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.

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.

Not surprisingly, the numbers from across Canada are dismal. There was also a massive increase in the personal bankruptcy rate throughout Canada, with bankruptcy filings up about 36% across Canada. Why is the bankruptcy rate increasing faster in Cambridge than in the rest of Canada?

That was a question I was asked today on the Gary Doyle show on 570 News (you can listen to my thoughts here). I said that I believe that other areas of Canada got hit in the recession earlier. For example, in the bankruptcy rate in Windsor was up about 44%, which is very high, but still less than our area, presumably because the automotive industry in Windsor got hit a year ago. In Cambridge, and in Waterloo Region, we have more white collar jobs, and we are closer to Toronto, so we haven’t suffered quite as much. Until now.

As I explained to Gary Doyle, the September numbers spiked upwards due to the new bankruptcy rules that made bankruptcy more expensive for some, so some people rushed to file before the new rules came into force on September 18. The main reason for the higher numbers, of course, is the fact than unemployment is high, and debt levels are high.

What does this mean to you? You are not alone. If you have more debt than you can repay, there is help available. Give my office a call in Cambridge at 519-622-3773 or 310-PLAN, or e-mail us and we will review your options and help you determine a solution. Call us today.

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.

How many people went bankrupt in Cambridge in 2008? That’s a hard question to answer, because the Office of the Superintendent of Bankruptcy (the "OSB") in Ottawa does not publish statistics for Cambridge. They include Cambridge in the results for Kitchener, so it’s impossible to know from their published statistics exactly how many people go bankrupt in Cambridge each year.

Fortunately, there is a way to find out. Every year (including last year) I request a summary of bankruptcies and consumer proposals by postal code from the OSB. Each year they send me a summary of by postal code (they don’t send me the names of the people who filed; just the number per postal code).

We then take that information and add up all the numbers. You can see the results on a postal code map by going to our Bankruptcy Cambridge Statistics page. Here are the results:

In 2008 there were 477 individuals that filed personal bankruptcy in Cambridge, and another 189 Cambridge residents filed a consumer proposal. There were another 25 commercial proposals filed (filed by people, not corporations in most cases), for total filings of 691 people in Cambridge, Ontario in 2007.

That’s an increase of 30% from last year, which is significantly more than the Ontario increase of 16%, and the 14% increase in all of Canada.

Of course statistics don’t matter; all that matters is your personal situation. I publish these bankruptcy statistics for one simple reason: to show you that you are not alone.

If you would like to discuss your options, please call my Cambridge office at 519-622-3773 or 310-PLAN, or e-mail me a question and my staff will set up a meeting so that I can personally review your situation, because you are a person, not a statistic.

How many people go bankrupt in Cambridge each year? That’s a hard question to answer, because the Office of the Superintendent of Bankruptcy (the "OSB") in Ottawa does not publish statistics for Cambridge. They include Cambridge in the results for Kitchener, so it’s impossible to know from their published statistics exactly how many people go bankrupt in Cambridge each year.

Fortunately, there is a way to find out. Every year I request a summary of bankruptcies and consumer proposals by postal code from the OSB. Each year they send me a summary of by postal code (they don’t send me the names of the people who filed; just the number per postal code).

We then take that information and add up all the numbers. You can see the results on a postal code map by going to our Bankruptcy Cambridge Statistics page. Here are the results:

In 2007 there were 396 individuals that filed personal bankruptcy in Cambridge, and another 128 Cambridge residents filed a consumer proposal. There were another 9 commercial proposals filed (filed by people, not corporations in most cases), for total filings of 533 people in Cambridge, Ontario in 2007.

That’s an increase of 5.3% from last year, which is slightly less than the Ontario increase of 8.2%, but worse than the 2.5% increase in all of Canada.

By way of perspective, there were 1,109 personal bankruptcies and proposals filed in Kitchener and Waterloo, so there are about half as many personal insolvencies filed in Cambridge as compared to Kitchener.

Of course statistics don’t matter; all that matters is your personal situation. I publish these bankruptcy statistics for one simple reason: to show you that you are not alone.

If you would like to discuss your options, please call my Cambridge office at 519-622-3773 or 310-PLAN, or e-mail me a question and my staff will set up a meeting so that I can personally review your situation, because you are a person, not a statistic.