QUOTES from the Insolvency Bulletin, Volume 18, #2 &3, Spring/Summer, 1999
Office of the Superintendent of Bankruptcy
Internet: http://osb-bsf.ic.gc.ca
E-mail: osb-bsf@ic.gc.ca
EXPANSION
The expanding workload for the OSB (is) up by 52% from 1994 to 1997.
Costs of $22.5 million in 1998-99 vs revenues of approx. $16 million.
Demographic shifts and changes in lending and employment conditions have contributed to sustaining an upward trend in personal bankruptcies over the past 25 years. There is little to suggest that the underlying conditions will change in the longer term.
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YEAR |
Consumer Bankruptcies |
Commercial Bankruptcies |
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1994
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53,802
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11,810
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1995
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65,432
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13,258
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1996
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79,631
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14,229
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1997
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85,297
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12,200
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NUMBERS of PERSONS
The OSB employs about 250 people working in 14 offices across Canada and at headquarters in Ottawa. Its clientele consists of 105,000 consumers and commercial debtors and more than 1 million creditors involved in bankruptcy and insolvency proceedings each year.
(an average of 12 creditors per consumer file and 51 per business file.)
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If we extend the 1997 stats times the average number of creditors we find the following:
85,297 Consumer bankruptcies X 12 = 1,023,564 creditors
12,200 Commercial bankruptcies X 51 = 622,200 creditors
Year-to-year totals are largely accumulative, not repetitive.
More and more of the population are acquiring bankruptcy status.
NOTE:
In CANADA, bankruptcy is culturally perceived as
- credit and business failure, with
- the individuals involved assumed to be incapable of change, and,
- future employment in financial planning, security, or management is denied them, plus
- credit re-consideration is typically denied for 7 years.
In the USA, bankruptcy is culturally perceived to be
- a sign of potential entrepreneurial risk,
- without impediment to future business involvement,
- with little career restriction following it, and,
- opportunities for credit re-consideration within months.
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Why Are Personal Bankruptcies Rising?
These are quotes from an article by this name included in the Bulletin and available on Industry Canada's corporate web site http://info.ic.gc.ca
... the Office of Consumer Affairs commissioned ... a study ... during ... 1997 .... The last Canadian survey in this area was done 20 years ago. ...
Women form a greater proportion of people in bankruptcy than ever before: 41% today compared to 25% two decades ago. ... greater participation of women in the labour force and the greater access to credit ... (and) more single-parent families ....
Students now face larger debt loads than their predecessors.
... students often face unemployment, underemployment and volatile incomes after graduation ....
Self-employed individuals and those involved with small businesses also form a large proportion ... had a median level of debt that was 2.5 times greater than that of other respondents ($50,000 compared to $20,000).
WHAT TRIGGERED THE INSOLVENCY?
A vast majority of respondents (85%) indicated that there were specific events or debts that triggered their insolvency ... a decline in income due to the loss of a job. Student loans, marital disruption, credit card debt, creditor "harassment" and the person's inability to repay loans (resulting from excessive debt service payments) all figured prominently ....
... important contributing factors ... "not enough work" and "too much borrowing or credit-card use ....
DID RESPONDENTS HAVE ANY ALTERNATIVE TO BANKRUPTCY?
... Many ... had experienced some financial instability or reduction in income as long as two years before filing for bankruptcy. Almost half reported receiving either Employment Insurance or Social Assistance in the previous two years. ...
When it became clear to respondents that they were, indeed, in serious financial difficulty, nearly all (93%) took various actions to try to avoid getting into worse trouble. ... reduced their level of spending ... renegotiated their debts ... consolidated their loans ... took a second job, or obtained professional credit counselling. ...
A majority (59%) also resorted to other measures ... the use of credit cards to pay down other debts ... can be counterproductive ... many seem to view it as a last-ditch effort to buy time until they can re-establish their income or sell an asset. ...
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Business Bankruptcy Study.
These are quotes from an article by this name included in the Bulletin.
... Data came from the Survey on the Characteristics of Bankrupt Firms, conducted from March 1 to August 31, 1996 ....
... the most fundamental internal problems are related to poor overall management skills ... included management's lack of knowledge, lack of vision, and inadequate use of outside advisors.
A second key deficiency ... Seven out of 10 firms failed because of bad financial planning. ... an unbalanced capital structure, an inability to manage working capital, and undercapitalization.
... Canada's financial sector ... bankrupt firms did often encounter roadblocks to capital at financial institutions. ...
Problems in securing different types of capital were often related. For example, firms that were unable to get capital because of roadblocks at financial institutions were also unable to raise enough resources to pursue various financing options. ...
The number of business bankruptcies nearly doubled from 1985 to 1995, while the business population increased only by half. ...
The services sector recorded the highest increase in business bankruptcies in the early 1990s. ...
Small, young firms are most at risk ...
WHY FIRMS FAIL ...
Many firms in Canada went bankrupt because of external factors beyond their control ... an economic downturn, increases in competition and the loss of key customers. ...
... a strong financial structure is critical for all firms ...
Another critical factor is marketing. Poor pricing policy was the most important marketing problem ....
AVERTING BANKRUPTCY ...
... the majority of bankrupt firms would not have been capable of surviving even if management had taken appropriate actions when the firm began to run into serious difficulties. ... About half of the firms might have been able to avoid bankruptcy had they raised additional capital earlier. ...
... about four in every ten firms might have avoided failure had they turned to an outside consultant for help in offsetting managerial shortcomings.
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Personal bankruptcy in Ontario costs a minimum of $1,400.
For each single consumer bankruptcy, there are 14 others who are too poor to declare bankruptcy. For them, financial recovery is a near impossibility which will influence their ability to obtain longer-term employment, healthcare, housing, skill upgrading, social acceptance, political participation.
In 1997 ............. 85,297 individuals declared bankruptcy.
Potentially ... 1,121,358 individuals would have, if they could.
At a double-digit increasing rate, ALL Canadians will be "informally" bankrupt in as little as 10 years!
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