Consultant calls high insolvency rates 'a troubling trend'
Low oil prices, struggling economies cited as contributing factors
A St. John's financial consultant who helps people cope with unmanageable debt says a spike in the number of personal insolvencies in oil-producing provinces is a sign of the times.
"We're talking about almost 2,000 filings a year and, for a small province such as Newfoundland, [that's] a pretty big number. It's not insignificant," said Sean Stack, a trustee with S.R. Stack and Company Ltd.
"For a few years there, Newfoundland's economy had been doing quite well and total filings were decreasing. But now — with lower oil prices and Alberta's economy struggling, parts of Labrador struggling — we're starting to see that showing in the bankruptcy and insolvency numbers," he said.
New data from the Office of the Superintendent of Bankruptcy Canada shows the number of insolvencies in Alberta and Newfoundland and Labrador has jumped sharply.
Personal insolvencies in Newfoundland and Labrador grew by 17.4 per cent from 2014 over 2015, the office reported Monday.
Moreover, N.L. saw insolvency rates increase by 26.2 percent from the fourth quarter in 2014 to the same period in 2015.
Alberta's insolvency rate jumped by 18.1 per cent year-over-year, with 10.4 per cent hike in personal bankruptcies and a 24.9 per cent increase in proposals to have debt payments restructured.
All ages, all demographics
Stack said more young families — parents in their 30s and 40s — who once made six-figure salaries in Alberta or Newfoundland and Labrador now "don't have that employment income to maintain that debt that they have accumulated."
He said some work paycheque to paycheque and "are spending all of it and then some," while others no longer generate enough income to support their mounting debt.
The data released Monday underscores the impact of the ongoing shakeout in the oil industry, which has been racked for more than a year by a slump in commodity prices.
The data shows that in Newfoundland and Labrador, 1,519 bankruptcies were recorded last year, a jump of 144 from the year before.
The office reported that there was a 65 per cent increase in N.L. in proposals for debt-payment restructuring.
Nationally, there was an increase of 1.1 per cent in the number of personal insolvencies.
Don't call it a crisis
Stack said insolvency filings in Newfoundland and Labrador peaked in 2009, and there has been a downward trend in the years since then.
"This is quite a dramatic reversal of that trend. If we're not out of the woods yet, given the provincial budget numbers as we're all aware of, it's a troubling trend for sure," he said.
Stack said this is a stressful thing to go through, and people should know that they're not alone.
"Declaring oneself to be insolvent and making a proposal, or filing for bankruptcy, isn't a decision that people take lightly ... and it's important to get support and help as you go through it."
Stack estimates that someone who has never filed bankruptcy before can be "discharged" after nine or 21 months "depending on their income."
He said it's then that person's responsibility to establish a savings habit and start rebuilding their credit.
While Stack said he wouldn't call the problem an epidemic, he believes it is a sign of troubling times to come.
With files from Jonathan Crowe