Bankruptcies on the rise

It was a sobering signal when the phones were ringing off the hook at the city's Financial Fitness office.

On the heels of a record year for personal bankruptcies, executive director Wendy Dupuis doesn't see things getting better in 2010.

Even if the local economy picks up, "there are still a significant number of people grappling with unemployment and lots of debt," she says.

How many? If 2009 is an indication, there are thousands. The Financial Fitness centre, providing mandatory credit counselling to clients of several local bankruptcy trustees, saw about 2,500 insolvencies, says Dupuis.

That is more than double the number in 2008, which was not a good year either.

The Windsor office of BDO Ltd. handled 579 personal bankruptcies and proposals to creditors in 2009. That's a 25-per-cent increase over the previous year, which is "huge," says senior vice-president Andrea Orr.

She, too, doesn't foresee improvement in 2010. "A lot of people are relying on their credit cards to pay their day-to-day expenses," says Orr.

Many of those folks are only making the minimum monthly payment, which means the hole they are digging gets deeper by the day because of the high interest rates. If they don't have a secure income, climbing out eventually becomes impossible. That's when bankruptcy or a proposal to creditors may be the only option, says Orr.

But bankruptcy should be a last resort, Dupuis says.

Not only can it make getting credit much tougher down the road, the cost for those with decent incomes has gone up, notes Orr. recent bankruptcy legislation increases the payments and lengthens the time it takes higher-income earners to be discharged from bankruptcy.

Those with lower incomes typically pay the bankruptcy trustee about $1,600 over nine months before they are discharged from bankruptcy. Higher income earners must pay an additional 50 to 75 per cent of what they make above the threshold. And they must pay that for 21 months.

As well, bankruptcy means giving up all assets except those that are protected by law, such as RRSPs, life-insurance policies and a vehicle. It is also a black mark on your credit rating for six years after you are discharged.

Other less drastic steps, such as loan consolidation, can also affect your credit rating. So do some research before taking action, Orr and Dupuis advise.

If you are worried your finances are unravelling, don't wait for things to get worse, they say. Seeing a credit counsellor or bankruptcy trustee for advice won't affect your credit rating. It could also help turn an avalanche of debt into something manageable sooner rather than later.

NEED HELP WITH DEBT?

Here are some useful websites and phone numbers:

- Office of the Superintendent of Bankruptcy Canada, www.ic.gc.ca/eic/site/bsf-osb.

nsf/eng/home

- BDO Ltd., www.bdodebthelp.ca

- Deloitte, www.bankruptcydeloitte.ca

- KPMG, www.kpmg.ca/en/ms/personalbankruptcy

(prepared by By Ellen Van Wageningen, Canwest News Service; Windsor Star/Vancouver Province)