Government support eased bankruptcies: trustee

The number of bankruptcies expected as a result of the pandemic has not materialized, and could be due to government social programs, says a bankruptcy trustee.

Randy Kobbert, licensed insolvency trustee with MNP, says there have been few inquiries from businesses about insolvency and larger companies are restructuring.

“We’re seeing amazing resilience in southern Alberta, Medicine Hat and Lethbridge,” said Kobbert, specifically noting government supports for businesses such as the federal wage and rent subsidies and small business loans.

The challenge in the coming months is how well people and businesses transition to fewer supports, he said.

Economists had anticipated a spike in bankruptcies in the fourth quarter of 2020.

The courts had been closed for several months and creditors had also been holding back over the summer after the spring lockdown. Kobbert says individual bankruptcies may still be lower because there is still reduced creditor collection action.

Some of the collections taking place, affecting personal financial situations, is Revenue Canada demanding repayment of CERB benefits it says should not have been claimed and collected. Kobbert says 400,000 people received one of those Revenue Canada letters.

“We are seeing more people come to our offices saying that they can’t repay those,” said Kobbert.

He says economists in general are suggesting that people who are in the middle- to highincome bracket will not be severely impacted by the economic results of the pandemic.

“They’ve been resilient and in fact they’ve been able to save money,” said Kobbert, suggesting the travel they may have traditionally enjoyed was not possible so they saved money and were perhaps even able to pay off debt.

In contrast, the more vulnerable are those earning minimum wage or close to that salary range.

“There is a big contingent of those individuals in southern Alberta,” including the Medicine Hat and Lethbridge corridor, said Kobbert.

Included in this cohort are those who have contract employment and many immigrants, he said.

“It is not going to be as easy for this group to bounce back with employment. They’ve been the ones that have been displaced and may have been working in the service industry,” said Kobbert.

Current information from the superintendent of bankruptcy indicates that from January to November 2020, Alberta insolvency filings were down 22 per cent compared to the same period the year before.

“Medicine Hat was down 32 per cent,” in that same time, said Kobbert.

However, if you isolate the month of November,

Medicine Hat dropped five per cent in 2020 when compared to 2019.

“That tells me that we’re starting to see a bit of a ripple in the water in Medicine Hat,” said Kobbert, who suggests bankruptcy filings will start to creep up.

If anyone is struggling financially a licensed insolvency trustee can discuss insolvency options, and that consultation is provided at no charge, said Kobbert.