Madam Chair and honourable members of the committee, thank you for the invitation. My name is Doug Hoyes of Hoyes, Michalos. I am a licensed insolvency trustee. Over the last 27 years, my firm has helped more than 75,000 Canadians formally deal with their debt.
Let me give you three observations on what we're seeing on the ground right now. First, this isn't a new debt problem. It's the same problem stretched further. Canadians are carrying more debt for longer before they run out of options. Based on data we gather from our clients and publish annually in our Hoyes, Michalos Joe Debtor bankruptcy study, the average insolvent Canadian now owes over $67,000 in unsecured debt, spread across more than 10 creditors. That's not one bad decision. Canadians are layering debt on top of debt, using credit as a coping strategy. By the time they come to see me, they're not dealing with one problem. They're dealing with 10.
Consumer insolvency is a lagging indicator. People don't rush to file. They exhaust every option first—refinancing, balance transfers, minimum payments—before seeking formal help. What we are seeing today is financial stress being stored, not resolved. That doesn't fully show up in today's numbers, but it will. Today's relatively modest increase in insolvency filings understates the pressure building beneath the surface. That pressure will lead to a higher number of insolvency filings over the next 12 to 24 months.
My second observation is that the federal government, through the Canada Revenue Agency, is a creditor in over 40% of personal insolvencies. Based on my estimates, approximately $1.4 billion of CRA debt was included in consumer insolvencies last year. In most cases, the best outcome for all parties is a consumer proposal, one where the debtor repays a portion of their debt and creditors receive more than they would in a bankruptcy. In practice, though, we are seeing a growing disconnect.
As you may be aware, the Office of the Auditor General of Canada recently identified significant service delivery challenges at the CRA. I have the same concerns. In practice, when the CRA is a significant creditor, consumer proposals may take months to be reviewed. In some cases, the CRA requires repayment terms that exceed what the debtor can realistically afford.
The result is predictable. The proposal fails. The debtor files bankruptcy. Everyone, including the government, recovers less. The debtor was willing to pay more, but the system just didn't allow it. This is not a policy problem; it's a process problem. If the goal is to maximize recovery, then decisions should be grounded in what is achievable, not what is theoretically recoverable.
Finally, I would like to address the issue of unlicensed debt advisers. We continue to see cases where vulnerable Canadians unwittingly fall prey to unregulated advisers who charge significant upfront fees for unnecessary services or, in some cases, harmful ones. These consumers often arrive at a licensed insolvency trustee later, with fewer options and worse outcomes. As the superintendent of bankruptcy noted in her testimony before this committee last week, she has made progress in this area. I commend her for that and encourage continued enforcement.
Canada's insolvency system is fundamentally sound. It balances two objectives—maximizing recovery for creditors and providing a fresh start for the honest but unfortunate debtor—but right now we are seeing strains in how it operates. Financial pressure is building, process decisions are reducing recoveries, and vulnerable consumers are still falling prey to unscrupulous debt advisers. These are real problems, but they are solvable. If we focus on what people can realistically repay, we will improve outcomes for debtors, creditors and taxpayers.
Thank you. I look forward to your questions.