More Albertans file for bankruptcy as oil-and-gas sector struggles, expert says

The difficulties in Alberta's oil-and-gas market are likely pushing more people to file for insolvency, a bankruptcy expert says.

In the past year, nearly 1,100 more Albertans filed either a consumer proposal or bankruptcy, up 8.4 per cent over the year before, according to new figures from the federal Office of the Superintendent of Bankruptcy.

The statistics measure insolvencies over the year ending in November 2018. Data shows these recent figures are more stark than the year before, which recorded a 2.3 per cent increase in Alberta's personal insolvencies.

This past year's increase overall, of personal and business insolvencies, placed Alberta as the second-highest among Canadian provinces at 8.3 per cent, beaten only by Newfoundland and Labrador. The oil-producing eastern province saw an increase of near 12 per cent.

To find out what contributed to this change, Calgary Eyeopener radio host David Gray spoke with David Lewis, an executive board member of the Canadian Association of Insolvency and Restructuring Professionals.

Here's a portion of their conversation Monday.

Q: What can you glean from these numbers in terms of why?

A: A large portion of why is our price differential that we see for our oil and gas market. People are struggling to find work that was paying similar to what they were earning, and their debt level hasn't changed. We've seen a levelling off of home prices increasing, and they've started to actually decrease in most places, and then we've seen the prime rate increase 125 basis points in the last year — all which add stress to people who are trying to manage their debt level. 

Q: How much of this is about mortgages and the size of mortgages Albertans are carrying? 

A: I think it's more the size of unsecured debt that they're carrying more than it is the mortgage themselves. Mortgages, yes, they're a big percentage of that.

As Statistics Canada's reported, we don't have a historic number of people defaulting on their mortgages. They're not three months behind but it's not helping, right? If you've got to make a mortgage payment or make a credit card payment, you're going to make your mortgage payment first. 

Q: You're talking about levels of personal debt. But what about business insolvencies?

A: So business insolvencies in Alberta have been up [2.6] per cent, and we're second in the country with 198 filings year-to-date, November 2018, compared with 193 last year.

The problem with business filings that we don't see is there's lots of businesses that will close down and not file a formal filing because they don't have the funds or their assets don't allow for such a filing to occur.

So such things as your local restaurant that was opened Friday may be closed Saturday because they just can't afford to be opened anymore and they've made that decision but they're not making a bankruptcy filing. They're just shutting their doors. 

Q: What you're saying, I'll be blunt, sounds pretty grim. Is this just that? Is this a short-term thing? Is this what happens after we've had several bad years in this province after so many good years in this province? Or is this something that you can project into the future as something set to continue?

A: Unless we see changes in the oil and gas market such as a pipeline being being built and approved or some more economic certainty, I think we're going to see this go into the future for quite some time.

This interview has been edited for length and clarity.

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With files from the Calgary Eyeopener.