When I opened my Brantford office more than a decade ago the I filed about five bankruptcies for every consumer proposal. Today the ratio has narrowed, and in a typical month I file about the same number of consumer proposals and bankruptcies. Why? Because for many people in Brantford, a consumer proposal is a better option than bankruptcy.

I’ve made a list of the five reasons why a consumer proposal might be a better solution to deal with your debts than a bankruptcy in Brantford.  The reasons are listed below, or you can watch the video:

1 Your bankruptcy payment each month is based on your surplus income.  If your pay goes up, you pay more.  In a consumer proposal, your payment never changes, even it your income increases.  If you expect your pay to increase, or if you simply want the certainty of knowing what your payment will be each month, a proposal may be the solution for you.

2 In bankruptcy you lose some assets, like your tax refund, RRSP contributions in the past year, RESPs, investments, and possibly any equity in your house or car.  In a consumer proposal, you keep all of your assets.

3 A consumer proposal is simple.  Unlike a bankruptcy where you are required to submit proof of your income (paystubs and budgets) each month, in a consumer proposal there are no monthly reports required.  You will meet with your administrator to work out a plan, and once it’s approved, that’s it!  You simply make your payments each month until your plan is completed.

4 If a creditor objects to your bankruptcy ending (your discharge), you are required to attend a court hearing.  Since a proposal is approved by the creditors at the start of the process, there is no court hearing.

5 Bankruptcy is a last resort.  You file bankruptcy as a reaction when you have no other options.  A consumer proposal is pro-active.  You are taking charge of your situation.  You are deciding what you can afford to offer your creditors, so you know you can handle whatever you propose.

A consumer proposal is not the correct solution for everyone, but if you have more debts than you can handle, and you want to avoid bankruptcy, arrange a no charge initial consultation with a licensed consumer proposal administrator and find out if a consumer proposal is the right solution for you.

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The concept behind surplus income in a bankruptcy in Canada is simple: the more you make, the more you pay.  Under federal bankruptcy rules, you are permitted to earn a set amount each month; if you earn more than that amount, you pay more.  Here’s a simple example:

In 2011 a single person is allowed to earn $1,926 per month, net income, after taxes.  Each month you send copies of your paystubs to your trustee, and if you earn more than that amount, you pay a surplus income penalty of half of the amount you are over the limit.  So, if you earned $2,526 this month, you are $600 over the limit, so you are required to pay a penalty of half of that surplus, or $300.

At the end of the first seven months of your first bankruptcy the trustee averages your income, and if on average your income was more than $200 over the limit, your bankruptcy is automatically extended from nine months to 21 months, and you are required to make that surplus income payment ($300 in this example) for the full 21 months..  Obviously surplus income greatly increases the cost and length of your bankruptcy.

So, what’s the solution?

First, before you go bankrupt, do the math.  When you meet with me, or any of my associates in our Brantford bankruptcy office, we’ll help you crunch the numbers.  We’ll estimate what your surplus income is likely to be, and then you can decide whether or not bankruptcy is the correct option for you.  In fact, we’ve developed a special computer program to help with the math.  We take into consideration when you get an extra paycheque (a three pay month if you get paid bi-weekly, for example), to help estimate your expected surplus.

Second, we can show you how to avoid the surplus income penalty by filing a consumer proposal.  How does that work?  If you know that your bankruptcy is likely to be extended, it may make more sense to avoid bankruptcy and file a consumer proposal instead.

With a consumer proposal we can extend your payments over a longer period of time, which keeps the monthly cost lower.

Which option is right for you?  We’ll crunch the numbers, so that you can make an informed decision that makes sense in your situation. You can read more about how surplus income payments are calculated, or watch this video where we answer a real life question about surplus income.

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When I meet with you at my Brantford office, I’ll explain all of the ways to avoid bankruptcy.  We’ll talk about budgeting, and consumer proposals, and other options.  For some people, however, there is no other logical option, and bankruptcy becomes necessary.  Here are the steps that explain how to file bankruptcy in Canada:

1 We start with our meeting, where we review all of your options.  I can explain the options, but only you can decide that you need to file bankruptcy.  We’ll discuss some of the warning signs, and help you explore your options.

