Why have the number of bankruptcy filings in Brantford dropped this year? The obvious explanation is that the economy in Brantford has improved since last year. In many respects that’s true; unemployment levels remain stable, and with interest rates remaining low, we are more able to pay the interest on our debts. That’s good news for Brantford.

What lies ahead? I predict that as the government releases bankruptcy numbers over the next few months the bankruptcy rate will continue to remain at these improved levels. July and August will show lower levels than last year. As long as unemployment rates and interest rates remain low, the bankruptcy rate will remain lower as well. That’s good news.

Here’s more good news: the number of Brantford residents filing consumer proposals continues to increase. Of the 306 filings so far this year, 113 of them, or 37%, were consumer proposals. As time goes on the percentage of proposals filed will continue to increase, and that’s also good news, because most people prefer a consumer proposal as an alternative to bankruptcy.

To find out more about consumer proposals, feel free to e-mail me, or call us in Brantford at 519-770-4440 (or 310-PLAN) to arrange a no charge initial consultation and I’ll explain your options, and help you decide which option will work best for you.

Many local Brantford businesses get together each year to sponsor these movies. I’m pleased to be one of the sponsors, because I think a free movie night is a great way to spend time with your family, and save money!

Why I’m I writing an article about movie night in Brantford? What does that have to do with bankruptcy in Brantford?  Simple: I know that many Brantford residents have financial problems; I meet with them every day, and they want help, but they don’t want to have to travel to Hamilton, or Toronto, to get professional advice.  That’s why I like to spread the word that Hoyes Michalos is a local firm, and when you meet with us in Brantford, I guarantee that you will meet with me, Doug Hoyes, the co-founder and co-owner of Hoyes Michalos.

Do you need help with your money problems?  Give my office in Brantford a call today at 519-770-4440, or e-mail me, and let’s put our local expertise to work for you.

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.

Answer: In general, yes, the creditor will pursue the applicant first. If the applicant does not pay, then the creditor may pursue the co-applicant. However, if two people have signed for the debt, the creditor can pursue both of them initially if they so choose.

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.

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.

However, I do have a large number of Brantford residents that have filed a bankruptcy or consumer proposal with me that work at the casino. The casino is one of the largest employers in Brantford, so it’s not that surprising that I meet with people who work there. Often they lose their job, are off work for a period of time, and then they finally get a job at the casino, and they are afraid that their wages may be garnisheed, so they file bankruptcy. Their financial problems are not caused by gambling at the casino.

This morning I met with two people who are currently in the bankruptcy process with me, and both of them work at the casino. I asked them how business was, and they both said the same thing:

Booming.

That surprised me; I would have assumed that during a recession people would save their money and gamble less, but apparently that’s not the case. The casino is very busy these days.

I asked both people why they thought the casino was busy during a recession, and they both had the same response: If you have lost your job, and if you have very little money, you are looking for hope. The casino offers hope. They hope that they may win some money and make everything better.

I have no objection to people going to a casino. It’s your money, you can spend it as you wish. I don’t see much difference between spending $100 at the casino, or spending $100 on dinner and movie, or $100 going to a sporting event.

I do worry about people spending money they don’t have, and my two contacts this morning told me that they worry about that as well. If you are spending your Employment Insurance or Welfare cheque at the casino, you’ve got a problem. We all want hope, but that’s not a good way to get it.

Here’s my advice: if you are down on your luck, don’t despair. We are in the worst recession any of us have ever lived through. You are not alone. Everyone else is also worried about losing their job, or not having enough money to pay the bills. Instead of hoping to win by gambling, a better strategy is to follow my three point plan for financial success:

1. Make a budget. Unless you know where your money is going, you can’t control it. Here’s a link to some free personal budgeting tools.

2. Pay off debt. A recession is not the time to be carrying a lot of debt, so pay down your debts as fast as possible. If you have more debt than you can handle, it’s time to investigate your options.

3. Once your debt is under control, start saving money. It’s a lot easier to survive a job loss if you have money in the bank.

There is hope, but in most cases the casino isn’t the solution. It’s fine as entertainment; gambling is not a financial plan. For more information on your options, call my Brantford office at 519-770-4440 or 310-PLAN (no area code required in Ontario), or e-mail me to set up a no charge intitial consultation, and let’s get started.

I spoke to a car salesman at one of the local new car dealerships. He told me that he sold half as many cars last month as he did in the same month last year. I met with another person who told me that his factory has now gone to a work share arrangement, so instead of getting five days per week of work, he only gets two or three days per week, with a partial top up from unemployment insurance for the rest.

Lots of other Brantford residents have told me that they are having a hard time finding a job, and those with a job have had their hours cut back at work.

I have also heard lots of stories about house prices in Brantford. One person this week told me that last year their house in Brantford was appraised at $195,000, but a recent appraisal for mortgage purposes put the value at $175,000. This means it is now harder for people in Brantford to re-finance their mortgage if they need to raise extra money to deal with their debts. And, of course, it is now harder to sell your house to get enough money to pay off all of your debts.

The good news is that there is still hope. Since opening our office in Brantford ten years ago I have helped hundreds of Brantford and area residents file a consumer proposal or bankruptcy to deal with their debts.

That may not be the correct solution for you, but there is no charge or obligation if you call my office in Brantford at 519-770-4440, or e-mail me to set up a free initial consultation. I will review your options and help you decide what you need to do to protect yourself in this down economy.

The job market has been tough in Brantford over the last few years (you can read my post about the increase in the bankruptcy rate in Brantford last year). One of the few places that has been hiring over the last few years is the OLG Casino in Brantford. Here’s a common scenario:

A Brantford resident is out of work, so they apply for a job at the casino. By the time they are hired they have fallen behind on their debts, so to prevent their wages from being garnisheed they file a consumer proposal or bankruptcy in Brantford to deal with their debts. (If you are not working you have no wages for creditors to garnishee, so most people wait until they return to work to go bankrupt).

The strike at the casino has caused problems for many of the employees at the casino. I met with one person who was going to go bankrupt, but has delayed the filing until the strike is over. I am working with other debtors who work at the casino and are either in a proposal or a bankruptcy who are now having a tough time making ends meet without their regular paycheque (strike pay is only $180 per week).

On behalf of the many employees at the casino that I work with every month, I hope for their sake the strike is settled soon and they can get back to work.

If you work at the casino, or if your hours have been cut back at work and you are now feeling financial pressure, I encourage you to call my office in Brantford at 519-770-4440, or e-mail me to set up a free initial consultation to review your situation and help you decide which options will best help you deal with your debts and get a fresh start.

I started by describing the typical person I help here in Brantford. I explained that often bad things happen to good people, and as a result of job loss, marriage break up, medical condition, or bad money management people use credit to survive and end up with more debt than they can handle.

We then talked about solutions to debt problems, including personal budgeting, debt consolidation, credit counselling, consumer proposals, and bankruptcy.

The group then had lots of questions about different ways to deal with debt, and they also had many questions about credit reports.

Regarding credit reports, I recommended getting a free copy of your credit report each year to ensure that all information is correct. (You can get a free copy from the Equifax web site).

I closed by reminding everyone that financial problems occur frequently, so if you know of anyone experiencing debt problems, help is available by calling my office in Brantford at 519-770-4440, or e-mailing me to set up a free initial consultation.