New Brunswick had the highest monthly increase in bankruptcy filings by consumers in March, according to the latest data from the Office of the Superintendent of Bankruptcy.
There were 317 bankruptcies and consumer resolutions in the province that month, compared to 213 in February – a jump of 48.8 percent.
The average growth across the country was 24 percent.
For further reference, the provinces with the closest population sizes, Nova Scotia, Saskatchewan, and Newfoundland and Labrador, had 293, 313 and 164 consumer bankruptcies, respectively, in March. Month-on-month representations from February increased by 35 percent, 43.6 percent and 13.1 percent.
However, New Brunswick’s figure was actually lower than for the same period last year.
There were 328 consumer bankruptcies in the province in March 2021. This year’s 317 saw a decline of 3.4 percent.
The “record trend” in insolvency filings began before the pandemic, said licensed bankruptcy trustee Paul Moffett, who works for a global accounting firm called BDO Canada Ltd.
Then, people were more dependent on credit during the pandemic, he said.
And now, inflation is overtaking wage growth.
Moffett said there are several ways to identify when it’s time to talk to a date professional.
“If you’re losing sleep… the constant ‘How am I going to pay this next?’ I’m thinking about… making only the minimum payment every month… paying off another using one credit card or line of credit… Exceeding your limit… Those are clearly signs that something’s wrong is,” he said.
When a person files for bankruptcy, it withholds wage garnishment, collection calls and lawsuits, Moffett said.
“The purpose of bankruptcy is to provide an opportunity to the honest, unfortunate debtor to come out of the crushing burden of debt,” he said.
This can bring great relief. But it also comes with its challenges.
The Canadian Department of Innovation, Science and Economic Development explains on its website that what happens even in bankruptcy is that your assets are sold, you pay the trustee as much as you can for three years and your credit is affected less. For less than six years, which makes it difficult to make any major purchases.
Moffett said how long you’ve been bankrupt and its cost generally depends on what you have for assets, what you earned during your bankruptcy, and whether you’ve been bankrupt before.
Information Morning – Fredericton8:52NB. high rate of bankruptcy
“If you have minimum assets and your income doesn’t exceed a certain threshold and you’ve never been bankrupt before, it may take only nine months.”
In other cases it can be up to three years.
When he meets a person the first option is explored whether they can “take a knee” and deal with it on their own.
The second option is “Consumer Offer”.
According to the Canadian government, a consumer offer is one where you offer to pay creditors a percentage of what they owe, or extend the time you have to pay off debts, or both, over a maximum of five years.
“Sometimes we are able to settle the debt for 20 percent or less,” Moffett said.
Consumer offers are growing in popularity, he said, adding that they have some benefits over bankruptcy.
Debtors like them because they can pay less over a longer period of time — five years instead of three.
Creditors like them because they can often recover a substantial portion of the amount owed.
High real estate values are a ‘double-edged sword’
Another possible reason for their increasing popularity may have to do with rising real estate prices.
Moffett said that most people he sees, who are facing potential bankruptcy these days, have equity in their homes. This means that their home is worth more than any mortgaged.
He said equity is a “double-edged” sword when it comes to bankruptcy.
This increases a person’s assets and the amount required to repay creditors, but it also gives a person more options, such as consumer proposition.
Having equity can also give you the option of trying to mortgage your home, he added.
The home becomes an estate asset for the benefit of your creditors when filing for bankruptcy.
A person can decide to sell their home and pay all their bills, Moffett said, but it’s not a very popular option.
That’s probably going to lead you to consumer proposition, he said.
The Office of the Superintendent of Bankruptcy reports that New Brunswick consumer bankruptcy for March 2022 broke down into 106 bankruptcies and 211 consumer resolutions.
For the entire first quarter, there were 739 consumer insolvencies in the province – 259 bankruptcies and 480 resolutions.
This is less than the corresponding period last year – 802.
This is an increase of about 12 per cent from the last quarter of 2021 – when there were 660.