Despite the fact that nearly three million jobs have been lost as a result of COVID-19, the number of Canadians filing for insolvency is down, according to new data from the Office of the Superintendent of Bankruptcy.
After consistently increasing over the past year, the number of Canadians who filed for insolvency in the first quarter of 2020 declined by 5.5% compared to the previous quarter. What's more, in March alone, consumer insolvencies decreased by 8.5% compared to the same time last year.
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According to Canadian Association of Insolvency and Restructuring Professionals (CAIRP), the decline is largely led by increased payment flexibility among creditors, landlords, and administrators coupled with temporary income supports provided by the government. Though, while these measures have allowed many Canadians to make ends meet, bankruptcy professionals say they believe consumer insolvencies will spike in the wake of the coronavirus pandemic.
“For those who were already overstretched with more debt than they could reasonably afford, the government relief and short term payment reprieve have allowed many to stay afloat. But their underlying debt is a gaping hole in the lifeboat,” says Mark Rosen, Chair of the CAIRP. “The pandemic will magnify the debt problems Canadians were already facing and insolvency will be the way out for many.”
In the lead up to COVID, consumer insolvencies were increasing in Canada, with the total number of insolvencies for the 12 month period ending March 31 increasing by 8.4% compared to the same period last year. And with no end to the pandemic insight, Rosen is encouraging severely indebted Canadians to seek professional advice now from Licensed Insolvency Trustees before they find themselves "even more in over their heads."
According to Rosen, Licensed Insolvency Trustees are federally regulated debt professionals who can offer guidance regarding all of the debt-relief options available to Canadians. If it is determined that bankruptcy or proposal is the best course of action, the dual role of the Licensed Insolvency Trustee is to ensure that the debtors’ rights are not abused while protecting the rights of creditors.
“For individuals and families in financial distress, the insolvency process is really about moving forward after hardship to focus on a brighter future. For creditors, the process formalizes negotiations and cushions losses,” says André Bolduc, executive board member of CAIRP and Licensed Insolvency Trustee.
Bolduc says that as soon as an individual files for insolvency, they are protected from creditors, which can also include protection from collection agency calls and wage garnishment.
“It’s so easy to become paralyzed with fear or shame and let the bills pile up even more but that is the absolute worst thing you can do right now. You do not need to tough out this crisis on your own. Help is available,” adds Bolduc.
What's more, in an effort to adhere to social distancing measures while still supporting those in need of financial assistance, many Licensed Insolvency Trustees in Canada are offering free contactless consultations virtually or by phone. Those interested in speaking to an insolvency trustee can find one near them by visiting here.
