N.B. takes biggest jump in personal insolvencies in March

New Brunswick had the highest monthly increase in insolvency filings by consumers 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 per cent.

Across the country the average increase was 24 per cent. 

For further context, the provinces with the closest population sizes, Nova Scotia, Saskatchewan and Newfoundland and Labrador had respectively 293, 313 and 164 consumer insolvencies in March. Those represented month-to-month increases from February of 35 per cent, 43.6 per cent and 13.1 per cent.

New Brunswick's figure was actually lower, however, than it was for the same period last year.

There were 328 consumer insolvencies in the province in March 2021. This year's 317 marked a drop of 3.4 per cent.

"Record trends" in insolvency filings started 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 outpacing wage increases.

There are many ways to recognize when it's time to talk to a debt professional, said Moffett.

"if you're losing sleep … constantly thinking about 'How am I going to make these next payments?'...making only the minimum payments every month … using one credit card or credit line to pay off another … exceeding your limits…those are obviously signs that something's wrong," he said.

When a person files for bankruptcy, it stops garnishment of wages, collection calls and lawsuits, said Moffett. 

"The purpose of bankruptcy is to provide the honest, unfortunate debtor the opportunity to get out from under the crushing burden of debt," he said. 

That can be a big relief. But it also comes with its own challenges.

The Canadian Department of Innovation, Science and Economic Development goes on to explain on its website that what also happens in bankruptcy is your assets are sold off, 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 it difficult to make any major purchases. 

How long you're bankrupt for and how much it costs generally depends on what you own for assets, what you earned during your bankruptcy, and whether you've been bankrupt before, said Moffett.

"If you've got minimal assets and your income is not over a certain threshold and you've never been bankrupt before, it could only take nine months."

In other situations it can be as long as three years.

The first option explored when he meets with a person is whether they can deal with it on their own by "knuckling down."

The second option is a "consumer proposal."

According to the government of Canada, a consumer proposal is where you offer to pay creditors a percentage of what is owed to them, or extend the time you have to pay off the debts, or both, over a maximum of five years.

"Sometimes we're able to settle debts for as little as 20 per cent or less," said Moffett.

Consumer proposals are increasing in popularity, he said, adding they have some benefits over bankruptcy.

Debtors like them because they can make lower payments over a longer period — five years instead of three.

Creditors like them because they can often recoup a larger portion of what's owed.

High real estate values are 'double-edged sword'

Another possible reason for their growing popularity could have to do with soaring real estate prices.

Moffett said more of the people he sees who are facing possible bankruptcy these days have equity in their homes. That means their house is worth more than what they owe on any mortgage.

Equity is a "double-edged" sword when it comes to insolvency, he said. 

It increases a person's assets and the amount they're expected to repay creditors, but it also gives a person more options, such as a consumer proposal.

Having equity may also give you the option of trying to remortgage your house, he said.

When filing for bankruptcy the house becomes property of the estate, for the benefit of your creditors. 

A person could decide to sell their house and pay off all their bills, said Moffett, but that's not a very popular option.

It's probably going to steer you more toward a consumer proposal, he said.

The Office of the Superintendent of Bankruptcy reports that New Brunswick 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.

It's an increase of about 12 per cent from the final quarter of 2021 — when there were 660.