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Bankruptcy Canada Trustees Talk — The insider's view of Bankruptcy in Canada

Cambridge Life Solutions Reviewed by Maclean’s

by Ted Michalos

If you are in financial difficulty and are considering using a debt settlement company to deal with your debts, then you really should pick-up a copy of the March 26, 2012 Maclean’s Magazine.  On page 39 you will find an article titled Growing (debt) pains: Cambridge Life Solutions offers a lifeline to indebted Canadians—using a model that’s banned in the U.S.  The story, written by Richard Warnica, presents a review of a debt settlement company operating in Canada called Cambridge Life Solutions, and it is quite revealing.

Ted Michalos, Bankruptcy Trustee

Ted Michalos, Bankruptcy Trustee

The title of the piece is a play on Cambridge Life Solutions corporate spokesperson’s old TV show.  The spokesperson is Alan Thicke and the show was called “Growing Pains” – a sitcom that was quite popular in its day.  Alan Thicke played  Dr. Jason Seaver, a psychologist, husband and father of 4 children.  The show was a hit and Alan Thicke was all that you’d want a father figure to be.

While stranger storylines have been written, I for one have a hard time picturing the friendly father figure of Dr. Seaver sitting down with one of his sitcom children and actually advising them to deal with a debt settlement company like Cambridge Life Solutions over some of the other options that are available to people in need of debt management services.

For those of you who haven’t read the Maclean’s article, debt settlement plan companies offer to negotiate (settle) with your creditors to reduce the total amount that you have to repay.

According to the Maclean’s article, Cambridge Life Solutions determines your total unsecured debt and then suggests a target of 30% as a reasonable repayment.  By way of example, if you owe $60,000, then your target will be $18,000.  According to the Maclean’s article, Cambridge Life Solutions then sets you on a savings plan and only once you have accumulated the target in your savings account do they offer lump sum settlement to your creditors.

Cambridge Life Solutions doesn’t actually contact your creditors as soon as you sign with them.  While Cambridge Life Solutions states that they contact their clients creditors within 30 days of enrollment 99.9% of the time, they have contracted with their clients for the discretion to hold off on making contact with the creditors for as long as they deem appropriate.  But even in those instances where contact has been made shortly after enrollment, settlement proposals generally aren’t made until a much later date.  All the while, you make payments to Cambridge Life Solutions, the first portion of which goes towards payment of your fees to them, being typically around 15% of your debt according to the Maclean’s article.  In my example that means their fee may be $7,500 – paid mostly upfront, before any reduction has been accepted or even negotiated.  While not a psychologist, my father certainly wouldn’t encourage me to pay such an exorbitant fee up front.

In 2010 this form of debt settlement contract where fees were required upfront was banned in the United States.   For good reason, a similar ban exists in Alberta and this year, Manitoba passed a similar law.  Interestingly, Cambridge Life Solutions does not operate in either Alberta or Manitoba.

I have no idea what percentage of Cambridge Life Solution’s clients successfully save enough money to negotiate deals with their creditors.  In the Maclean’s article we are told the success rate in the United States was less than 10% for all clients of debts settlement companies – I see no reason to expect significantly better results in Canada, although Cambridge Life Solutions’  representative doesn’t think the comparison makes sense.

I strongly encourage you to read Richard Warnica’s article in Maclean’s and draw your own conclusions.  In the past I have written numerous critiques of the debt consulting industry and I do not hold them in high regard.  Neither Alan Thicke nor Dr. Seaver can change that opinion.

My advice? Research your options, including debt settlement plans, credit counselling, consumer proposals and bankruptcy, and only make your decision when you have reviewed all of the facts.

Posted on Thursday, March 22nd, 2012
Filed under: Bankruptcy Alternatives andConsumer Proposal andDebt Options
posted by Ted Michalos @ 9:33 am 2 Comments

Credit Education Week Canada 2011

by Doug Hoyes

Douglas Hoyes and Credit Education Week Canada

Douglas Hoyes, Canada Bankruptcy Trustee

Credit Education Week in Canada runs from November 14 to November 18 this year, and is designed to teach Canadians about the proper use of credit. We’ve reported on it before, in our articles on Credit Education Week 2009, Credit Education Week 2010 – The Language of Money, and Credit Education Week in Canada 2010 – Some Final Thoughts. I also wrote about this year’s edition in Credit Education Week – Who Should Teach Us About Debt?

