Insolvency numbers drop in Newfoundland and Labrador, but pandemic could explain why

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New figures show insolvency and bankruptcy are on the decline in Newfoundland and Labrador, which one Licensed Insolvency Trustee says could mean filing is in natural decline after years of recovery, or that people are simply delaying seeking help due to the ongoing pandemic.“It was pretty dramatic actually,” Sean Stack told CBC News.

“January, February and the first half of March have been busier than ever, but since the coronavirus hit Newfoundland numbers have fallen 55 to 60% more each month compared to last year. ”

According to the Office of the Superintendent of Bankruptcy Canada, 50 bankruptcies were filed in Newfoundland and Labrador in July of this year, compared to 139 in July 2019.

The total number of bankruptcies fell to 126 in July from 280 the previous year.

Stack said those numbers may seem counterintuitive, given the number of people who have lost their jobs or worked reduced hours due to a pandemic, but there has been some relief.

“So much has been postponed. People have had their mortgages deferred, their interest payments have been deferred, student loan payments have been deferred, ”he said.

“For a long time people weren’t working – or they were working from home, so they didn’t have to pay child expenses like they would have to pay otherwise. So there was a lack of urgency financially of things for a little while. ”

It remains to be seen whether the recent drop in bankruptcy filings means people are generally better off right now or whether they are delaying the inevitable, Stack said.

Insolvency trustees note a drop in cases at the end of the year. (Peter Cowan / CBC)

Stack said it’s possible that the number of insolvencies seen in recent years has simply run out.

“Maybe it was time for a natural downsizing anyway. Maybe we have reached that summit of the summit, ”he said.

“Or maybe some people are delaying an inevitable insolvency claim. The purpose of these postponements of mortgages and other things was to relieve people, to get back to work, to get their income back so that they could go back to normal life. ”

Stack said there are still a lot of unknown variables, but it will watch for a change as the CERB package starts to terminate and some jobs don’t come back.

He added that there could also be an insolvency backlog, where cases such as divorce or illness would normally lead the total.

“We can just see a backlog of these as people come out of financial hibernation. ”

Read more articles from CBC Newfoundland and Labrador

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