”.  In simple English, it means that “if you owe us money, and we owe you money, we won’t send you any money until you pay us what we are owed.”

So what can you do if you get a pension, and you owe Canada Revenue Agency money?  As I described in the article, you have a number of options:

First, file all outstanding tax returns.  If you have not filed your taxes, CRA will not be willing to make payment arrangements with you.  All tax returns must be filed, even if you are not able to pay the full balance owing.

Second, I suggest you talk to CRA.  If you owe a manageable amount of money, you may be able to make payment arrangements directly with CRA, and repay the amount owing over a reasonable period of time.

If that doesn’t work, you could attempt to get a debt consolidation loan to repay them in full.  That may only be possible if you have assets, like a house, to pledge as security, or if you have a co-signer.

Your next option would be to file a consumer proposal, where we help negotiate a settlement with CRA and all of your other unsecured creditors.  To make a proposal work you need to have enough income to make monthly payments, while still paying your monthly living expenses.

If none of those options work, the final option is personal bankruptcy.  However, as I was quoted as saying in the Financial Post, personal bankruptcy may not be the best option for you, so I suggest you call my office in Cambridge at 519-622-3773, or call 310-PLAN (310-7526), or e-mail me to set up a time to meet and discuss your options.

Mark Silverthorn

Last week I attended a presentation that Mark gave to the Cambridge Self-Help Food Bank and other social agencies at the Cambridge Centre For the Arts here in Cambridge. He discussed various strategies for dealing with collection agencies. He explained that in some cases, if your debts are old, you can simply refuse to pay, and there may be very little the collection agency can do to collect. In other cases, a settlement with a collection agency may be an option, or it may be necessary to file a consumer proposal or even file a bankruptcy in Cambridge. You can read a full report on his talk in the Cambridge Times article about The Coming Debt Storm.

I was familiar with many of these strategies, since I have read his new book, The Wolf at the Door: What to Do when Collection Agencies Come Calling.

In fact, he interviewed me for the chapters on Consumer Proposals and Personal Bankruptcy, so I have spoken to Mark on many occasions. He did however make one comment that surprised me: He said that borrowers in Canada are often victimized three times.

First, borrowers often get caught in predatory lending practices, paying excessive rates of interest, or signing contracts they don’t understand. Interest rates in Canada are at historic lows, but interest rates on credit cards and finance company loans are as high as ever.

Second, if a borrower can’t pay, they are often victimized by abusive collection agency practices. Collectors call at all hours of the day and night, and often make threats to collect the money. It’s hard to deal with a collection agent if you don’t know the rules that govern them; they can intimidate, which is often unsettling.

Mark Silverthorn and Doug Hoyes

Finally, borrowers are often victimized by "helpers"; people who earn their living by "helping" people, even though they really aren’t helping them at all. You have probably seen their advertisements: "We will reduce your debts by 70% without bankruptcy; call us today!" Unfortunately most of these ads are nothing more than Debt Management Scams. These unlicensed "helpers" take your money, but they have no legal ability to actually reduce your debt. They might be able to convince your creditors to accept a deal, but more often than not the only person who profits is the helper.

Mark’s advice: if you meet with a debt management professional, ask them to explain all of your options, not just the option they are selling.

I am proud to say that whether you meet with Howard Hayes or me in our Cambridge office, we will explain all of your options. If we think a debt consolidation loan will solve your problems, that’s what we will recommend. If you need credit counselling, or a lawyer, or a tax accountant, or if you can deal with the problems on your own, we will tell you that, too. If the solution is a consumer proposal or personal bankruptcy, we will explain the advantages and disadvantages of all options, so that you can make an informed decision.

To find out more about Mark Silverthorn, you can visit his debt help web site. To find out more about your options, feel free to call my office in Cambridge at 519-622-3773, or e-mail me, and we can arrange a no charge initial consultation.

