Insolvency numbers tell a grim tale

Economic statistics make for sober reading in Alberta right now.

Economic statistics make for sober reading in Alberta right now.

Last week, the latest job numbers showed unemployment hit 10 per cent in Red Deer region, a level not seen in decades.

Another key indicator of the province’s financial health is insolvency —and those numbers tell a grim tale.

Donna Carson, a senior vice-president and licensed insolvency trustee with MNP’s Red Deer office, is seeing a lot more individuals and businesses considering repayment proposals or filing for bankruptcy.

“It’s definitely busier this year than last year, for sure,” said Carson on Monday.

Last year, consumer insolvencies averaged around 780 per month in Alberta for the first five months of the year. This year, the number is 1,114 — a 43 per cent increase.

For Red Deer alone, the increase is similar. There were an average of 34 insolvencies each month this year, up from 25 for the same period last year — a 36 per cent increase.

It is apparent how much of that is tied to slumping oil markets when compared with national figures where insolvencies are up only five per cent.

“It’s a very regionalized economic situation we’re in,” said Carson.

The insolvency numbers in Alberta are even worse than in 2009, when insolvencies averaged 1,050. That was a wider-spread economic slump, affecting the national economy.

While every insolvency case has its own character, many consumers are running into problems because overtime hours, bonuses and other sources of income that they had counted on have evaporated.

Back taxes owed the federal government are another final pressure some are facing.

If there is some good news, it is that about six out of 10 consumers reorganizing their finances to repay creditors are opting to make financial “proposals.” It is a way of working out repayment options without going the bankruptcy route.

It is an option that has less of an impact on someone’s credit rating. A bankruptcy leads to an R-9 rating. A proposal is rated R-7. Someone with perfect credit would be rated R-1.

Carson said the proposal versus bankruptcy numbers also show that many creditors are receptive to working out repayment options with debtors.

The age range of those running into financial difficulties is wide. It is not — as some might expect — heavily weighted to young workers with new homes, trucks and other expenses.

Many of those struggling have been in the workforce for many years.