Key Points:
- Insolvency filings fell 30 per cent in 2020, but are on the rise again as we enter a post-lockdown economy and debt levels increase
- A stable cash flow is just as important as a good credit score, so borrowers shouldn’t avoid filing for insolvency just to protect their credit scores
Understanding insolvency
Today, I sat down with Graeme Hamilton, an insolvency trustee from Spergel, to chat about how the pandemic has affected insolvency filings. We discuss the up-and-down trends of these filings over the past 18 months, who fits the profile of someone in need of these services, and regaining financial stability in the wake of COVID-19. Check out the conversation below:
Graeme Hamilton’s contact info:
Phone number: 416-497-1823
Website: www.spergel.ca
Don’t feel like watching? Find the full transcript below!
Chris: [00:00:10] November is Financial Literacy Month, and I couldn’t think of a better person to bring on board than Graeme Hamilton, insolvency trustee with Spergel on the Danforth. Graeme, how are you?
Graeme: [00:00:23] Good morning, Chris. I’m good, bud.
Decreased insolvency filings on the rise again
Chris: [00:00:24] Good, very good. Graeme, we’ve chatted a few times over the last 12 months and since the pandemic began, and I think, we think about financial literacy and the work that you do, I think it goes hand in hand. And it’s very interesting because as people experience the pandemic and the, the fallout of it, it has a major impact on on your business and the work that you do. And I know in some of our previous conversations, right in the thick of the pandemic in 2020, that you weren’t very busy, you weren’t actually working necessarily with a lot of new clients or people who needed your services as an insolvency trustee. How has that changed as we are now starting to see the light at the end of the tunnel?
Graeme: [00:01:15] Yeah, I think we’ve transitioned now from lockdown to a post-lockdown economy and in 2020, the insolvency filings had decreased by almost 30 per cent, which was the largest decline in recorded data in Canadian history. This year, I can say for myself that the last three months of have been quite busy, so I am seeing just anecdotally in my own practice that the days are getting quite full with appointments. And I think the numbers that are released each month by a regulator do show that the curve is starting to swing up. So I think we’ll see at the end of the year that 30 per cent decline coming back to a bit more of a normal level. There’s generally between one hundred and one hundred and forty thousand insolvency filings, and there’s kind of that consistent 10 per cent up and down.
Chris: [00:02:16] And sorry, Graeme, is that per year, per month?
Graeme: [00:02:19] Yeah, yeah. Per year. So I mean, we’re used to seeing 10 per cent, 20 per cent dips up and down, but nothing that big, right? So the other thing is the stimulus has ended. So the CRB program is is now wound up. And so I don’t know if that had a psychological impact on on why… People knew it was going to come at some point. And so I’m not sure if that’s a direct correlation in why we’re getting busier, but I think it’s going to have some impact on that.
Lockdowns and inflation are impacting filings
Chris: [00:02:56] Graeme, can I, can I ask you quickly here for anybody who’s watching this and might, might be in need of your services, at the moment what what does the profile look like? What what are you seeing? Is it people that have been impacted by COVID? They’ve lost their jobs, haven’t been able to keep up, the CERB payments are ending and now they’re having to face the music? Is that the profile?
Graeme: [00:03:24] That’s one. Like, there’s certainly, I have, I have a large amount of people I’ve spoken to over the last 18 months that probably fit the profile of someone that does need our services and has not gone that next step to do it. And there’s lots of human reasons for that. It’s natural, but we are getting those callbacks. So a lot of people are now ready. And you know, I mean, the other thing is there’s the new people too, right? So there’s there’s people that are impacted directly by the lockdown and had something new happen to them over the last 18 months are calling us for the first time. So we’re seeing a bit of both. The other thing is, unfortunately, people are now, with this being Financial Literacy Month, people are, now that we’ve opened up, people are getting into debt again and the inflation isn’t helping with the cost of everything going up. Yeah, but we were speaking offline about some of these things, like the new microloans with credit cards, right? Which is this, this new product that is new to Canada, but one of my coworkers who’s from the U.K. has said we’ve had it for years, right? And it’s essentially you’re financing small purchases that you normally wouldn’t think of doing, right, like a new pair of running shoes. You know, you pay for installments of 60 bucks, well, you’re now getting financing for everyday purchases. So I think it’s going to be interesting to see what the next six to nine months look like for our industry. Assuming we don’t go back into lockdown, right?
Understanding cash flow and credit scores
Chris: [00:05:09] Yeah, of course. That’s the big if. Now just, just so we’re mindful of the time and in preparation for wrapping up the call, you mentioned that you’ve had people call you, they’re discussions that happen, but then they don’t move forward with proceeding with your services. Is there, in your experience, a point in time where the writing’s on the wall, where somebody is the right candidate and has to face the music? I would imagine there’s a lot of delay there and uncertainty. Nobody, there’s a lot of emotion tied to money and making a decision like this. Can you just talk to us a little bit about that and what you observe and who, when is the right time to pull the trigger on insolvency proceedings?
Graeme: [00:05:58] Yeah, I think the common thing that we see with our clients that are trying to get out, right, there’s people that have, for whatever reason, stopped making payments to their creditors. But there’s a lot of people that we work with that are trying their best month-in, month-out to fix this on their own. And we see them paying hundreds and hundreds and hundreds of dollars in minimum monthly payments, and they’re in the same spot the next month when the clock resets. And that’s really, like, you’re, these are all good, hardworking people. They’re paying six, seven hundred bucks a month in minimum payments to two or three high interest credit cards. They’re not getting anywhere, but they’re going to continue that, paying that money each month. And one of the things that people really worry about in an insolvency filing is the impact on your credit. But the other thing, the other C word is their cash flow, right? So if you’re, if you’re going to be paying that kind of money each month and we put you into some kind of a more stable settlement, all of a sudden your cash flow is improving because there’s stability. And, but that’s, that’s the main thing for me that I like. It’s one of my first questions, which is how much are you paying each month, and just trying to keep things chill. So that’s, that’s the one main thing for me that, you know, watch, watch how much you’re paying in the minimum monthly payments.
Chris: [00:07:23] Sure. And I guess you’re one crisis away from being underwater and not being able to support it and then having to turn to whatever form of financing you need to survive and that’s dangerous, whether it’s…
Graeme: [00:07:39] If you’re taking on debt, to pay that debt, we see that as well. That’s, that’s a huge, huge trap. You’ve got to call quickly.
Chris: [00:07:50] Graeme, I really appreciate you spending some time with us today. If anybody who is watching this would like to get in touch, what’s the best way to reach out to you, Graeme?
Graeme: [00:07:59] Yeah. So you can call us on the Danforth. So it’s 416-497-1823 or you can check us out on Spergel. And again, if you’re not in Toronto, we’re in three provinces. We’ve got dozens and dozens of locations. If you’re watching this video from a different region, there’s someone out there to help you. So that’s www.spergel.ca.
Chris: [00:08:27] Thanks very much, Graeme. We’ll see you next time.
Graeme: [00:08:29] Thanks. Take care, Chris. Cheers.
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