A report issued today by the Certified General Accountants Association of Canada called Where Is the Money Now: The State of Canadian Household Debt as Conditions for Economic Recovery Emerge finds that household debt in Canada reached $1.41 trillion in December 2009, or $41,740 on average per Canadian. That personal debt level means that Canadians, including residents of Cambridge, have the most per capita debt of all advanced countries.

I was interviewed today on 570 News, and I made the following comments:

To start, I agree with the findings in the study. I meet with Cambridge residents each week, and there is no doubt we are carrying more debt than ever, and certainly more debt than when I opened our Cambridge Ontario bankruptcy office back in 1999.

I also commented that it’s not just the level of debt that’s a problem. The real problem is the carrying cost of our debt. Here’s what I mean: You might have a $1 million mortgage, but if the interest rate is low, and you have a great job making lots of money, making your mortgage payment may not be a problem. However, if you have a $100,000 mortgage with a high interest rate, and you lose your job, you may have trouble making your mortgage payment. It’s not the size of the debt that matters; it’s whether or not you can carry the debt.

Most of the people I meet with here in Cambridge are worried about two potential risks:

First, they worry about interest rates increasing. Mortgage interest rates, which have been very low for the last few years, are now starting to increase. That can be a huge problem if you have a variable rate mortgage, because if rates go up, your monthly payment increases.

The second worry is income. Ask yourself this question: if I lose my job, or if my hours get cut back at work, could I still make the payments on my credit cards, bank loans, and my mortgage? For the last few months the people I’ve met in Cambridge have told me things are going reasonably well. Toyota employees are back to full shifts, and the construction industry has picked up. But will it last?

Construction workers tell me they are worried about interest rates increasing, which will reduce demand for homes. I’m also hearing that people are worried about the HST that comes into effect on July 1; higher taxes generally are not good for the economy.

I concluded the interview with the following advice:

If you are living paycheque to paycheque, and you worry about losing your job, and you have a lot of debt, the time to take action is now. Start cutting your expenses, and use the extra money to pay down your debt. If that’s not enough to solve your problems, get help. Talk to a credit counsellor (Mosaic Counselling in Cambridge and Kitchener is a not for profit agency that can help with budgeting and debt management plans), or consider filing a consumer proposal or even personal bankruptcy.

Want to find out more? Please call my office in Cambridge at 519-622-3773 or 310-PLAN, and Howard, Gaye, Danielle or I would be pleased to answer your questions over the phone, or book a time when you can meet with me personally to review your options. There are options for dealing with debt, so call or e-mail me today for a fresh start.

Why are bankruptcies are up to record levels in Cambridge? There are two reasons:

First, we are in a recession. Unemployment is high, and when you are out of work it’s harder to pay your debts. I meet with many people each week who are actively looking for a job, but jobs are not easy to find at the moment.

Second, residents of Cambridge, and in fact in all of Canada, are carrying record levels of debt. Canadians have household debt of 141% 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 "only" $1.28 in debt for each dollar earned. When debts are high, bankruptcy rates rise.

Interestingly, of those 917 people who filed last year in Cambridge, 634 filed bankruptcy, and 283 filed proposals. In other words 31% of Cambridge residents filed a proposal last year, the highest percentage on record.

A consumer proposal is a deal made with creditors to avoid bankruptcy. Last year in Cambridge my firm, Hoyes, Michalos & Associates, filed more about a third of all consumer proposals filed in Cambridge, making us the largest filer of consumer proposals in the area. In a typical proposal you may pay back about a third of your debt, so if you owe $50,000 on credit cards and loans, you may pay $350 per month for four years, and once the proposal is completed your remaining debts are discharged. It’s a great way to avoid bankruptcy.

So why are more residents of Cambridge filing proposals? Most people don’t want to file bankruptcy, but it is also due to the fact that government of Canada changed the bankruptcy rules on September 18, 2009 when 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.