2 We then work together to gather the necessary information.  I need to know who you owe money to, what you own (like a car, or a house), and what you earn and spend each month.  I’ll give you our Fresh Start Application Package and I’ll help you fill it out.

3 My office will then prepare all of the necessary bankruptcy paperwork.

4 You will then meet with me, or one of my team members, to sign the paperwork.  While you are still in our office we immediately electronically file your documents with the Office of the Superintendent of Bankruptcy, and you are officially bankrupt.

5 During the bankruptcy period, which lasts for a minimum of nine months, you are required to attend two credit counselling sessions with a credit counsellor in Brantford.  You will also provide us with the information needed to file your taxes, and you will be required to make payments, based on your surplus income.

6 If you perform all of your duties, and if no creditor objects, you are automatically discharged at the end of your bankruptcy period (which is 9 or 21 months in a first bankruptcy, or 24 or 36 months in a second bankruptcy, depending on your income).

Of course the bankruptcy process can’t be fully explained in 300 words or less, and each situation is unique, so I suggest you phone my Brantford office at 519-770-4440 or 310-PLAN, or e-mail me, and we can arrange a time to talk on the phone, or to meet, and explore your options.

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Over the last two weeks I have met with five people (yes, I counted) in my Brantford office who have told me a very similar story.  It goes something like this:

I’ve been struggling with debt for a while, ever since I lost my job, or had my hours cut back. I was using credit cards and my line of credit to survive. Then, one day, I got this phone call from a telemarketer who said they could solve my debt problems. It sounded too good to be true, but they seemed nice, and I was desperate, so I signed up with them.

Unfortunately they weren’t able to make a deal with two of my credit cards, and now I am so far behind I’m afraid my wages at my new job are going to be garnisheed.

This is a sad story I’m hearing the debt consultant horror stories all too often.

Doug Hoyes, Brantford Bankruptcy Trustee, Consumer Proposal Administrator

We’ve all heard ads on the radio by debt consultants promising to reduce your debt.  But over the last six months some of them have started telemarketing.  It’s a brilliant strategy.  They have a bunch of people sitting at a call center in California, or wherever, and they have a computer auto-dial hundreds of telephone numbers every hour.  If you answer, you hear a recorded message offering to solve your debt problems; just press “1″ to be connected to an operator.

It’s brilliant, because having a computer doing most of the work is very inexpensive.

If you get one of these phone calls and you are tempted to talk to them, here are some questions I would ask:

1. What company are you calling from?  (You want to know exactly who you are dealing with).
2. What city are you calling from? (If they are calling from Brantford, or even somewhere in Ontario, fine.  If they are calling from California, or overseas, that’s a big warning signal).
3. When can we meet to discuss this? (If they are calling from California, they don’t have an office here in Brantford to meet with you.  Do you really want to trust someone you will never meet?)
4. Who licenses you? (It’s quite possible they have no licenses at all).
5. How do I know if I pay you this money that my debts will go away?

Here’s the truth: At my firm, Hoyes, Michalos & Associates Inc., we never use telemarketers.  The only time we will ever phone you is if we are returning your call.

My office is here in Brantford (and has been for over ten years).  Here it is (we share space with the Investment Planning Counsel):

View Larger Map

If you want to meet with me in Brantford, no problem.  I’m licensed by the federal government of Canada.

How do I know I can help you deal with your debts?  I won’t know if I can help you until we meet to review your situation, so give me a call in Brantford at 519-770-4440, or use the yellow box on the right to send me a message, and let’s get started.

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In statistics released today by the Office of the Superintendent of Bankruptcy, the personal bankruptcy rate in Brantford is down, but consumer proposal filings are up significantly.  Here are the numbers:

In the first six months of 2011, residents of the Brantford region filed 253 personal bankruptcies, and 279 consumer proposals, for a total of 532 filings.