In general, we all agree that education in any form is worthwhile. Obviously the more we can learn about credit, money and debt, the better.

This year’s Credit Education Week theme, according to their website, is The Sandwich Generation, referring to Canadians in their 30′s, 40′s and 50′s who are responsible for their children, but are also assisting with the care of their aging parents. Being in the “sandwich” can be very rewarding, but also stressful, both emotionally and financially.

Jonathan Chevreau wrote an article in the Financial Post about Adult kids living at home? It is going to cost you, where he explains that 60% of Canadians aged 20 to 24 still live at home with their parents, which obviously puts an increased financial burden on the parents. I’m sure his talk on Tuesday will be quite informative.

I am a strong believer in education, but I am even stronger believer in self-education.

Credit Education Week is sponsored by three of the big banks (RBC, TD, and BMO). Other sponsors include OLG (who operates our lotteries and casinos), a large payday loan company, Credit Canada, and three bankruptcy firms.

I’m glad they are sponsoring the events, but I do worry that their advice will be somewhat biased.

What debt advice would you get from various sources?

A bank would encourage you to cut your expenses, or get a debt consolidation loan. The Royal Bank is a “Silver” sponsor of Credit Education Week. They have an Advice Centre on their website that includes a section on managing and reducing debt. They recommend that you “Go to your bank, meet with an accountant, or set up an appointment with a not-for-profit credit counselling service.” That’s good advice, but they missed two other obvious solutions: a consumer proposal, or personal bankruptcy.

What advice would I get from a payday loan company?

What advice would I get from a bankruptcy trustee? Obviously they would tell me to consider a consumer proposal or bankruptcy, but would they tell me to consider a debt consolidation loan?

Gail Vaz-Oxlade, host of TV’s Till Debt Do Us Part, and Princess, believes that during Credit Education Week we should all stop using our credit cards. That’s an interesting idea, and probably not an idea you will hear at a bank-sponsored event. Not using credit cards eliminates the possibility that you will ever have to pay interest charges, so it’s not a bad idea. You can read more on her blog post where she suggests we should school, which means teach lenders not to lend to people who can’t afford it.

In an interview on CBC she tells the story of a young man, earning $21,000 per year, who got $15,000 in credit from a big bank. You can watch the interview on CBC. The only solution for this person was to, you guessed it, file a consumer proposal.

You won’t see Gail Vaz-Oxlade speaking at Credit Education Week, delivering her message of personal responsibility, and looking out for yourself.

My point is this: everyone has their own point of view, so everyone will give you potentially biased advice.

Of course I’m biased, because I’m a licensed bankruptcy trustee. However, I also know that the federal law under which I am licensed requires me to discuss all options. Directive No. 6R3 requires me to “discuss the options available to debtor for resolving financial difficulties”, including “non-legislative debt settlement arrangements” which includes debt consolidation, credit counselling, debt settlements, and budgeting. So even though I, like everyone else, is biased, I, like all trustees, am required to explain all of your options, to help you make a decision.

So here’s my advice this Credit Education Week: make it a priority to teach yourself about credit and debt.

By all means make use of all of the Credit Education Week seminars and resources. Talk to your banker, and your accountant, and a not for profit credit counsellor. But also talk to a consumer proposal administrator and a bankruptcy trustee so that you know all of your options.

Do searches on the internet to find people like Gail Vaz-Oxlade and Jonathan Chevreau and other personal finance writers and learn from them. Of course they are biased too, so don’t blindly follow anyone. Listen to what they have to say, and think for yourself.

Debt is too dangerous to ignore. It’s your life, so only you can be responsible for how you handle debt. If we can all learn that lesson, this will be the most successful Credit Education Week ever.

Posted on Monday, November 14th, 2011
Filed under: Bankruptcy Alternatives
posted by Doug Hoyes @ 5:17 am No Comments

Supreme Court Decision – Will it Lead to Changes in Bankruptcy Law in Canada

by Doug Hoyes

On July 14, 2011 the Supreme Court of Canada released its decision in the case of Schreyer v. Schreyer. Why are we discussing a Supreme Court of Canada decision in a blog about bankruptcy in Canada? Because this case confirms a long held principle of bankruptcy law, but it also forces us to consider whether changes to bankruptcy law are required.

