Strong return to bankruptcies in 2022

Bankruptcies could make a comeback in 2022, with the potential end of all financial aid.

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“For many reasons that escape us, there are many things during the pandemic that are inexplicable. One of them is a drop in bankruptcies and insolvency, both personal and commercial,” testified Fabien Tremblay, trustee at Tremblay et Cie, located in Chicoutimi.

When the pandemic started, trustees predicted a rise in bankruptcies. But that didn’t happen. However, after 22 months of health crisis, personal bankruptcies have even dropped by 30 to 40%. The percentage could increase rapidly.

“Everyone in our field expects there to be a backwash. Good. But we expected it as two months after the start of the pandemic and there it has been two years, ”added Mr. Tremblay.

With the end of a majority of aid benefits, creditors are now demanding payment of loans.

“Equifax noted, We saw in the third quarter of 2021, an increase in spending with credit cards. A small increase in outstanding balances on credit cards. A big increase in mortgages, There is still a 20% increase in mortgage balances, compared to 2019,” said Pierre Fortin, trustee at Jean Fortin & Associés.

It is therefore important, according to these experts, not to hesitate to ask for help.

“Making a budget is always good, but with what we have been through for two years, we have to go a little further, believes Éric Morin, insolvency partner at Raymond Chabot Grant Thornton. We renovated our houses, bought recreational vehicles. We will have to look at our repayment capacity to find out if it is there. Do not be afraid to consult.

For companies, the telephone of the trustees has started ringing again for a month. There are concerns among traders.

“There are more calls for advice, noted Éric Morin. Lots of things that can be done to companies with forecasts, a recovery plan. Profitability has not necessarily been there for two years. It will be important to recalibrate all that.

“A lot of small businesses used that amount as working capital. And now they have no working capital. The $60,000 has run out and that’s why some people may be discouraged,” said Fabien Tremblay.

Pierre Fortin also calculates that some SMEs have received loans higher than their financial situation.

“It’s debt that they might not have had access to in normal times. It’s nice, they got the money. They were able to survive that, but one day or another, these amounts will have to be repaid and that is what is starting to weigh very heavily. The characteristics of the bubble are no longer there. And 2022, it will be the return to reality. And for some, unfortunately, it will be a reality that will be quite abrupt.

To this must be added, according to him, the inflation that will count in the family budget. Especially when it touches on major items in their finances like gas and food.

“Food is the third budget item in the family budget. Transportation is the second. So these are big budget items. And if interest rates start to rise…”

This is what some analysts are also predicting.

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