In other words, a bankruptcy is now more expensive for some people, making a consumer proposal an even better alternative.

What will happen in 2010? If the economy recovers, the number of bankruptcies filed in Cambridge may fall. However, if the economy recovers, it is likely that interest rates will increase, and if the cost of carrying debt goes up, more bankruptcies may result.

So what’s my advice? Excessive personal debt is a very dangerous, and unless residents of Cambridge take steps to deal with their debt, an increase in interest rates, or having hours cut back at work, will lead to a continued trend of higher personal bankruptcies.

For many people this recession 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 friends or co-workers. Unfortunately many debtors are now turning to less than reputable debt consultants, who charge a fee and then simply refer the debtor to a bankruptcy trustee. We strongly urge everyone 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.

If you are treading water, trying to service your debts, please call my office in Cambridge at (519) 622-3773 or 310-PLAN, or e-mail me, and I 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 Cambridge bankruptcy statistic.

Doug Hoyes, Cambridge Bankruptcy Trustee

I had an interesting meeting with a man this week in my Cambridge office. As with everyone I meet, we talked about his options for dealing with his debts, including a consumer proposal or a personal bankruptcy. In his case, due to his reduced income and some health factors, he decided that filing personal bankruptcy was his best option. At end of our conversation, I asked him why he chose today to make an appointment to meet me; why not last week, or last month?

He said that he had been struggling to pay his debts for a long time, and he finally got to the point where he couldn’t take it any more, and he wanted a fresh start. I told him that I’m not surprised; most people I meet with are "at the end of their rope", and want a fresh start.

But then he said something even more interesting: he said that he had decided he wanted a fresh start, not just dealing with his debts, but in many other aspects of his life as well. He gave me two examples: he wants to quit smoking, and lose some weight.

Earlier in our conversation we had reviewed his budget, and it was obvious that his two-pack-a-day smoking habit was costing him a lot of money. He new it was bad for his health, and his wife had been after him to quite for quite a while, and know that he added up what smoking was costing him every month, he knew that now was the time to quit. He was spending about $400 per month on smokes, so quitting will help his health, and significantly improve his monthly cash flow.

He also said he wanted to lose some weight and start eating better. Less trips to the fast food store will help his budget, and going for a walk every night will help his overall health.

I told him I was proud of him. It’s a difficult decision to decide to make changes, but as he said, "in for a penny, in for a pound." He decided that dealing with his debt while not dealing with smoking or unhealthy eating didn’t make sense. He wants a fresh start, and that’s what he will get.

Don’t misunderstand what I’m saying: I don’t give advice on healthy lifestyles; I’m no expert in that. My job is to help you deal with financial problems. But, I agreed with his approach: if I’m going to fix it, let’s fix everything.

Are you looking for a fresh start? Start by making a budget to see where you are spending money, and you may decide to quit smoking or cut other expenses as well. Either way, once your budget is done, give my office a call in Cambridge at 519-622-3773 or 310-PLAN (no area code required), or e-mail me to set up a no charge initial consultation, and let’s get started.

Tuesday is one of my normal days in my Cambridge office, and today was no different. Early in the afternoon I met with a young couple in financial trouble. She is home with their newborn child, and up until a few weeks ago he had a good job, until he got laid off. They met with me to ask for my advice on how to deal with their debts. Towards the end of our meeting my cell phone began to ring, but as I always do when I’m in with someone, I ignored it.

After they left my office I checked my voice mail message to find that a producer from BNN – The Business News Network wanted to do an interview in two hours about the massive increase in personal bankruptcies, and to get my thoughts on the new bankruptcy rules coming into force on September 18, 2009. I called the producer back, and they said they wanted me on camera at 4:05 this afternoon. Fortunately my colleague Howard Hayes was available to cover our appointments this afternoon, so I got into my car and headed for the CTV studio in Kitchener. BNN is based in Toronto, but they use CTV facilities across Canada for many of their interviews.