You can read the entire case on the Supreme Court of Canada’s website, but here’s a simple summary:

Doug Hoyes, Bankruptcy Trustee

Doug Hoyes, Bankruptcy Trustee

Mr. and Mrs. Schreyer divorced in 1999, and as is standard procedure, their assets were to be divided amongst them. Mr. Schreyer was to make an equalization payment to Mrs. Schreyer of about $41,000.

Where both parties own assets, and one of the parties will be retaining one of the assets, that party pays the other their share.

For example, if the wife’s only asset are shares in a business worth $100,000, and the husband has no assets, upon divorce the wife may be required to make an equalization payment of $50,000 to the husband. By doing so, after the divorce, they both end up with $50,000 in assets, so they each have half of the total assets they had while married.

In the case of Schreyer v. Schreyer the asset was a family farm, and Mr. Schreyer was ordered to pay $41,000 as an equalization payment to his wife.

However, before that payment was made, Mr. Schreyer declared bankruptcy. Mrs. Schreyer therefore became a creditor of his in his bankruptcy. Under Manitoba’s The Judgments Act, the family farm was exempt from execution by creditors.  That meant that Mr. Schreyer kept the farm when he went bankrupt, and his wife got nothing.

(It should be noted that the law is different in each province. For example, in Ontario there is no exemption for real estate, so in Ontario if the bankrupt owned a farm worth $80,000, the trustee may sell the farm and distribute the proceeds to the creditors, so had this happened in Ontario, Mr. Schreyer would have lost the farm when he went bankrupt, or he would have been required to pay into his estate the value of the farm).

Is this fair?

According to bankruptcy law, your debts are extinguished when you go bankrupt, so on that basis yes, it’s fair.

However, the Bankruptcy & Insolvency Act does give special treatment for child support, in section 178 (1) (c), which states that the following debt or obligation is not discharged in a bankruptcy:

any debt or liability arising under a judicial decision establishing affiliation or respecting support or maintenance, or under an agreement for maintenance and support of a spouse, former spouse, former common-law partner or child living apart from the bankrupt;

In other words, if you go bankrupt, you are still required to pay child and spousal support.

So, why, if you file bankruptcy in Canada, are you not required to make equalization payments to your former spouse? That’s a good question, and I suspect that the law will be changed to close this loophole; it’s certainly received a lot of press since the decision was released, including these articles:

Parliament moves slowly, so we shall see how long it takes for the government to act.  Regardless of their speed, I believe that it is time for the government to change the rules regarding divorce and bankruptcy.

Posted on Monday, July 18th, 2011
Filed under: bankruptcy Canada andbankruptcy reform
posted by Doug Hoyes @ 3:22 am 1 Comment

Gift Cards are Worthless if the Store is Bankrupt

by Doug Hoyes

Gift cards are a nice, convenient gift, but what happens if the store declares bankruptcy in Canada? The answer: you’ve got a problem.

Last week Global TV News ran a story about the bankruptcy of Tabi, a large women’s clothing retailer with 78 stores across Canada. All stores are being liquidated, and the liquidator is not allowing customers to spend their gift cards. You can watch the entire story here:

Have you ever wondered why almost every store, including grocery stores, have a gift card program? Obviously they want to encourage you to shop at their store, but that’s only part of the story. They have gift cards because they are very profitable, for two reasons:

First, statistics show that if a gift card is not redeemed within the first few weeks, it’s likely that it will not be redeemed at all. Gift cards can be easily forgotten or lost. That’s great for the store, because they sell a $50 gift card and in many cases don’t have to provide any product. That’s a 100% profit for the store.

Second, even if the gift card is used, it’s common for the gift card not to be used in full. If you have a $100 gift card and buy something for $95, what are the chances that you will go back to the store later to redeem the final $5? It’s unlikely, and in that case the store increased their profits by 5%, so again, stores love gift cards.

What can you learn from this story?

A gift card is not something you want to keep for a “rainy day“. If you get a gift card as a gift, spend it. It won’t increase in value, and there is always the chance that the store will go bankrupt, so the sooner you spend it, the better. Tabi was in business for 30 years, so if they can go bankrupt, anyone can.

The prudent approach is to use the gift card for something you were going to buy anyway. If it’s for clothing, decide what clothing you will need to purchase in the next few months, and purchase it now. You can use the gift card for luxuries, but by buying what you need you save your money.

