Despite P.E.I.’s strong economy, the number of consumer bankruptcies on the Island in 2018 increased by 10.1 per cent compared to the previous year – the largest percent increase in Canada.
“I have everybody in here. There isn’t a sector of people that you could name that haven’t been in here at some point,” said Walter MacKinnon, a licensed insolvency trustee and vice-president of MNP Ltd. in Charlottetown.
P.E.I. had the 426 consumer bankruptcies in 2018 compared to 387 in 2017. As well, there were 305 consumer insolvency proposals on P.E.I. last year – 6.6 per cent more than in 2017, according to the annual report on insolvencies released on May 24 by the federal Office of the Superintendent of Bankruptcy. The total amount of liability from bankruptcies and consumer proposals in 2018 was $79.9 million.
This is the first time since 2015 that insolvencies on the Island has increased. Even so, MacKinnon said there are still lots of people out there that are too embarrassed to get help.
“Everybody struggles,” he said. “If they came sooner rather than later, they have more options. It’s like being on top of a funnel. As you go around the top of the funnel, you have all kinds of room and all kinds of space to maneuver. But as you start sliding down and get to the spout at the bottom, you don’t have very many choices. And, that’s what happens in this financial sweatbox when people are in it too long.”
The age groups with the most insolvencies on P.E.I. in 2018 was 35 to 39 (13.7 per cent) followed by the age 40 to 44 group with 13.1 per cent.
“It doesn’t have to be really complicated. Do a budget, track where you’ve actually spent money for the month, compare it to your budget and do it again the next month.”
-Walter MacKinnon
MacKinnon said he has clients from all walks of life.
“People struggle along, and they can do it for a long time. They might use a credit card or two to pay off another credit card or two or get a cash advance from these money lending firms. And, it is just so hard on the head that they get to the point that they just can’t do this anymore,” he said.
Seniors made up 11.4 per cent of total insolvencies on P.E.I. MacKinnon explained that seniors can run into financial trouble in cases when one of the partners dies, and all of his or her debt is transferred to the other partner, but now with only half the income to make payments.
Another challenge with seniors is when they’re still financially helping out their adult children.
“They help their kids by maybe using or borrowing on their credit cards – because the kids are having a hard time, and that impacts on the parents and everybody gets in the mix.”
The market research firm Ipsos conducted a survey of 2,070 Atlantic Canadians between March 13 and March 24 about their debt challenges.
According to the Ipsos survey, conducted for MNP Ltd., 80 per cent of Atlantic Canadians said they own more than $1,000, 42 per cent said they don’t have enough money on hand to pay their debts and 38 per cent said they don’t make their debt payments on time.
In terms of unexpected expenses, 32 per cent said they couldn’t financially cope with unexpected auto repairs or purchases, 36 per cent couldn’t financially cope with unexpected illnesses or not being able to work for three months and 40 per cent couldn’t financially cope with losing their job.
In 2019 (up to March 31), 171 consumer insolvencies have been filed on P.E.I., including 92 bankruptcies.
MacKinnon said the biggest thing that people should do to help stay out of financial trouble is set a budget and stick to it.
“It doesn’t have to be really complicated. Do a budget, track where you’ve actually spent money for the month, compare it to your budget and do it again the next month.”
In Canada last year, there were 128,864 insolvencies (including businesses), which was a 2.4-per-cent increase compared to 2017. Total liabilities in Canada were $21.6 billion.
On P.E.I., only three businesses went bankrupt in 2018 compared to 10 the previous year, and only one filed a consumer proposal. There were seven receiverships in 2018 totaling $290.7 million in declared assets compared to six receiverships in 2017. Of the seven receiverships last year, five were court appointed (compared to two in 2017) with businesses having a total of $286.8 million in declared assets. The remaining receiverships were privately appointed.
