Archive for the ‘bankruptcy Brantford’ Category

In statistics just released by the Office of the Superintendent of Bankruptcy, 1,319 residents of Brantford filed a consumer proposal or personal bankruptcy in 2009. In the City of Brantford there were 701 filings, and in rural Brantford, including Caledonia, Delhi, Dunnville, Paris and Simcoe there were a further 618 filings. That’s an increase of 38% from last year. Ontario was up about 32%, so Brantford fared slightly worse than the rest of the province.

The attached postal code map shows where each bankruptcy occurred. Not surprisingly, more bankruptcies happen where more people live, in the center of the Brantford. (We assembled this map based on our analysis of filings by postal code; the government does their math slightly differently, and they calculated 822 filings in Brantford and some of the outer areas, for a total increase of 40% for the year).

Why are bankruptcies are up to record levels in Brantford? 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.

Second, residents of Brantford, and in fact in all of Canada, are carrying record levels of debt. Canadians are 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 “only” $1.28 in debt for each dollar earned. When debts are high, bankruptcy rates rise.

Interestingly, Of those 1,319 people who filed last year in Brantford, 960 filed bankruptcy, and 359 filed proposals. In other words 27% of Brantford 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 Brantford my firm, Hoyes, Michalos & Associates, filed more than a third of all consumer proposals filed in Brantford, 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 $40,000 on credit cards and loans, you may pay $300 per month for four years, and once completed your remaining debts are discharged. It’s a great way to avoid bankruptcy.

So why are more residents of Brantford filing proposals? One reason is that the 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 Brantford 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 ticking time bomb, and unless residents of Brantford 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 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 family or friends or co-workers. 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.

If you are having debt problems, please call my office in Brantford at (519) 770-4440 or 310-PLAN, or contact me by e-mail, 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 Brantford bankruptcy statistic.

As a follow up to my blog post about a record month for bankruptcy in Brantford, an interesting article appeared yesterday on brantford.com. The article, part of their series on Tough Times, discussed the record rate of increase in personal bankruptcies in Brantford. I liked the article because rather than emphasizing the bad news, the articles authour, Jennifer McCarthy, explained the options I discuss with everyone to help them deal with their debts.

I believe bankruptcy may be necessary, but it should not be considered until you have looked at your other options:

• Work through the problems on your own, perhaps by making a budget and cutting expenses.
• Get a debt consolidation loan to lower the interest you are paying, so you can pay off your debts faster.
• Talk to a credit counsellor at the Family Counselling Centre of Brant, Brantford’s only not for profit counselling agency
• Consider a consumer proposal;
• If none of those options are possible, bankruptcy may be the final option.

For an interesting discussion of the pros and cons of bankruptcy, Greg McMillan wrote and interesting article asking whether or not residents of Brantford are jumping the gun by filing for bankruptcy?

Each situation is different, so if you have questions about your situation, call my Brantford office at 519-770-4440, or e-mail me to set up a free initial consultation.

I hate to be the bearer of bad news, but June was a record month for the number of personal bankruptcy and consumer proposals filed by my firm in Brantford. Since we opened our Brantford bankruptcy office in 1999, we have never had a busier month than we just finished. In fact, our volume in June, 2009 was more than twice as high as it was in June, 2008. The bad news for Brantford residents is that June is not normally a busy month; we are usually busy in March, April and May, and then as the summer approaches we slow down. Not this year. Our Brantford help line is busier than ever, with no slow down in sight.

Why is this happening?

First, more people in Brantford are losing their jobs, or having their hours reduced at work, so they just can’t make ends meet.

Second, house prices continue to fall in Brantford, so it’s no longer possible to re-finance your house to pay off your debts, or sell your house at a profit to raise cash. An increasing number of Brantford residents are finding themselves “under water” (the value of their house is less than the amount owing on the mortgage), so they are letting the bank foreclose, and they are finding a place to rent, and then dealing with the resulting shortfall.

Finally, a large number of the people I meet are no longer optimistic. They believe that the recession won’t end tomorrow, so they are deciding to go bankrupt now to deal with their debts, in the hope that by 2010 the economy has improved, and they will have a fresh start.

I can’t predict when the recession will end, or when house prices in Brantford will start to increase, but I can tell you that debt problems don’t go away on their own, so if you are struggling with debt, now is the time to act. Call my Brantford bankruptcy office at 519-770-4440 or 310-PLAN (no area code required), or e-mail me today with your questions, and let’s get started making a plan for dealing with your debts.