Finally, think twice before giving a gift card as a gift. Is it likely that the recipient will use it, or is it to a store they don’t shop at so it might not be used? If in doubt, give gift cards that are redeemable at many different locations, and at stores that sell a wide variety of goods, so they are most likely to be used.

If in doubt, and you can’t think of a gift, give cash. Bankruptcy in Ontario, or anywhere in Canada can happen. Losing a $50 gift card is easy; it’s much less likely that someone will forget about a fifty dollar bill. Gift cards are convenient, but spend them quickly.

Posted on Monday, April 4th, 2011
Filed under: bankruptcy Canada
posted by Doug Hoyes @ 7:34 am 3 Comments

Bankruptcy Rate Drops in Canada

by Doug Hoyes

The bankruptcy rate in Canada dropped in 2010, according to statistics recently released by the Office of the Superintendent of Bankruptcy. That’s good news, right? Yes and no.

First, let’s review the numbers. In 2010 a total of 135,008 Canadians filed a consumer proposal or personal bankruptcy. That’s an 11% drop from the 151,712 who filed in 2009. That’s a drop of 16,704 people, and yes, that’s good news. Fewer Canadians declared themselves insolvent in 2010. Now let’s take a look behind the numbers.

Personal Bankruptcy Rate Falls, By Consumer Proposals Increase Dramatically

Personal bankruptcies dropped from 116,381 to 92,694, a drop of over 20%. But consumer proposal filings increased by almost 20%, increasing from 35,331 to 42,314.

So why did personal bankruptcy filings drop, while consumer proposal filings increased? Two reasons:

First, the economy in Canada was somewhat better in 2010 than it was in early 2009, as we were still in “recovery mode” after the credit crisis and stock market correction in late 2008. A better economy generally means lower unemployment, higher consumer spending, and generally fewer personal bankruptcies. So it’s not surprising that the total number of insolvencies (bankruptcies and proposals) dropped, and that the number of personal bankruptcies also decreased significantly.

It’s also not surprising that, in a good economy, Canadians in debt are more likely to choose a proposal over bankruptcy if they can’t pay their bills. In a proposal you make a payment each month, and that money is distributed to your creditors. If you don’t have a job or a source of income, a proposal probably isn’t possible. If you are working and do have an income (just not enough to pay your bills in full), then a consumer proposal is a great solution. Clearly there is a greater chance of Canadians having jobs during good economic periods, so during recessions proposal filings are likely to drop, while in good times they may proportionately increase.

Second, the government changed the bankruptcy rules in 2009, making bankruptcy more expensive for Canadians with surplus income. As a result, in 2010 more Canadians chose to file a consumer proposal as a way to avoid bankruptcy.

So yes, it’s good news that bankruptcy numbers are down, but you have to take the numbers with “a grain of salt”, since part of the decrease in bankruptcy filings was due to a change in the rules.

Also, let’s not forget that debt in Canada remains a ticking time bomb, and massive credit card debt continues to lead to bankruptcy in Canada. Year to year bankruptcy numbers may rise and fall, but over the long term, as long as our debt remains high, Canadian will continue to file bankruptcy.

If you are interested in 2010 bankruptcy statistics for other areas of Canada, here’s list of other articles on bankruptcy statistics

If you are experiencing financial problems and think bankruptcy might be the answer, use our free debt options calculator to review your options, and then contact a licensed bankruptcy trustee today for a free initial consultation, and be sure to ask about a consumer proposal, the number one alternative to bankruptcy.

Posted on Monday, March 28th, 2011
Filed under: bankruptcy Canada
posted by Doug Hoyes @ 7:44 am No Comments

Massive Credit Card Debt Leads to Bankruptcy in Canada

by Doug Hoyes

Look in the mirror. It’s likely that you have more in common with the average person who files bankruptcy in Canada than you may think.

My name is Douglas Hoyes, a trustee with Hoyes, Michalos & Associates Inc. in Ontario, and today we released Joe Debtor, The Face of Bankruptcy, a comprehensive new research study profiling the average person who files a consumer proposal or bankruptcy in Ontario. We call this average person “Joe Debtor”.

Who is Joe Debtor? What does he look like?

Joe Debtor looks just like the average Canadian. He has a job, and may also own a home. He is very similar to the average person. The only difference between Joe Debtor and the average Canadian is that Joe Debtor has a huge amount of debt.