In the first six months of 2010, residents of the Brantford region filed 350 personal bankruptcies, and 206 consumer proposals, for a total of 556 filings.

Here’s what interesting about those numbers:

First, in percentage terms, personal bankruptcies dropped by 28%, which is a significant drop.  That shows the local economy is improving.  However, consumer proposal filings increased by over 35%, which is a significant increase.  That shows that Brantford residents still have debt problems.  Overall filings (bankruptcies and proposals combined) were down 4%, which in a region the size of Brantford is not a huge percentage swing.

More interesting is that this is the first time in history that there were more consumer proposals filed than personal bankruptcies in Brantford.

In the first six months of 2010 only 37% of filings were consumer proposals.  This year it was 52%.  That’s a massive swing.

So, what’s going on?

It’s possible that the Brantford economy has improved slightly compared to 2010.  People have slightly more income, either from better jobs or more hours at their existing jobs, so they have the resources to file a consumer proposal.

A consumer proposal is a legally binding deal we negotiate with your creditors.  For example, if you have $50,000 in credit card and other debts, we might be able to negotiate a settlement where you repay $20,000 (say $400 per month for the next 50 months).  Each case is different, but the point is that you have enough income to make partial, but not full, payments.  A proposal is a great solution.

In my experience if the economy really gets into trouble, people can’t afford to make a deal, and bankruptcy becomes the more likely solution.

What will happen for the rest of 2011?  I predict we will see a further drop in filings in when the numbers are reported for July and August, but we will have to wait to see how the economy goes to find out what will happen in the Fall.

Stay tuned…….

If you are interested in statistics for the rest of Canada, you can see these links to bankruptcy Canada statistics, bankruptcy Ontario statistics, and Canada consumer proposals statistics.

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Doug Hoyes, Brantford Bankruptcy Trustee

The 2011-2012 edition of the Brantford yellow pages was delivered to my home today.  Since I opened our Brantford office in 1999, I’ve had a big ad in the yellow pages.  Last year I had the biggest ad in the book: two full pages.  You don’t need to be an accountant to figure out that paying for a two page, full colour advertisement costs a lot of money. In the early days the big ad was great for business, since in those days everyone went to the yellow pages when they wanted to buy a product or service.

Today, not so much.  You yourself are proof that the yellow pages is “old technology”.  Today if you want to find out something, you do what you are doing right now: you go to the internet.

Other people are starting to agree; this year’s Brantford yellow pages is thinner than last year’s, which is thinner than the year’s before.  It no longer makes sense for local businesses to pay thousands of dollars per month for big printed ads, when instead we can communicate with you directly over the internet.

That’s why instead of spending thousands of dollars per month on a big two page ad in the yellow pages, I’m now only spending a few hundred on a small, quarter page ad.  You can see it on page 29 of this year’s book, but you won’t, because why would you go read a book when you can get more information on the internet?

More than half of the people who file bankruptcy in Brantford, Ontario with me, or who file a consumer proposal in Brantford with me find me on the internet.  So, it makes sense for me to devote my time and energy to giving you as much information on the internet as possible.  (The best resource is still our main bankruptcy and consumer proposal website).

I also noticed on the front of the yellow pages, for the first time, in the upper left hand corner it says ‘To stop receiving this directory call…” and they give a phone number.  I guess a lot of people don’t want a paper book that they will never use, and will just end up in the blue box!  I’ll do my part for the environment by answering your questions here on the internet; no more trees need to die!

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As I reported earlier this month in my post on the Face of Bankruptcy in Brantford, high debt levels lead to bankruptcy.  But just how many people go bankrupt in Brantford?

The Office of the Superintendent of Bankruptcy reports that in 2010 337 residents of Brantford declared bankruptcy, and a further 225 people filed a consumer proposal, for a total of 564 filings.  Here’s a summary by postal code for the City of Brantford:

This is a significant drop from the massive increase in Brantford bankruptcy filings in 2009.  In 2009 there were 701 total filings, so a decrease to 564 filings represents a drop of almost 20%.

