Mathieu Roy
Licensed Insolvency Trustee and Financial Recovery AdvisorSince the beginning of the year, an average of 78 people have filed for personal bankruptcy in Quebec every day. The situation is causing serious concern, particularly in northern Lanaudière. This region of Quebec ranks first in Canada for bankruptcies, according to the Journal de Montréal’s investigative unit.
The areas surrounding the towns of Sainte-Julienne, Saint-Calixte, and Rawdon are particularly affected. With more than 416 insolvency cases since January 2023, this area has the highest number of legal proceedings in Canada.
“[Throughout] northern Lanaudière, and northern Saint-Jérôme as well, [there are many people] seeking social services who have no assets and who are filing for bankruptcy.”
– Mathieu Roy, Licensed Insolvency Trustee at M. Roy & Associés.
An Overview of Bankruptcy in Quebec
Personal bankruptcy is a legal process governed by the Bankruptcy and Insolvency Act that allows individuals with overwhelming debt to be released from their obligations. Under the supervision of a Licensed Insolvency Trustee, the bankruptcy process often involves liquidating assets to repay creditors.
Although bankruptcy can provide a financial fresh start, it is important to understand the disadvantages of bankruptcy before proceeding. The impact on your credit history and your ability to obtain financing in the future can be significant.
Quebec already had the highest number of bankruptcies in Canada before the pandemic, and the province has continued to see a large number of insolvency cases since then. At the end of August 2023, the Office of the Superintendent of Bankruptcy reported a 17.5% increase in bankruptcies compared to 2022.
A Downward Trend
However, the situation has improved in recent years. In 2019, Quebec’s insolvency rate was 6.3, meaning there were 6.3 bankruptcies or consumer proposals for every 1,000 people. At the time, the Canadian average was 4.6.
By 2021, Quebec’s rate had dropped to 3.3, while the national average fell to 2.9. Still, insolvency cases have gone up more quickly in other parts of Canada, especially in western provinces.
In the past, people in Quebec generally earned less money than those in Ontario. This may explain the higher number of bankruptcies in the province. At the same time, the high cost of housing in Ontario and British Columbia has led to higher debt levels in those provinces. Unlike credit card debt, mortgage debt is often seen as more acceptable because it is linked to a home. This may partly explain the differences in insolvency rates across Canada.
A Sharp Rise in Bankruptcies Among Young People
According to the Journal de Montréal, the number of young people struggling to manage their debt problems has reached a peak. Insolvency filings by those aged 18 to 34 currently account for nearly 30% of all proceedings in Quebec.
In 2011, the 18-to-34 age group accounted for the lowest share of insolvency cases, at 22.5%. In 2022, that figure reached 29.2%, marking a 15-year high, according to data from the Office of the Superintendent of Bankruptcy. More than 7,500 young adults filed for bankruptcy in Quebec in 2022.
The Main Factors That Contribute to Bankruptcy
The root cause of financial distress among young people, as they often cite it, stems from multiple underlying factors.
The following are the main factors that have been identified:
- Poor financial management
- Decrease or loss of income
- Medical reasons
A Lack of Education
The current situation is strongly affected by a lack of education and the difficulty of finding well-paid jobs. This is true even in a job market considered to be fully active in Quebec.
A skills gap makes it harder for young people to find better-paying jobs. The link between insolvency among young adults and these challenges is becoming more and more clear.
Easy Access to Credit
There are more opportunities to spend money than ever before, especially after the pandemic and the end of many restrictions. Easy access to credit is part of the problem, as people can pay for many expenses without fully realizing how much they are borrowing.
Today, many products and services can be financed easily. From Amazon purchases to travel, access to credit has a major impact on the spending habits of people between the ages of 18 and 34.
In 2022, the average credit card debt of people under 35 who filed for bankruptcy was $4,722. This shows the difficult financial situation many young people face when they are no longer able to pay their debts.
A Consumption-Based System
We live in a consumption-based system, where no government is trying to slow down this trend. When income is not enough, the usual solution is to use credit and make regular monthly payments.
Unfortunately, this system does not help reduce financial problems. On the contrary, the risk of debt is now much higher than before.
E-Commerce
Payments are becoming more and more abstract, sometimes made with just one click. This creates real challenges for younger generations. This convenience can lead to serious financial consequences.
The simple act of “tapping” on a phone can instantly connect bank accounts and credit cards. Technology also reduces the number of steps that force people to think before buying a product or service.
This easy access to credit, often built into modern technology, can lead to impulsive spending decisions. It shows how spending habits and personal finance management are changing.
Bankruptcy and Its Alternatives
Many people aged 35 and under say they feel less shame about filing for bankruptcy than older generations. However, the effects of this decision should not be taken lightly. Although bankruptcy may seem like a way to start over, it is usually considered a last resort for serious financial problems.
The impact of bankruptcy includes long-lasting effects on your credit score. Before deciding to file, it is important to understand which debts are included in your bankruptcy and whether alternative solutions may better suit your situation. Among the alternatives, a consumer proposal and debt consolidation are viable options.
Consumer Proposal
A consumer proposal involves formal negotiations with creditors to reduce the total amount of debt. With the help of a trustee, a detailed and more affordable repayment plan is established.
Debt Consolidation
On the other hand, debt consolidation involves combining multiple debts into a single loan, typically at a more favourable interest rate. This is a solution to debt where a financial institution grants you a single personal loan. This loan allows you to repay your other creditors.
These solutions offer an attractive alternative to personal bankruptcy. They help restore financial stability while avoiding long-term repercussions on your credit history.
The insolvency situation in Quebec, especially in northern Lanaudière, shows a complex and worrying issue. Even if the province has improved in recent years, it still has the highest number of bankruptcies in Canada. People under 35 now make up a growing share of insolvency cases, reaching almost 30% in Quebec.
If you have questions about bankruptcy and insolvency, contact the team at M. Roy & Associés. Together, we will look at the solution that best fits your financial situation. Every meeting with our Licensed Insolvency Trustees is private. This allows you to speak openly about your situation.
To schedule a free initial consultation, feel free to contact our team at 1-877-352-6661 or fill out the online form.
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