Bankruptcies on rise in Manitoba

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This article was published 29/03/2023 (921 days ago), so information in it may no longer be current.

Professional service providers knew it would be coming — they just didn’t know when.

Well, it’s starting to happen.

Personal bankruptcies and consumer proposals were up 31.5 per cent in Manitoba in February compared to a year ago, with bankruptcies up 66.7 per cent, much higher than the national rate of 5.8 per cent.

No one is quite sure why there is such a dramatic spike in Manitoba. For instance, in Saskatchewan there were fewer bankruptcies in February last year than this year (and more than there were in Manitoba).

But regardless of how large an increase there was in Manitoba, the fact is that bankruptcies and consumer proposals — a formal agreement under the Bankruptcy and Insolvency Act that allows an offer to creditors to settle debts under conditions other than the existing terms — are on the rise across the country.

Vicki Doell, vice-president and licensed insolvency trustee at BDO Canada Limited’s Winnipeg office said there was an expectation that the number would rise.

“But it certainly has taken longer than we expected,” she said.

Doell said since the pandemic experience was new to everyone, no one really knew what to expect.

While there was additional financial support from governments during the lockdowns and creditors backed off and there was extra money floating around for a while, the financial challenges many experienced are now getting settled.

“All that has delayed the increase in insolvency filings.” said Doell. “But now government has ended its additional supports and creditors are beginning to be more aggressive in their collections.”

In February there was a total of 240 bankruptcies and consumer proposal filings in Manitoba. That was fewer than in January.

According to the Office of the Superintendent of Bankruptcies, the percentage of consumers seeking debt relief surged in February with insolvency filings increasing nearly 25 per cent across the country compared to February of 2022.

Leigh Taylor at LCTaylor Licensed Insolvency Trustee said we’re starting to see the effects of all the economic problems that have accumulated over the last couple of years.

“It had to come,” Taylor said.

He had moved his own shop into larger premises just before the pandemic and then saw his business fall 40 per cent. But he kept his staff in place because he knew his services would be required at some point.

With inflation causing everything to cost more and interest rates making it that much more expensive to borrow, those who may experience hardships like a job loss or divorce now find it that much more difficult to get out from under it.

“Someone might have lost a job and hoped to be back in a couple of weeks, so you put off taking action,” he said. “You start paying the minimum on your credit card to see if you can get by. Maybe you take a part-time to help in the short term. The problem is, that’s not helping as much as it might.”

Taylor and Doell both stress that the best thing to do when the red flags start to flap around is to speak to a licensed insolvency trustee.

There is no charge to talk to them and no obligation, and they have plenty of options and strategies to share.

For instance, Doell said some people might decide to cash in their RRSPs. But if there is still debt left over and a consumer proposal or bankruptcy has to be pursued that RRSP money is gone and it would otherwise be protected from seizure in a bankruptcy or proposal. And there’s also a big new tax debt as well.

“We try to get people to sit down and go over their situation because the devil is in the details,” Taylor said.

Consolidating high interest debt is a good idea. Some creditors will give you more time to pay. Adding payments onto the end of a loan can provide a little more cash flow right now.

“But often times, and it is sort of a sad commentary on human nature, people don’t take steps until it is too late,” he said. “If you’re getting garnisheed next week it’s a little late to ask creditor for a little more time because they’ve already paid the legal fees to get the judgment.”

While consumer proposals might be more expensive — usually five years’ worth of set payments that will go up or down depending on changes to income — they are discharged off your credit rating sooner than in a bankruptcy and you are able to retain your equity in a home or vehicle.

However for someone with low income and no assets, a bankruptcy might make more sense.

But regardless of the particulars, Doell said, “It is really important for individuals that the sooner they contact a licensed insolvency trustee to find out what their option are, the more options they have.”

Both warn about debt consultants who may charge an upfront fee and who in many cases will then just refer the client to a licensed trustee because they are the only ones who can register a consumer proposal or bankruptcy.

Licensed trustees are paid, as per the federal legislation, a percentage of the agreed upon monthly payment.

martin.cash@freepress.mb.ca