June 2021 Insolvency industry update
I sat down to chat with Graeme Hamilton, an insolvency trustee with Spergel, to discuss the changes in the industry over the past year and what’s happening now.
We cover the state of the insolvency profession and when it should be considered. Join us for the full discussion below:
Graeme Hamilton’s contact info:
Email: ghamilton@spergel.ca
Don’t feel like watching? Find the full transcript below!
Chris: [00:00:00] Welcome, today I am joined by Graeme Hamilton, licensed insolvency trustee with Spergel and a neighbour of mine on the Danforth Grand. How are you today?
Graeme: [00:00:13] Morning, Chris. Doing good. Doing good.
Low volume of insolvency cases are rising again
Chris: [00:00:16] Good to see you. I can just poke my head out the window and wave, but I appreciate you joining me via Zoom. And I wanted to connect with you again and have a quick conversation. Last time we chatted was November of 2020, right during the depth of the pandemic. We didn’t really understand where we were relative to the length of it, but about halfway through and now as the economy reopens, we’ve got sunshine, it’s warm, patios are open. What does it mean for your business and the clients that you help?
Graeme: [00:00:53] Yeah, so we had the largest annual decrease ever recorded in our industry, which is really an anomaly to a lot of my friends and family members and people that are familiar with our profession. So we had a 30 percent decline in Canadians that accessed the insolvency system, whether it was a business, a family or a person. And so we’re starting to slowly come out of that all-time lull. It’s not coming back overnight, but we’re starting to see an uptick in activity. And certainly in my practice, I’m starting to see a lot of people that called me in June or July or September last year coming back to me saying, OK, so things are changing. It seems like everyone’s vaccinated. Commerce is going to resume at some point at a normal level. And as things open up, as we discussed earlier, the creditors are also going back to work. And so this kind of standstill that everyone’s been able rightfully to live through the last 12 months and not have to worry about interest payments to your creditors, that is going to stop at some point when this apparatus that exists for people to get repaid through legal processes comes back to to functioning again, which has not been around the whole year.
Chris: [00:02:21] Right. Let me pause you there. So for the last year, volume has been down. And that’s surprising, right? Because the pandemic has impacted our lives in so many ways, job loss and health concerns and just things have not been normal. So that has impacted people’s ability to repay. But you’re seeing that over the last 12 or how many months is it now? 14 months. Your world of insolvency and helping creditors has really not been business as usual, which is kind of counterintuitive because we may have expected that it would be more important than ever.
Why has volume been down?
Graeme: [00:03:04] Right. And I think there are a couple of, a three pronged answer to that. One is people, obviously we’re not incurring more debt during the last period of time because there really wasn’t much to spend your money on. Second is that there was a steady kind of setting income coming from the federal government through all the various benefit programs. And then the third was that the creditors were not active. So during this kind of standstill, the normal process of people making monthly payments, they got amnesty for interest, mortgages included. But all of the credit cards, the high interest stuff, that stopped. So when you kind of put all that together, it’s not surprising because when someone files insolvency with us, there’s two types of people.
Two types of clients filing for insolvency
Graeme: [00:03:57] There’s the ones that are proactive and have looked at their affairs, their set of facts and said, I need help, I need to talk to a trustee. Then there’s the other person that’s pushed to us because their creditors are pursuing them. They’re potentially getting their wages garnished. They’re getting calls throughout the day. So they’re the ones that are reacting, saying, I need to do something to have this stop. That type of person did not file insolvency in the last 12 months because none of those pressure points were there. And the ones that we filed that I worked with in the last 12 months were the ones that were looking at their affairs.
Graeme: [00:04:39] They took a sober look and said, this isn’t sustainable. And we help them. We help them probably also the ones that looked at some kind of a settlement involving repayment of percentages of what they owed. They probably saved some money by doing it during the contact. Then COVID, because creditors had a lot more empathy for what we’re all going through and someone may be going out to settle with the bank this fall when they could have maybe settled a debt at 30 percent or 25 percent, maybe now may have creditors saying we want more. Some people did benefit from being proactive. But, you know, the fact that we had a 30 percent drop is just a one off. Like our industry will move in 5 or 10 percent drips up and down as the economy and people rise and fall. Right. That’s normal commerce. There’s winners and losers in commerce every day. So we don’t think like, come summertime ending, we’re going to go back in this 30 percent. It’s going to just happen automatically. All going to be a slow classical economics curve, kind of coming back up to a normal level. And the other thing, too, is that that’s cyclical. So some people would have lowered their debt during there not being anything to spend money on. But if they hadn’t learned their lesson, they may go back out and ride it out again.
Chris: [00:06:15] And let me let me pause there and let me ask you a question in terms of when the people that you help, you mentioned the two types, those that take a sober look at the reality of their situation and those that kind of bury their head in the sand like the proverbial ostrich in your world, what you’ve observed, when should somebody be in touch with you? Is it when they’re maxed out and they’re not moving forward? Is it when they’ve already fallen behind on their payments? When is the right time for somebody who thinks they might need insolvency help to be in touch with you?
When should someone get in touch?
Graeme: [00:06:56] I think the common thread with a lot of my clients that are being proactive, that aren’t being pursued by their creditors, is that they realize they’re spending money each month on maybe making the minimum monthly payments on their debts. And the needle is not moving. Right, because the interest clock just resets. So we’ll have people calling us that are spending six, seven thousand bucks a month of cash to all their credit cards to just kind of tread water. And I think if you’re not, if you’re spending all that money and you’re not moving the needle at all, that cycle is just not sustainable. Right. That’s just the wads of interest are not your friend. So each month you’ll have a huge outlay of hard earned money, and it’s just kind of keeping you where you are. So that’s a very common thread when someone kind of just looks at it and they’re like, Jesus, I think I’ve just spent, you know, $10,000 this year on interest payments and my debt hasn’t gone down, that’s common. And that’s obviously the main warning sign. And that, you know, you miss one payment and then all of a sudden the calls come. The calls are really self-explanatory. So I’m seeing more of that now that people are starting to get a few more phone calls from people. So that I think just try to look at the Danforth. Right. It’s people are out, people are eating lunch, people are having afterwork drinks. People are calling to ask to be repaid.
Chris: [00:08:39] And so in that order.
Graeme: [00:08:44] Yeah. So we’re having people call us saying the calls are getting bad, so that I didn’t get a lot of those calls last year.
Chris: [00:08:50] Right. So that’s the main difference. Graeme, I really appreciate you joining today and sharing a little bit about your world. And I think I’d like to have you on in about another three months’ time. We’ll have another discussion about some of the remedies. So we’ll be in touch in September. But if somebody is getting those calls from creditors now and they’d like to seek help from a pro, what’s the best way for them to get in touch with you?
Graeme: [00:09:18] Yeah. So most of my days speaking to someone for the first time, just kind of getting the lay of the land and just trying to give some, you know, some tips about what options are available so they can call me at (416) 497-1823, or they can send me an email at ghamilton@spergel.ca. And, you know, there’s no commitment and it’s free for us to have a quick chat just to kind of go over, I’ll read the menu to you and then we’ll see what the right thing ordering is.
Chris: [00:09:58] Thanks so much. Graeme, and for anybody watching, I can’t stress enough the importance of if you think you’re falling behind, get on top of it earlier. There are more remedies available, and reach out to Graeme with confidence. Thank you so much for joining us today. My name is Chris Molder. I’m a Toronto mortgage broker. Do you have any questions or concerns about mortgage financing and how mortgage financing can help to consolidate debt? I’m just a phone call or an email away. Bye for now. Thanks again, Graeme.
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