Here are some facts:

Comparison of Joe Debtor to Average Canadian
Personal Information:
Joe Debtor
Average Canadian
Male1 58% 49%
Female1 42% 51%
Average age2 41 41
Married or Common-law3 45% 52%
Divorced or Separated 26% 10%
Widowed 2% 6%
Single 27% 32%
Average family size3 2.3 2.6
Average monthly income4 $2,240 $2,419
Total credit card debt5 $24,390 $3,709
Total unsecured debt6 $59,814 $16,399

 

The Big Difference: Debt

Joe Debtor Debt Canada

Joe Debtor's Unsecured Debt

 

As you can see, the most significant difference between Joe Debtor and the average resident of Canada is debt. (That’s not surprising to readers of this blog; the most read post here on Trustees Talk is our post on Personal Debt in Canada: The Ticking Time Bomb.

The average Canadian has about $16,400 worth of consumer credit (debt excluding mortgages), while Joe Debtor has almost $60,000 in unsecured debt. That means that Joe Debtor has more than three and a half times as much debt, so it’s no surprise that Joe Debtor gets into financial trouble.

Simply put, debt is very dangerous.

To find out if you may have a debt problem, take this quick four question survey:

1 Are my debts, not including my mortgage, closer to the Canadian average of $16,400, or closer to Joe’s average of almost $60,000? If your debt is close to, or higher than $60,000, you owe more than Joe Debtor, and that’s an indicator that you may have a debt problem.

2 “Joe Debtor” owes $24,390 spread out over more than four credit cards. In other words, the typical bankrupt person in Canada has a lot of credit card debt. If you owe near that amount, and you are having trouble making your payments, you have a debt problem. If you are carrying a balance each month on any credit cards, you have a debt problem, because credit cards are the most expensive form of borrowing.

3 Am I afraid to open my mail? If you have bills that you haven’t opened because you know you can’t pay, you probably have a debt problem.

4 Am I “robbing Peter to pay Paul”? Do I take a cash advance from my line of credit to pay my credit card, and then next month will I take a cash advance from my credit card to make the minimum payment on my line of credit? If you are simply borrowing from one place to pay another, your debt, with interest, is gradually increasing, and you probably have a debt problem.

How can you solve your debt problem?

Start by taking inventory. Make a list of all of your debts, and the amount you owe. Make a budget to see where your money goes each month. If you can cut expenses and use the extra money to pay off your debts, great; that’s the perfect solution for you.

If you are like Joe Debtor and you have more debt than you can handle, consider filing a consumer proposal. You make one manageable monthly payment, and your unsecured debts are eliminated. If that’s not possible, filing bankruptcy in Canada may be your final option.

To find out more, use our free, on-line debt options calculator to review your options, then contact a consumer proposal administrator or bankruptcy trustee for a no-charge initial consultation.

 

1. Statistics Canada: Percentage of population over the age of 20, July 2010

2. Statistics Canada: Median age 2010

3. 2006 Census of Canada: Ontario

4. Statistics Canada: Personal Disposable Income per capita

5. Trans Union

6. Statistics Canada: Consumer Credit, Seasonally Adjusted per adult (18+)

Posted on Monday, February 28th, 2011
Filed under: bankruptcy Canada andConsumer Proposal andDebt Options
posted by Doug Hoyes @ 8:07 am No Comments

Power Spending – Getting More For Less

by Doug Hoyes

In addition to our articles bankruptcy in Canada, we occasionally review books that may be of interest to our readers. You can see all book reviews in our book review section.

Today we review Power Spending: Getting More For Less by Carolyn Johnston, Eric Poulin and Robin Poulin. I was consulted for the section of the book on debt, and bankruptcy, and in fact the Bankruptcy-Canada.ca website is referenced to describe how a consumer proposal works.

With that said, the highest compliment I can give this book is that it’s full of practical financial advice. Lot’s of book talk about theories, and explain complicated budgeting systems that no-one could ever implement in real life. That’s not a problem with this book; everyone who reads it will find dozens of practical tips they can implement in real life, immediately.

That doesn’t surprise me, because two of the authors, Eric and Robin Poulin, are the Co-Founders Calendar Budget - sign up for a free trial of CalendarBudget, the online personal finance tracking and planning tool that makes managing money easy. You simply open the program and you will see a calendar. Enter what you spent today in the calendar. That’s it! The program will then summarize where you spend your money, and help you produce easy to use graphs and charts so you can easily see where your money is going. (You can even get a free, one-month trial of Calendar Budget; after that, there is a very small cost each month).

