Personal Bankruptcy Canada, Inc.

Personal Bankruptcy Canada, Inc.

August 12, 2014 08:00 ET

Bankruptcy Industry Overcharging Canada's Poorest $10 Million a Year

OTTAWA, ONTARIO--(Marketwired - Aug. 12, 2014) - Each year it is estimated that more than 30,000 of Canada's poorest overpay for their bankruptcies, according to Personal Bankruptcy Canada Inc., a national network of independent personal bankruptcy trustees.

In Ottawa attending the Canadian Association of Insolvency & Restructuring Professionals Annual Conference, Personal Bankruptcy Canada estimates the average overpayment amounts to $350 per person or approximately $10 million a year coming from the country's lowest income earners filing for bankruptcy.

Rising consumer debt has driven bankruptcy and consumer proposal rates to more than 120,000 per year. For the vast majority of these cases, a trustee's fees are taken from a debtor's estate - money made available from selling assets, mandatory income based payments or income tax refunds.

However, for the 30,000 low income Canadians who file bankruptcies each year, who have no assets to sell and whose wages are too low to require payments, a trustee asks for fees up front in the form of a 'fee guarantee'. These funds are collected monthly and are rolled into a debtor's estate resulting in higher payments to creditors, government regulators and trustees themselves when there is no legal requirement to do so.

"The system is broken and needs to change," said David Smith, President and CEO of Personal Bankruptcy Canada and partner of trustee firm Bromwich and Smith Inc. in Alberta. "As an industry, we've become complacent in the way we run our practices. The same guidelines that were set up to ensure we get paid are inadvertently costing the debtor more money than they need to pay."

Put in perspective $350 might not sound like a lot but it could mean making next month's rent or two weeks' worth of groceries for a family. In addition, the overpayment delays the honest but unfortunate debtor from getting the fresh start the bankruptcy process is designed to deliver.

The Office of the Superintendent of Bankruptcy Canada (OSB) is the government regulator whose mandate is to supervise the administration of all estates and matters under insolvency legislation. The OSB oversees 1,100 public trustees licensed to perform bankruptcies and consumer proposals. The organization established guidelines to help ensure trustees get paid, including outlining various methods for prepayment collection. On the surface, this approach seemed fair and reasonable. However, in practice, it has had negative consequences.

To address the issue, Personal Bankruptcy Canada developed a new standard for practicing bankruptcy in Canada. Called F.A.I.R. Practice, this new governance is designed to deliver financial transparency, accountability, impartial advice and respect for Canadians with debt problems.

In cases where a low-income debtor overpays, Personal Bankruptcy Canada believes those funds should be returned to the individual. In fact, the organization learned late last week that in 2006 a New Brunswick court agreed and found that "money paid voluntarily to fund the administration of the estate" was simply and properly returned to the debtor.

"Our goal is to continue to work with the consumer advocacy groups, creditors, the courts, the OSB and the federal government to change the way personal bankruptcy is administered in Canada - particularly for those least able to afford the associated costs," added Smith. "We're raising this issue because we believe it's in our collective social and economic interest to help the financially vulnerable get back on their feet as quickly and painlessly as possible."

About Personal Bankruptcy Canada

Personal Bankruptcy Canada (PBC) is a national network of independent bankruptcy trustees. Trustees in Bankruptcy are licensed by the Federal Government following a rigorous period of study and examination. They are the only debt professionals licensed by the Government to assist with proposals to creditors and bankruptcy filings. Personal Bankruptcy Canada Members are in good standing with the Office of Superintendent of Bankruptcy.

PBC Trustee Members regularly provide commentary to media outlets on a variety of personal finance topics including bankruptcy and debt management advice. To learn more visit

Contact Information

  • For further information and interview requests:
    Jeff Fredericks
    Springwater Communications
    T: 647-963-6957