The good news is that the rate keeps falling.  In the first six months of 2010 in Brantford there were 306 bankruptcy and consumer proposal filings in Brantford.  If that rate had continued there would have been 612 filings for the year; the fact that we had “only” 564 filings shows that the rate dropped even further in the second half of the year.

Why the drop?  One explanation may be that the economy is gradually improving, so Brantford residents are more able to service their debts.  A pessimist would tell you that so many people have already gone bankrupt or moved out of town that there’s no-one left!

I believe the answer is somewhere in between.  Yes, Brantford has had hard times over the years, and yes, the economy did improve somewhat in 2010.

The fact remains that there are still a large number of people with financial problems, so if you are feeling the crunch, feel free to give my office a call in Brantford at (519) 770-4440 or e-mail me to set up a no charge initial consultation, and let’s get started making a plan to deal with your debts.

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What does the typical person who files bankruptcy in Brantford look like? As reported in an article in The Brant News titled The Face of Bankruptcy my firm just released a study where we profile a person we call “Joe Debtor”, the average person who who files a consumer proposal or bankruptcy in Ontario.

Jason Teakle, the reporter on the story, wanted to know what the typical person who files bankruptcy in Brantford looks like; here’s what I told him:

The average person in Ontario who files a consumer proposal or bankruptcy has total unsecured debts (not including mortgages or car loans) of just under $60,000 at the time they file. In Brantford total unsecured debt is just over $51,000, so Brantford residents have slightly less debt than the provincial average.

However, $51,000 in debt is still a massive amount of debt, so it’s not surprising that with that level of debt a bankruptcy or a proposal is often the only solution.

Here’s another scary statistic. In Ontario “Joe Debtor” owes $24,390 on four credit cards. In Brantford the typical person I meet with is also carrying a balance on over four credit cards, owing a total of $23,358. As you can see, credit card debt in Brantford is a problem, just like it is throughout Ontario.

Another interesting finding deals with a popular misconception about bankruptcy. Many people believe that people who go bankrupt don’t have a job, and don’t own a house. We found that most people who file bankruptcy in Brantford are working, and about a quarter of them own a house. The average mortgage balance owing at the time of filing in Brantford was $187,000, which is lower than the provincial average of $210,000, due primarily to the more reasonable house prices in Brantford.

I was asked what individual residents of Brantford should do if they have more debt than they can handle. My advice is this:

First, make a list of your debts, and make a budget, and crunch the numbers to see if it’s possible to repay your debts on your own. If you need help with budgeting, or just want someone to talk to, the credit counsellors at Brant Family Counselling here in Brantford can help; they are a not for profit agency dedicated to helping you find solutions to your problems.

If budgeting alone won’t eliminate your debt, give me a call in Brantford at (519) 770-4440, or e-mail me, and we can discuss whether a consumer proposal is the correct solution for you. As a Brantford consumer proposal administrator and bankruptcy trustee, we can use a proposal to negotiate a settlement with your creditors, where you make monthly payments to eliminate your debt, often for less than the full amount owing.

Give me a call to discuss your options today.

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In the first six months of 2010, 306 residents of the City of Brantford filed a consumer proposal or personal bankruptcy. If that pace of filing remains consistent for the balance of this year that would project out to 612 filings for the year, which would be about 13% less than the 701 filings in Brantford in 2009. Here is a map showing where the filings have occurred, by postal code:

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 to arrange a no charge initial consultation and I’ll explain your options, and help you decide which option will work best for you.

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Every Thursday night during July and August Harmony Square in downtown Brantford hosts a free Movie Night.  The movies are geared towards kids of all ages.  Tonight’s movie is Honey I Shrunk the Kids, and I’m happy to announce that my firm, Hoyes, Michalos & Associates, is the sponsor for the movie today. Here’s my welcome message:

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.

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