More Canadians are considering bankruptcy this year as attitudes toward financial insolvency grow more understanding, according to a recent survey.
The poll found that 19% of Canadians could be considering financial insolvency this year. The information comes from the COVID Economy Poll conducted by Bromwich and Smith: Licensed Insolvency Trustees.
The survey results show that a much higher proportion of Canadians are considering insolvency than those who declared bankruptcy or filed a consumer proposal last year, according to the Office of the Superintendent of Bankruptcy Canada.
The poll also found that 17% of Albertans are considering filing for bankruptcy or making a consumer proposal in the near future, and one in 10 Albertans are likely to seek advice on the matter within the next month.
Ontario leads the survey with 22% of respondents contemplating financial insolvency.
“We’re all in or around, hovering around that one in five. But it’s still a big explosion around Canada,” said Jasmine Marra, vice president of Bromwich and Smith. Marra was interviewed on CBC Edmonton AM Wednesday.
The poll surveyed 1,510 Canadians last month.
Financial insolvency can mean bankruptcy or a consumer proposal. Last year, Canada saw an increase in consumer proposals — debt repayment agreements with creditors where consumers don’t have to dispose of their assets as they do in bankruptcy.
Federal government figures show that last year in Canada, 4.6 out of every 1,000 adult consumers filed for insolvency, either by declaring bankruptcy or filing a consumer proposal.
In Canada, there were 137,178 consumer insolvency cases in 2019; 60% were consumer proposals and the rest bankruptcies.
In Alberta last year, 4.9 out of 1,000 adult consumers filed for insolvency. The rate had risen steadily since 2014, when it was 2.6 per 1,000 people.
Edmonton had a consumer insolvency rate of 0.49% last year, while Calgary’s rate was 0.47%. Both of these numbers have steadily increased, along with the provincial rate, since 2014.
This year, insolvency filings have fallen by around 40%. But Marra and other experts short-lived fear after the end of the COVID-19 financial relief plans.
To add to the concern, the Canadian COVID Wake Up Call, a study by Angus Reid of 1,500 Canadians sponsored by Credit Canada, found that 39% of Canadians receiving financial assistance do not know what they will do in the end of their support. The online survey was conducted last week.
That might lead more people to consider bankruptcy or consumer proposals, but there’s still a stigma attached to financial insolvency, Marra said.
Divorce, job loss can be triggers
The Bromwich and Smith survey showed that there is still a significant portion of people who believe that those who do not pay their debts are lazy, irresponsible and selfish.
But the COVID-19 pandemic could help change those attitudes by providing a teachable moment, Marra said.
“One of the things that a lot of people don’t realize is that people who file for bankruptcy or a consumer proposal to restructure, a lot of the time, it’s not just because they can’t not manage their money, it’s probably because of an unexpected trigger,” Marra said, citing divorce, job loss, illness and the current pandemic as examples of triggers.
The Bromwich and Smith survey found this may already be happening, with more respondents expressing empathy for others considering bankruptcy.
Marra hopes more people can overcome the shame that is still often associated with declaring bankruptcy to seek professional advice if they are struggling with their finances.
“This shame and the money stories we tell ourselves keep us from reaching out early, but reaching out early is so critical.”
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