Knowing that CalendarBudget is easy to use but also very powerful, I knew that Power Spending: Getting More For Less would also be powerful, but easy to apply and understand.

The first section starts with basic economic survival, and discusses household budgeting, emergency planning, credit and debt, and how to save money.

The second section is on Advanced Power Spending, and includes chapters on how to save money on your food bill (and since everyone eats, this should help everyone), and chapters on saving money on entertainment, travel, and even partying!

All chapters contain practical advice. Let me prove it. I opened the book randomly on five different pages; here’s a practical, easy to implement tip from each page I opened to:

  • put money aside at the beginning of the month (because if you wait until the end of the month, it won’t be there) (page 57);
  • on page 75 they have a nine step sidebar to answer the question “should I lease or buy a vehicle”; (the advice is practical, but you’ll have to buy the buy the book for the actual tips!;
  • don’t buy life insurance for your baby; the only members of your family who need life insurance coverage are those whose death would create a financial hardship (page 93);
  • on page 120 they have 19 ideas for an inexpensive date, including test driving cars, going on a picnic, and playing with animals at a pet shop;
  • on page 166 the book has six tips for how to sell stuff you no longer need by selling on-line.

As you can see, all of the tips are practical and easy to implement.

I suggest you start with the table of contents, and open the book at whatever section most appeals to you; you don’t have to, and probably won’t, read the book from cover to cover. Start where you want, use the tips, and return often for a refresher. That’s what makes Power Spending: Getting More For Less a powerful, practical book.

Posted on Monday, February 7th, 2011
Filed under: Book Reviews
posted by Doug Hoyes @ 5:31 am No Comments

Cost of Filing Bankruptcy in Canada

by Doug Hoyes

What does it cost to file bankruptcy in Canada? As a trustee I have handled thousands of personal bankruptcy filings, and that may be the most common question I am asked. For many, the answer is also somewhat confusing.

Doug Hoyes, Bankruptcy Trustee

Doug Hoyes, Bankruptcy Trustee

In simple terms there are three costs to filing. There is a minimum contribution, there is a surplus income payment, and then there is the money you lose in the process due to your assets.

1 Most trustees in Canada will require you to make a minimum contribution each month towards the administrative charges of your bankruptcy. That may be in the range of $200 to $250 per month, and they may require a month or more of contributions to be contributed when you sign the bankruptcy paperwork. As each case is different, your trustee can explain this to you in more detail.

2 Surplus income is a more complicated concept, but in simple terms the government allows you to earn a base amount each month. If you earn over that amount, you are required to pay more. We have lots of details on this site, including our post on Surplus Income and Bankruptcy in Canada, and surplus income in the bankruptcy process in Canada. There are a number of surplus income worksheets available on the internet as well.

3 Finally, if you file bankruptcy you will lose any non-exempt assets. For example, you will lose any money you have contributed to your RRSP in the last twelve months. You also lose your tax refund, HST credits, and any equity you have in a car or house. More details can be found in our article on bankruptcy exemption limits in Canada.

For more information, please see our article on the cost of filing bankruptcy in Canada, or review other articles on the cost of bankruptcy.

Two final comments:

First, the calculations to determine the cost of bankruptcy are confusing, so we strongly recommend that you arrange a no-charge initial consultation with a bankruptcy trustee in Canada.

Second, if you are concerned about the cost of bankruptcy, a consumer proposal may be a better option for you, because often the monthly payment in a consumer proposal is less than the monthly payment in a bankruptcy. Please see our free, interactive debt options calculator for more information.

Posted on Monday, January 17th, 2011
Filed under: Bankruptcy Alternatives andbankruptcy Canada andConsumer Proposal
posted by Doug Hoyes @ 5:06 am No Comments

Household Debt in Canada at Record Levels

by Doug Hoyes

Bank of Canada Governor Mark Carney has warned that Canadians are carrying too much debt. On Monday Statistics Canada released a report showing that the ratio of household debt-to-disposable income reached the highest level on record in the third quarter, at 148.1%, which is 6.7 per cent higher than last year. This means, in simple terms, that if you earn $10,000 in disposable income per year, you are carrying almost $15,000 in debt.

