The Office of the Superintendent of Bankruptcy recently released the latest 2010 statistics, and yes, fewer people are filing bankruptcy in London.  In the 12 month period ending in June 2010, filings were down 7.5% compared to the same period ending in June 2009.  We have been hearing in the news that we are nearing the end of the recession and this may be an indicator that our London residents are truly feeling the benefit.

Of further statistical note, more people are filing consumer proposals – this is likely due in part to the change in bankruptcy rules that came into effect in September 2009; these new rules can increase both the costs and length of bankruptcy, making a consumer proposal a very attractive alternative.

In the last few months, we seem to be hearing from fewer Londoners; I mentioned this to one of the clients I saw, and he said something interesting: “Well, maybe they have just given up on dealing with their debt, just like the people in London have given up on ever finding a job”.  Maybe, he is right.  I know that Londoners are still struggling – ask some of them about how the end of the recession has helped them get back on their feet and they will tell you that their own personal recession continues – some get quite upset by the reports they hear, since they continue to struggle to find work to feed their families.  Our London Food Bank had to do a special drive to get them through to their next major collection at Thanksgiving – this tells us something that is quite contrary to the reports we hear.

So, what lies ahead for London?  We have heard mutterings about growing fears of a double-dip U.S. recession.  Ontario has a strong reliance on the U.S. Economy – as we read in a recent issue of the London Free Press, many London manufacturers have changed their business models since the recession, but even so, are watching the U.S. situation very closely.

The Free Press made reference to a recent Bank of Montreal study that showed a strong recovery in the Ontario economy in the first half of 2010 – we saw growth in its gross domestic product and growth in employment.  That said, the bank also warned that this growth may wither in the last half of 2010.

Personally, I don’t think we are out of the woods yet – the good news is still good news and I suspect we will see further decreases in the number of bankruptcy filings in the next few months.  I think the trend towards more people filing consumer proposals will continue – in a lot of cases, proposals are simply the most cost effective means for Londoners to deal with their debt. But, I also know that lots of people in London continue to struggle.   If you or someone you know is finding it hard to make ends meet, please know that we can help, and we want to help; please call 310-PLAN or visit us at www.hoyes.com .

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A consumer proposal is the lesser known alternative to filing for bankruptcy, and many clients find that it is a better solution for them than filing bankruptcy.    So, in what circumstances might a consumer proposal be a good alternative for you to consider?

1.)  You may have things that you own (assets) that you wish to keep, but might be required to surrender if you filed bankruptcy.  This is one of the most common reasons that clients choose to file a consumer proposal rather than bankruptcy.  Let me give you an example.  Let’s say you owned a home that had $10,000.00 equity in it (equity is the amount of money after selling costs that would be left in your pocket if you sold it).   If you filed bankruptcy, you would have to give that equity to your Trustee to give to your creditors, and that would happen in one of 2 ways – either you give the Trustee $10,000 or the Trustee takes your house and sells it.  For many people finding $10,000 to give to a Trustee is next to impossible.  If you file a consumer proposal, you  still have to give the Trustee $10,000 to give to your creditors, but you can  do so by making monthly payments to your Trustee over a period of up to 5 years that will then be distributed to your creditors.

2.)  Based on the government’s rules, you might not be able to afford the payments you are required to make if you file for bankruptcy.   These rules are called the  Surplus Income Payments and they don’t apply when you file a consumer proposal.  This is another common reason why people choose to file a consumer proposal.  Again, let me try to illustrate this with an example. Let’s say that you are a single person earning $2,800 per month.  If you filed a bankruptcy, you would be allowed to keep $1884 of this income, but would be required to give your Trustee half of any monthly earnings that exceeded this amount; in my example, if you earned $2800 in a month, you would pay 50% of $916 ($2800-$1884) which would be $458.  Further, depending on how much income you earn over the period of your bankruptcy, you could end up paying this for an extended period of time.  As you can see, for many people, the bankruptcy payments in of themselves can be difficult to manage.  If you filed a consumer proposal you would still pay the Surplus to your creditors, but again, you would do so in more manageable monthly payments over a longer period of time.

These are the 2 of the most common reasons that people choose to file a consumer proposal rather than bankruptcy.  In many cases, people choose to file a proposal because it is simply more affordable.  So, if you have delayed seeing a Trustee because you are worried about the costs of bankruptcy or that you might lose your house or other assets, perhaps a consumer proposal is an alternative you could consider.   If you have any questions or would like to discuss how filing a proposal might help you in your situation, give us a call at 310-PLAN or fill out an on-line evaluation – we would be very pleased to help.

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And you are thinking: how can I make a proposal such that the creditors will accept it?

I just met with someone who has income that can vary from as high as $2,800 a month to as low as $1,800 a month. This person wanted to do a proposal but during the lower income months it would be hard to pay a proposal that could be paid more easily during the higher income months. The person wanted to make some compensatory payments to their creditors so we planned the consumer proposal very carefully.

We have offered the creditors one amount for the months when income is low and another amount which is much higher for those months when income is increased. The overall effect to the creditors meant the proposal could be paid in a shorter period of time but still offer much more than would be received by them in a bankruptcy.

This way both the debtor and the creditors win as more of the debt is repaid and the payments more reflect what the debtor is earning.

If you think a consumer proposal is not an option because of your changing income, call our offices for a consultation in London at 310-PLAN. We will try to work out a plan that will benefit both you and your creditors.

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