New Brunswick saw the largest monthly increase in consumer insolvency filings in March, according to the latest statistics from the Office of the Superintendent of Bankruptcy.
There were 317 bankruptcies and consumer proposals in the province that month, compared to 213 in February, a jump of 48.8%.
Across the country, the average increase was 24%.
For more context, the provinces closest in population size, Nova Scotia, Saskatchewan and Newfoundland and Labrador, had 293, 313 and 164 consumer insolvencies, respectively, in March. These represented February month-over-month increases of 35%, 43.6% and 13.1%.
However, New Brunswick’s figure was actually lower than the same period last year.
There were 328 consumer insolvencies in the province in March 2021. This year’s 317 marked a decline of 3.4%.
“Record trends” in insolvency filings began before the pandemic, said licensed insolvency trustee Paul Moffett, who works for a global accounting firm called BDO Canada Limited.
Then during the pandemic, people relied more on credit, he said.
And now inflation is outstripping wage increases.
There are many ways to recognize when it’s time to speak to a debt professional, Moffett said.
“if you’re losing sleep…constantly thinking ‘How am I going to make these next payments?’…only make the minimum payments each month…use one credit card or line of credit to pay off another …exceed your limits…these are obviously signs that something is wrong,” he said.
When a person files for bankruptcy, it stops wage garnishment, collection appeals and lawsuits, Moffett said.
“The purpose of bankruptcy is to provide the honest and unfortunate debtor with the opportunity to extricate themselves from the crushing burden of debt,” he said.
It can be a great relief. But it also comes with its own challenges.
Canada’s Department of Innovation, Science and Economic Development goes on to explain on its website that what also happens in bankruptcy is that your assets are sold, you pay as much as you can to the trustee. for up to three years and your credit is affected. for at least six years, making any major purchase difficult.
How long your bankruptcy lasts and how much it costs generally depends on what assets you have, what you earned during your bankruptcy, and whether you’ve ever been bankrupt, Moffett said.
Information Morning – Fredericton8:52High rate of bankruptcies in NB
“If you have minimal assets and your income does not exceed a certain threshold and you have never been bankrupt before, it could only take nine months.”
In other situations, it can be up to three years.
The first option explored when meeting a person is whether they can deal with it on their own by “kneeling down”.
The second option is a “consumer proposal”.
According to the Government of Canada, a consumer proposal involves offering to pay creditors a percentage of what they are owed, or extending the time you have to pay off debts, or both, up to a maximum of five years.
“Sometimes we’re able to settle debts for as little as 20% or less,” Moffett said.
Consumer proposals are growing in popularity, he said, adding that they have some advantages over bankruptcy.
Debtors like them because they can make lower payments over a longer period – five years instead of three.
Creditors love them because they can often recover more of what is owed to them.
High real estate values are a ‘double-edged sword’
Another possible reason for their growing popularity could be related to soaring real estate prices.
Moffett said more and more of the people he sees who are at risk of bankruptcy these days have equity in their homes. This means their home is worth more than they owe on any mortgage.
Fairness is a “double-edged sword” in insolvency, he said.
This increases a person’s assets and the amount they are expected to repay to creditors, but it also gives a person more options, such as a consumer proposal.
Having equity can also give you the option of trying to remortgage your home, he said.
Upon filing for bankruptcy, the house becomes the property of the estate, for the benefit of your creditors.
A person might decide to sell their home and pay all their bills, Moffett said, but that’s not a very popular option.
This will likely steer you more toward a consumer proposal, he said.
The Office of the Superintendent of Bankruptcy reports that New Brunswick’s consumer insolvencies for March 2022 break down into 106 bankruptcies and 211 consumer proposals.
For the entire first quarter, there were 739 consumer insolvencies in the province – 259 bankruptcies and 480 proposals.
That’s fewer than there were during the same period last year – 802.
That’s an increase of around 12% from the last quarter of 2021 – when there were 660.