David Sklar & Associates Inc.

Consumer Proposal & Bankruptcy Trustees
Serving the Greater Toronto Area

Increasing Rates of Consumer Proposals in Toronto CMA

In an earlier consumer proposal blog, we noted the apparent increase of the rate at which people who were insolvent, were filing for consumer proposals and division 1 proposals, as opposed to filing for bankruptcy in the Toronto CMA (Census Metropolitan Area).

Recent statistics from the Office of the Superintendent of Bankruptcy, indicate that this trend continued throughout 2010, and into 2011.

To put this into perspective:

Proposals have been an option in Canada since 1993, when they were introduced in the Bankruptcy and Insolvency Act.

In 2009, the total amount of debt (not including the mortgage on their prime residence) an insolvent person could have and still be eligible to file for a consumer proposal was increased from $75,000 to $250,000. Insolvent individuals, who owe more, may be eligible for the division 1 proposal.

Also of importance, in 2009 the rules surrounding bankruptcy were tightened, with the result that for many, bankruptcy has become a much longer process that requires increased levels of surplus income payments.

2008:

	Insolvencies Filed by Consumers in 2008
Toronto (CMA*)	2008	2007	% Change
Bankruptcies	12,208	10,597	15.2%↑
Proposals	6,880	5,942	15.8%↑
*Census Metropolitan Area

2009:

	Insolvencies Filed by Consumers in 2009
Toronto (CMA*)	2009	2008	% Change
Bankruptcies	15,423	12,208	26.3%↑
Proposals	10,230	6,880	48.7%↑
*Census Metropolitan Area

2010:

	Insolvencies Filed by Consumers in 2010
Toronto (CMA*)	2010	2009	% Change
Bankruptcies	10,996	15,423	28.7%↓
Proposals	11,566	10,230	13.1%↑
*Census Metropolitan Area

Using the above statistics for the Toronto Census Metropolitan Area, we see that:

• In 2007: 35.9% of Consumer Insolvencies were Proposals


• In 2008: 36.0% of Consumer Insolvencies were Proposals


• In 2009: 39.9% of Consumer Insolvencies were Proposals


• In 2010: 51.26% of Consumer Insolvencies were Proposals

Why are more insolvents choosing to file for consumer proposals vs bankruptcies in the Toronto area?

There are a number of factors, most notable of which are the advantages of a consumer proposal:

• avoids bankruptcy,


• enables insolvents to pay off some of their unsecured debt,


• insolvents are able to keep their assets (as long as they make payments on secured loans on those assets),


• no need to declare one’s self as having been a bankrupt on employment forms, etc.,


• increases in income do not require higher payments, and


• renegotiation of proposal terms may be possible if income decreases.

In addition, a consumer proposal offers many of the same protections of a bankruptcy:

• stops collection calls from unsecured creditors,


• stops all legal collection actions by unsecured creditors including removal of garnishees, and


• provides insolvents with a chance of a ‘fresh start’ in life.

As mentioned earlier, the tightening of the bankruptcy rules in 2009 have made bankruptcy a less attractive alternative for some individuals with surplus income.

Filing for Consumer Proposals in Toronto CMA

At David Sklar & Associates, Trustee in Bankruptcy*, we recognize the importance of informing people about all of their options for getting rid of overwhelming debt. That is why we offer a free initial consultation at all of our Greater Toronto locations. Our Licensed Debt Professionals™ will review your financial situation in detail, and discuss all of your options with you.

If you live or work in the GTA and need our help, book your free consultation by calling our central booking number at 416-498-9200.

*In Canada, only Trustees in Bankruptcy are authorized to file and administer Consumer Proposals.