During the first six months of 2010, 943 people in North York claimed bankruptcy.  In addition, 1,042 filed a consumer proposal.  This totals 1,985 individuals who made use of our bankruptcy laws between January and June of this year.  If we use these numbers to project the remainder of this calendar year, 3,970 people will have filed a bankruptcy or proposal in North York during 2010.  How does this compare to previous years? 

In 2009, there were 2,388 bankruptcies filed in North York, and another 1,663 proposals, for a total of 4,051.  This would mean we could be looking at a modest 2% drop in filings in North York.  This number compares to a 13% provincial wide projected decrease in insolvencies.   

On the whole, a reduction in the number of personal bankruptcy filings is good news for the economy.  This would lead us to believe that more people are working and better able to manage their debt loads. 

What’s ahead for the balance of 2010?

I think that bankruptcy rates will continue to decline in North York for the rest of this year.  We have stable interest rates and unemployment numbers, so no big changes are expected.  Things to watch out for are an increase in interest rates, or the impact of the new HST on consumer spending. 

One more important point to reflect on:  the good news is that more and more people in North York are choosing to file a consumer proposal as an alternative to bankruptcy.  In 2009, 41% of filings in North York were proposals (the rest filed bankruptcy).  This year, that percentage has increased to 52%.  That’s a big jump.  And it’s a good sign, as more people are choosing to negotiate a settlement with their creditors than file for bankruptcy.

If you would like some more information about filing a consumer proposal in North York as an alternative to claiming bankruptcy, call me at 310-PLAN (310-7526, no area code required) or email me today to arrange a no charge initial consultation.

Thanks so much!

Answer: You can apply for a pre-paid credit card, or a secured credit card, whenever you want. However, most credit card companies will only issue the card once your bankruptcy is officially over. Our advice is to start saving money now, since that’s the best way to re-build your credit, and then apply for the pre-paid credit card in six months.

Answer: Once you have completed your consumer proposal, you are free to apply for new credit. It will be up to the individual banks to decide whether or not they will lend you money in the future.

You are correct that one factor they will consider will be the fact that they may not have been repaid in full in your consumer proposal. However, they will also consider other factors, such as your current income, and whether or not you have taken steps to repair and rebuild your credit after bankruptcy.

Your goal should be to pay off your consumer proposal as quickly as possible, and then begin saving money and take steps to re-establish credit.

Answer: Yes, what your trustee has told you appears to be correct. In the case of a second bankruptcy (filed before September 18, 2009) you are required to appear in bankruptcy court in Toronto for a discharge hearing. At that hearing the bankruptcy judge will determine when and how your bankruptcy will end. In the case of a second bankruptcy with no other issues it is common for the Toronto court to grant a “suspended order of discharge”, meaning that your official discharge will occur six months in the future. You would not be required to complete further income and expense statements, unless ordered to by the court.

GST refunds continue to be sent by Canada Revenue Agency to the trustee until you are discharged. In most cases you only lose your tax refund up to and including the year of bankruptcy. Your trustee can advise you further, based on your specific circumstances.

NOTE: Under new rules implemented on September 18, 2009, a court hearing is not automatically required if a second bankruptcy is filed after September 18, 2009.

Answer: In a consumer proposal, a settlement is reached with your creditors. For example, in a proposal you may offer to pay $300 per month for 5 years, or $18,000 in total. If the creditors accept, and you make the payments, the remainder of your debt is eliminated.

If you can’t afford a proposal, or if the creditors don’t accept the offer, the other alternative is personal bankruptcy. The cost of bankruptcy depends on your family income, the size of your family, and certain expenses.

Each situation is different, so we recommend that you contact a Toronto bankruptcy and proposal trustee to review your specific options.

Answer: Yes. The filing of a consumer proposal or a personal bankruptcy does not prevent you from being able to travel outside of Canada.

Most surprising is the increase in consumer proposals, which are fast becoming the leading alternative to bankruptcy in Toronto. Consumer proposals increased by 22% across the GTA. In the first six months of last year 2,275 residents of Toronto filed a consumer proposal. In the first six months of this year that number has increased to 2,768.

A consumer proposal is a legally binding deal we negotiate with your creditors. Instead of going filing for bankruptcy, you make payments over a period of time (no more than five years), usually for less than the full amount you owe. You avoid bankruptcy, and make one monthly payment, and the creditors get more money than if you went bankrupt, so everyone wins.

If you would like more information about consumer proposals or bankruptcy, call our Toronto team at 310-PLAN (310-7526, no area code required) or E-mail us to arrange a free initial consultation. There is help available, so give us a call, and let’s get started.

Thanks

Answer: If you file for personal bankruptcy in Toronto, or anywhere in Ontario, you are permitted to keep one motor vehicle worth up to $5,650. If you own more than that, you would be required to either surrender the vehicle to the trustee, or pay to your bankruptcy estate the difference.

For example, if you own a $2,000 vehicle and a vehicle worth $8,650, you would declare that the first $5,650 of the $8,650 vehicle was exempt, and you would pay the trustee $3,000 to keep the vehicle. Since you are only permitted to declare one vehicle as exempt, you would also be required to pay the $2,000 value of the other vehicle if you wanted to keep it.

If there are liens or loans against any of these vehicles, the answer would change.

These rules can get complicated, so I suggest you call us at 310-PLAN, or e-mail us for further information.