That may not seem like a high number, but it’s the highest number in Canadian history, and it’s even higher than the 147.2% level in the United States, which is a scary statistic given the serious economic problems faced by Americans.

So, what does this mean to you?

To start , as I have already commented in the press, I find it amusing that the Bank of Canada, which has kept interest rates artificially low to encourage us to borrow, is now worried that we are borrowing too much.

However, as a bankruptcy trustee I agree that too much debt is a problem. So, what can you do about it?

First, start taking steps now to reduce your debt. Make a budget, and look for ways to cut expenses, and then use those savings to start repaying your debt.

Next, spend less. There are lots of resources to help you spend less at Christmas, so you can avoid debt and have a stress free Christmas. Otherwise you risk having it all in December, but losing it in February when the Christmas bills come in.

Third, have a plan. Before you go shopping, decide who you need to buy for, and what you can afford to spend, and don’t overspend.

Finally, pay cash, or use debit. If you don’t borrow, you can’t get in to debt.

What do you do if you already have more debt than you can handle? Review your debt management options, and consider filing a consumer proposal or personal bankruptcy if that’s the appropriate solution to your financial problems.

The Bank of Canada Governor is correct: household debt in Canada is a problem, and we should deal with it now, before the situation becomes even worse.

Posted on Wednesday, December 15th, 2010
Filed under: Bankruptcy Alternatives andConsumer Proposal andDebt Options
posted by Doug Hoyes @ 10:43 am 2 Comments

Credit Education Week Canada 2010 – Some Final Thoughts

by Barton Goth

Two weeks ago was Credit Education Week in Canada. Now if you are like me and don’t live in Ontario, you may not have heard a great deal, but the more I have looked into Credit Education Week, the more impressed I have become with this initiative. For those of you who haven’t heard of this event previously, from what I can tell it is essentially a public awareness campaign.

Barton Goth, Bankruptcy Trustee

From all appearances this is a national event, although I made a number of calls and inquiries throughout Alberta and couldn’t find anyone who knew anything about it. Now I did find it interesting that I only heard about this event third hand from a colleague who practices in Ontario, as I am very active in the financial community and make an effort to stay on top of local and national news as it pertains to the economy, and personal finance, and I had no idea this event had taken place. So for now it appears to largely be based in Toronto and other major centers, and is supported by many major players across the financial community. It is designed to “empower the public to make wise financial choices by placing tools and resources at their fingertips,” and promised to teach “everything you need to know about managing your money and taking control of your financial future.” An excellent goal and something that is definitely a need in the economic climate we all live.

There were many efforts made to accomplish this vision and many free events designed to address key topics in all stages of Canadian financial life, including:

  • A National essay contest;
  • University Campus fairs;
  • Credit Education Trade Show;
  • Gala Dinner featuring Stephen Lewis; and
  • A professional development day that is designed to allow the financial professionals an opportunity to become more familiar with the services and products available, the value offered by the government agencies, and existing services designed to increase their clients’ ability to advocate for themselves.

This year’s them was “The Language of Money,” and the focus was on new Canadians. As part of this theme, Credit Canada and Capital One Canada released the results of an Angus Reid poll they conducted in an effort to better understand issues faced by new Canadians. There were some interesting findings. For example, new Canadians are significantly more likely to use words such as stable, accessible, and honest to describe our financial system, where the general population is more likely to use words such as frightening, in decline and confusing. While I don’t want to focus on the specific results of this survey, as interesting as I find them, I really just wanted to make mention of the conference itself and acknowledge the efforts of everyone involved.

Clearly we live in a time where the need for credit education is unmatched and I, for one, would like to commend Capital One, Credit Canada and the Ontario Association of Credit Counselors and all the others involved for their efforts as they try to make sure people everywhere better understand “The Language of Money.” My only hope is, that as this initiative grows deeper roots, there is a way to expand conferences like this into some of the smaller centers in the country. It is through initiatives such as this that Canadians will become more familiar with the resources available, be better educated about finances in general, and hopefully be able to prepare themselves for any economic uncertainties that may continue to exist.

About the Author: This article has been written by Barton K. Goth of Goth & Company Inc., a licensed Trustee in Bankruptcy, member of the Canadian Association of Insolvency and Restructuring Professionals, and a managing editor of the Trustee Talks article series.

Posted on Monday, December 6th, 2010
Filed under: Debt Options
posted by Barton Goth @ 3:14 am No Comments

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