The Office of the Superintendent of Bankruptcy has released information about the number of new insolvencies filed by consumers for the first quarter of 2014. In Canada, the overall number of new consumer bankruptcies continues to decline while the number of new consumer proposal filings continues to increase at a steady rate of approximately 8 per cent.
A consumer proposal is an option that allows consumers and businesses to offer their creditors an interest free settlement on their total debt. It works well for those that have the ability to make a regular payment or if there are assets that would be subject to seizure in a bankruptcy filing that the debtor wishes to protect.
An increase to consumer proposal filings shows that Canadians are over extended. Individuals that file a consumer proposal often have a regular income source and are able to commit to a monthly payment for a period of up to five years. While their debt issues may be a result of varying factors, including job loss, separation or even simply over spending, it is clear that Canadians are finding a consumer proposal to be a viable alternative to dealing with their debt issues.
There is more variation when you look at individual provinces. Saskatchewan and Prince Edward Island both show a significant increase in new insolvency filings of just over 8 per cent in the 12 month period ending March 31, 2014. This increase combines both bankruptcy and consumer proposal files.
Quebec and New Brunswick also show a significant increase in new filings during this same time period. While the increase in the number of consumer proposal files is more dramatic, sitting at over 25 per cent for each of these provinces, bankruptcy files are also increasing.
Ontario and Alberta on the other hand both show a drop in the number of new insolvency files over this 12 month period, both down by over 5 per cent overall.
The data for new business bankruptcy files is similar to the overall trends of consumer files. The number of new business bankruptcy filings is only slightly down from last quarter to this quarter, and have stayed relatively the same for the 12 month period ending March 31, 2014. In turn, the number of business proposal filings has also increased, though not as significantly as with consumer proposals.
It is not surprising that the greater majority of business insolvency files occur in Quebec and Ontario. Quebec alone accounts for over half of all new business filings in Canada.