I arrived a few minutes before the live interview. The technician clipped the microphone on my lapel, and gave me the earpiece, and I sat there staring at the camera in the same studio they use for the evening news. The interviewer, Andrew Bell, was in the studio in Toronto; I couldn’t see him; I could only hear him in my earpiece. My picture was beamed by satellite to their Toronto studios, and then on air.

Mr. Bell asked me about the speed that people’s finances are collapsing, and I related the story of the young couple I had met in my Cambridge bankruptcy office two hours earlier who had lost their job and were facing bankruptcy. We talked about options, and I explained why a consumer proposal is often a great way to avoid bankruptcy if you have the income to support it. (I didn’t say this on air, since I never disclose any names or exact facts to the media, but the couple I met with will cut their expenses and decide whether or not bankruptcy is necessary when we meet again next week).

Whether I’m appearing on national television or meeting in private with someone in my Cambridge office, my message is always the same: there are options, and in many cases it’s possible to avoid bankruptcy, but you need to understand your options, so call my Cambridge office today at 519-622-3773 or 310-PLAN, or e-mail me, and let’s get started.

And if you are interested, you can watch the interview on the BNN web site.

In fact, as the recession deepens and the economy gets worse, the media is doing a much better job of reporting on personal bankruptcy, and the implications of bankruptcy.

I want everyone to understand all of the options available, so I will often appear on the radio or TV to discuss the options. (You can see a list of my radio and television appearances on the Doug Hoyes Radio and Television page). For some reason newspapers don’t report on personal bankruptcy as frequently as is done on radio and television, but that is changing.

Last week I appeared on a live question and answer forum hosted by the Globe and Mail. Readers were invited to e-mail in their questions; I answered them, e-mailed the answers back to the Globe, and they were posted immediately. The session lasted for an hour and a half, and in that time I answered 19 questions (and yes, my fingers were tired at the send of the session). You can read the Globe and Mail personal bankruptcy article with Doug Hoyes here.

But you don’t need to watch TV, listen to the radio, or read the newspaper to get the answers to your questions. You can e-mail me directly, or call my Cambridge office at 519-622-3773 or 310-PLAN, and get answers to all of your questions. You are not alone, but you only get answers if you take the first step and call or e-mail, so if you have questions, please contact us today.

My advice on the show was the same as the advice I give to Cambridge residents every day: First, reduce your debt, and second, have a plan to deal with your debt.

I talked on the show about consumer proposals and personal bankruptcy. Proposals and bankruptcy are not your only options; you may be able to deal with your problems on your own, or with the help of a credit counsellor. Regardless of the possible solutions, I emphasized on the show that you need a plan NOW. Even if you are already drowning in debt, it is still possible to make a plan to deal with your debts.

Please give my office in Cambridge a call at 519-622-3773, or 310-PLAN, or e-mail me, and together we will explore your options and make a plan to deal with your debts.

I explained that all trustees are licensed by the federal government, so we are all required to follow the same rules. However, if you visit us in Cambridge, you will meet with two people: Howard Hayes, who manages our Cambridge office, and me, Douglas Hoyes, the trustee responsible for our Cambridge office (and the founder of Hoyes, Michalos & Associates Inc., the largest firm in Canada dealing exclusively with personal insolvency; we don’t do bankruptcies for corporations, or audits or tax work like the national accounting firms).

In other words, the difference is our people. You meet with senior, experienced people, not administrative clerks.

This man was pleased that Howard and I took the time to listen to him so we could understand his situation, and he was happy that we didn’t just talk about personal bankruptcy in Cambridge. We covered all of his options, including debt consolidation, credit counselling, and consumer proposals. With all of this information, it was easy for him to make a decision.

Whether you need a first or second opinion, please call our Cambridge office at 519-622-3773 or 310-PLAN, or e-mail us, and let’s get started on a plan to help you deal with your debts.