Seeking a life line

Filing for bankruptcy is one of the most difficult financial decisions a person or couple may have to undertake in their adult life.
I’ve been fortunate enough to not find myself in that circumstance. It can be a dark time, for sure, and knowing when to seek professional help with your finances is key.
Recent statistics show those in the most distress are finding ways to prevent the worst of outcomes.
Third quarter figures from last year released by the Office of the Superintendent of Bankruptcy Canada in December indicated consumer proposals are becoming the preferred way to dig out of debt.
Nationally, from July to September, figures show bankruptcies were down 8.4 per cent, while consumer proposals increased by 2.5 per cent compared to the same period in 2016.
Consumer proposals are now becoming an attractive option for people to deal with their debt because it allows them to make a fair offer to creditors to pay back all (or a portion) of their unsecured debt, typically with one monthly payment, while often being able to keep their assets.
Speaking with Blaire MacNeil, a licensed insolvency trustee with Grant Thornton Ltd. in Sydney, N.S., she tells me people are motivated to come to an agreement on a payment schedule with creditors because it means they likely can keep their assets. When you’re trying to grow your nest egg, keeping as many assets under your control is a huge consideration.
“Across Atlantic Canada there is a significant increase in consumer proposals,” she said in a recent interview.
“I think people are learning more about what’s available to them in the marketplace.”
These are, of course, decisions most of us hope we don’t have to make but tough times can fall upon anyone – especially if it’s a sudden job loss or a major illness that significantly reduces a family’s income, and there’s also the fact that Canadians, on average, owe $1.68 for every dollar of household disposable income. Any loss of income could force you against the wall as you seek ways to fend off debt collectors.
In Atlantic Canada, the most obvious signs consumer proposals have caught on is in Newfoundland and Labrador where comparing Q3 results from 2016 to 2017 showed a 19.2 per cent decline in bankruptcy filings but a 32.7 per cent rise in the number of consumer proposals.
In Nova Scotia and Prince Edward Island, both bankruptcies and consumer proposals were down comparing the third quarter in 2017 year-over-year but the percentage drop in bankruptcy filings were much greater than the decline in consumer proposals.
The numbers for Cape Breton look good on the surface. The total number of bankruptcies and consumer proposals in Q3 are down 21.2 per cent from the same period in 2016. Breaking it down further, bankruptcies were down 22.8 per cent, while consumer proposals dropped 19 per cent.
MacNeil said Cape Bretoners experienced hardship a few years ago following the dramatic drop in oil prices, which led to thousands of layoffs in the Alberta oil sands.
The bankruptcy and consumer proposal figures from 2015 to 2016 increased by 35 per cent, she said. The latest quarterly results show a considerable improvement however she’s hoping for even better results when the Q4 figures are released.
“Some disposal income is coming back to Cape Breton,” said MacNeil. “Hopefully that momentum will keep growing.”
No matter whether bankruptcies are up or down across the country, MacNeil told me Atlantic Canadians are no different than people in any other part of Canada – thousands continue to rely on unsecured credit and personal loans to finance their lives.
“When times get hard people get stressed out and sometimes people lose control of their budgeting process. The amount that Canadians owed compared to disposable income is hitting record highs. It’s all part of a national trend.”