Number of Manitobans declaring bankruptcy expected to rise, expert says
After a 2-year dip, insolvency rates beginning to match pre-pandemic levels
Manitoba could see a spurt in people filing for bankruptcy over the summer months, an insolvency trustee warns.
New data from the federal government shows 200 individual Manitobans filed for bankruptcy in the first quarter of this year, which is up from the first quarters of 2021 and 2022. And experts say the second quarter could see even more.
"Now that we're sort of coming out of [the pandemic], it's expected that there will be quite an increase in the numbers, and we're starting to see that now," said Leigh Taylor, a licensed insolvency trustee with LC Taylor in Winnipeg.
He says each bankruptcy case he sees is unique. Causes can range from someone losing their job, to divorce, to unexpected medical expenses.
"All of that can take a hit on your cash," he said.
But on top of the usual causes, he says the economy is moving faster now than in the past few years, and he points to recently increased interest rates as another factor. Minimum payments on credit card debts have increased, and he's seen clients have to renegotiate mortgages for higher monthly payments.
Taylor says the bankruptcy numbers in Manitoba from January to March are indicative of an expected increase — and he predicts the numbers to go even higher later in the year, as people feel the pinch of higher rates.
Bankruptcies mean more activity: Fry
"That tells me Canadians are getting back to their pre-pandemic activities," said Sandra Fry, a Winnipeg credit counsellor with the Credit Counselling Society. She says more bankruptcies mean more economic activity.
Figures from the seven years immediately before the pandemic show an average of 278 Manitobans filing for bankruptcy in the first quarter of each year.
In 2021 and 2022, the number was 185 and 130 respectively. Taylor says those low numbers reflect pandemic restraints on the economy. He says experts aren't surprised to see numbers go up again with the lifting of restrictions.
"People are realizing the pandemic is over, they've got to get back to work, they've got to start facing the difficulties," he said.
Taylor says when the economy moves — either positively or negatively — you'll see more bankruptcies.
When things are going negatively, the economy can't support as many businesses as it could previously. When a business fails, it's not uncommon for its employees to be forced into bankruptcy. When on an economic upswing however, people invest capital. But investors don't always see a return and bankruptcy can result.
Fry says Manitoba breaking the 200 number at the beginning of 2023 shows things are moving again.
"Canadians often spend more than they are earning," said Fry. "And aren't necessarily in touch with how much life is costing them."
Taylor says it typically takes 18 months to two years after a financial trauma for someone to decide to file personal bankruptcy.
"Bankruptcies are not a bellwether of how the economy is doing today," said Taylor. "It's more an indication of how it was doing a year-and-a-half ago."
He anticipates the second quarter of 2023 will see an even higher number, largely due to debt incurred at the height of the pandemic's partial shutdowns.
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