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Quality of Canadian debt advice: Is the current debt advice regime flawed…

- - - - Many counsellors attempt to force a client's profile to fit within the qualifications of a DMP
      - Budgets were created, but title attention was paid to realistically implementing it in their daily lives
      - Once DMPs are ruled out as an option through inability to afford the plan, little resources or financial advice is provided to debtors
      - Counsellors tend to discourage bankruptcy and its potential benefits
      - Lack of transparency regarding fees
        
        Potentially, counsellors are financially motivated to persuade debtors into pursuing DMPs as opposed to bankruptcy
  - - - LITs who had a relationship with debt consultants tend to file consumer proposals rather than bankruptcies for debtors
        
        Could be caused by the higher fees associated with consumer proposal vs a bankruptcy
      - Referrals often only required the services of an LIT to file the necessary paperwork, while debt counsellors would up-charge debtors for additional matters.
      - Debtors who were referred to an LIT by a debt consultant often pay thousands of dollars more to cover the administration of the process than those who were not
- - - - Race, Attorney Influence, and Bankruptcy Chapter Choice
        By: Jean Braucher, Dov Cohen, Robert M. Lawless
        
        Idea that there is a racial disparity in the United States, where African-American debtors tend to file for a Chapter 13 bankruptcy (equivalent of consumer proposal) as opposed to a Chapter 7 bankruptcy (straight bankruptcy)
        
        "African Americans disproportionately use a type of bankruptcy that requires greater repayment of debt, costs more in legal fees, and takes longer"
        
        Explanations for the disparity
        
        Attorney bias
        
        "... Attorneys are more likely to recommend that a fictional “Reggie & Latisha” file Chapter 13, as compared to a fictional “Todd & Allison.”"
        
        "Reggie and Latisha were judged to be competent people of good values when they wanted to make up for their debts of the past, whereas Todd and Allison were judged to be competent people of good values when they wanted to wipe the slate clean and make a new start on their life"
        
        Demonstrates the differing inherent biases that debt advisors and lawyers may have when providing advice to debtors. This bias may be influenced by social norms and understandings.
        
        Racial Steering in Bankruptcy
        By: Mechele Dickerson
        
        Relevance to proposal
        This paper examines the results from Chapter Choice, and poses alternative explanations for the disparity discovered. This paper may assist in informing the analysis we conduct, and the questions/characteristics we get in the data we are hope to obtain
        
        Experiences with African American individuals: The idea that different advice may be given to a specific demographic depending on the attorney's exposure to that race
        
        Paternalism: The notion that attorneys may have a belief that they have a duty to steer their clients in the more moral direction
        
        Belief that African-American debtors would need to work harder than their Caucasian counterparts to avoid credit discrimination
        
        "Bankruptcy lawyers might genuinely believe that they can and should ignore their client's individual autonomy and preferences and instead, provide lawyer-centered rather than client centered counselling"
        
        Religion: African-American individuals demonstrate a higher rate of religious involvement than Caucasian individuals. Religious involvement is also associated with a tendency towards moral decisions
        
        Financial literacy, or lack-thereof
        
        Similar to the analysis of gender and financial literacy, a lack of financial knowledge may lead debtors to simply accept the advice provided to them by someone they believe to be more knowledgeable, despite their preferences
        
        The Uses of Financial Literacy: Financialization, the Radical Imagination, and the Unpayable Debts of Settler Colonialism
        By: Max Haiven
        
        1 more item...
        
        Relevance to proposal
        This paper is relevant to my proposal, as I am seeking to determine whether the inherent characteristics of a debtor, such as race, impact the advice that LITs and CCPs provide them with. While this question was posed in the American context in this article, the findings in the study would be interesting to explore in the Canadian context.
      - Race and Bankruptcy: Explaining Racial Disparities in Consumer Bankruptcy
        By: Edward Morrison, Belisa Pang, and Antoine Uettwiller
        
        An alternative to Chapter Choice, where Chapter 13 filings may benefit African-Americans rather than hinder them
        
        "African Americans were more likely to accumulate city debt, were more likely to be targeted by city enforcement efforts, and consequently were more likely to file Chapter 13 bankruptcy cases in response to the Emmanuel policy compared with consumers from other racial groups"
        
        "Racial disparities in bankruptcy are attributable to underlying differences in background characteristics (especially commuting times)"
        
        Thus, other than attorney bias, the systematic reality of the area one resides in may play a role in their choice of bankruptcy
    - - Gender differences in the financial knowledge of Canadians
        By: Marie Drolet
        
        Relevance to proposal
        An examination of how the dynamics of gender and financial literacy interact with one another. As financial literacy may have an impact on one's debt, this data helps to inform the data that may be derived from this proposal.
        
        "In 2014, women were less likely than men to consider themselves to be “financially knowledgeable” (31% versus 43%) and were less likely to state that they “know enough about investments to choose the right ones that are suitable for their circumstances” (48% versus 63%)."
        
        The disparity in financial knowledge between men and women is "more pronounced among older Canadians, among the university-educated, and among higher-income workers"
        
        These are factors that may be considered in my proposed study
        
        Women are more likely then men to seek financial assistance than men
        
        This may manifest itself as women seeking CCPs more often than men, illustrating the importance of quality debt advice
    - - In the United States, racial and gender gaps continue to persist, despite its relative narrowing in recent years
        
        This is largely attributable to an individual's education, and discrimination in the work force.
        
        These factors are important to consider when analyzing debt and bankruptcy statistics, as one's wage and education likely has an impact on their ability to maintain their lifestyle, and potentially fall into unmanageable debt.
        
        Student Debt and the Crushing of the American Dream
        By: Joseph Stiglitz
        
        This is especially relevant when considering that student loans are not dischargeable upon bankruptcy, and can potentially lead to additional debt if an individual overestimate's their ability to find employment
- - - - "With little income and few assets that can be sold to repay creditors or to pay the fees associated with bankruptcy, some LILA debtors cannot afford to file for bankruptcy, given that bankruptcy trustees typically charge $1,800 to $2,000 per case"
      - "Canada needs a low-cost bankruptcy option, perhaps modelled along the lines of New Zealand’s No-Asset Procedure (NAP) or England and Wales’ Debt Relief Orders (DRO)"
        
        Implies the need for further reform of the debt relief regime in Canada - an idea that will be explored in my proposal
- - - - Notion that dual income families are worse off due to the lack of financial safety net
      - Results in a situation where there is no reserve worker, and no caregiver either
        
        This situation demonstrates a clear gendered situation, as often in single income households, the female partner involved is the caregiver, while the male is the provider. See gendered dynamics below
    - - Middle class households are struggling to keep up with inflation, "depleting its assets to maintain its previous level of consumption"
      - Racial minorities are more greatly impacted by this fact, which is further outlined in Eileen Patten's work below