Why Bankruptcy Filings Are Declining in Canada

Why Bankruptcy Filings Are Declining in Canada

Written by Caitlin Wood
Last Updated February 1, 2021

By Annie Bourque

As several sectors of the economy are slowing down, trustees are seeing a 47% drop in the number of bankruptcies across the country and a 35% drop in consumer proposals.

These data emerge from a recent report entitled “Canadian Insolvency Trends in 2020” published by the firm Davies Ward Philipps & Vineberg.

Annie Bourque

The situation seems unusual, especially since there has been an increase in the closures of shops, restaurants and businesses. Concurrently, thousands of workers are finding themselves unemployed.

These financial subsidies are helping both individuals and business leaders to get through this historic crisis. Meanwhile, financial institutions are offering some leeway to those that are facing financial struggles.

“Many consumers and businesses are currently on “artificial respirators”, but how long can we maintain this pace?” asks Ms. Houle, Vice President of Pierre Roy & Associés.

Some, still living in a state of precariousness, foresee a difficult spring. How will they go about repaying the amount of tax owed on the CERB payments? Already, the federal government has hinted that it will give the necessary time to those caught in such a situation.

Most affected sectors

The field of culture, arts and entertainment, clothing stores, restaurants and accommodation are living the unfortunate repercussions of the pandemic.

Ms. Houle believes that the slope will be difficult to climb for a large number of artists. Will the government or the private sector continue to subsidize the cultural industry for long?

“Some restaurateurs in their 60s might wonder if it is really worth staying in business,” she expresses.

The Canadian Chamber of Commerce, apprehending the closure of 60% of restaurants in the country, launched a campaign at the end of the summer to support restaurant owners.

At the same time, if such statistics materialize, a whole gastronomic culture, a symbol of Montreal par excellence, could die out.

Smaller spaces

In Montreal, medium and large businesses have started moving to smaller spaces. “The value of commercial buildings will begin to decline in the face of the phenomenon of telework which is becoming essential,” believes Ms. Houle.

Employers will hardly be able to ask their employees to come back to work in the office for five days a week. “I think it will be impossible to bring full-time employees back to the office. The good news is that we have all improved our respective quality of life.”

The future

The future looks bright for used car dealers, grooming companies or the self-employed who will want to take care of dogs or cats, bought in large numbers during the pandemic.

The authors of the insolvency report also believe that consumers could attend more shows or go to theaters once the pandemic ends, which is a good means of supporting these hard-hit industries.

Starting from scratch

In the meantime, many consumers or business executives are starting to feel frustrated by the effects of successive lockdowns on their morale.

With the end of the pandemic, many will want to make a fresh start. Tired of the problems caused by isolation, some will want to regain peace of mind. Perhaps the way to do this is by eliminating debt that is like a dizzying mountain of clothes piling up before our eyes. “I think an emotional or psychological trigger is going to lead insolvent people to make decisions. Some may say to themselves: I am no longer capable and this has gone on long enough,” adds Ms. Houle.

“Insolvency can eat away at you. We have to look at this positively. We literally liberate the person who is caught in an endless chain. This allows people to start from scratch, use their full potential and, above all, achieve a better quality of life,” she concludes.

Rating of 5/5 based on 8 votes.

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

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