Evidence of meeting #40 for Finance in the 43rd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was information.
A recording is available from Parliament.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
Is that raw data something that you could share with the committee?
NDP
Peter Julian NDP New Westminster—Burnaby, BC
Yes, because I think it would be helpful to understand.... I note from an earlier question that you were asked that you don't propose policy changes. You don't feel that's your purview, but understanding why people are finding themselves in bankruptcy is often a good indicator to legislators to put in place programs and services that actually prevent them that.
As I mentioned earlier, the increasing massive concentration of wealth, the situation of massive tax evasion that we're seeing, costing $25 billion a year according to the PBO, are all factors that have an influence on regular people struggling to make ends meet. The fact is that Canada has the sad history of being the worst in the western industrialized world, in terms of family debt that is being imposed on people, because of the lack of services, pharmacare and things like that. I certainly feel it in my own riding. People are connected to that. That information would be very helpful, and any policy prescriptions you could provide would be helpful as well.
I wanted to ask you about something that's a phenomenon certainly right across the country, which is people basically walking away from their businesses. They don't go through the bankruptcy route. They just realize, given the pandemic, that they have a sad situation. They close the door and walk away, and basically leave things. They don't have the ability to continue their business.
Are there any suggestions you can make to address that issue, and what is your sense in terms of businesses that are forced to go into bankruptcy, given the pandemic, and prior to the pandemic?
Superintendent, Office of the Superintendent of Bankruptcy
Yes, we could look at that.
Superintendent, Office of the Superintendent of Bankruptcy
It would be a policy question, I think, on the solutions for that problem, but certainly you are not wrong that the majority of businesses.... We looked at the birth and death rates of businesses, and it's approximately 3% of corporations that actually file a formal insolvency proceeding. So, you're correct in that.
I do not believe—I would have to verify—that we collect a reason for insolvency in the corporate sense, if that's your second question.
Peter Julian NDP New Westminster—Burnaby, BC
Okay, so that's not any information that you would be able to share with us.
Superintendent, Office of the Superintendent of Bankruptcy
I certainly will if we have it. The only question is whether we collect that, but I will get back to you on that.
Liberal
The Chair Liberal Wayne Easter
Peter, we'll have to move on. You will get a second round.
We'll go to Mr. Cooper for five minutes and then Mr. Fragiskatos.
Michael Cooper.
Conservative
Michael Cooper Conservative St. Albert—Edmonton, AB
Thank you, Mr. Chair.
Thank you, Ms. Lang.
I just want to follow up in terms of having an understanding of the dramatic decrease that we've seen in terms of bankruptcies. In answer to a question posed by Mr. Ste-Marie you listed some of the factors, including a slowdown in terms of the activity of creditors.
What explains that? Is it a function, for example, of more people being out of work and therefore from a practical standpoint being in a position of being creditor-proof, in that there aren't wages to garnishee and so on?
Superintendent, Office of the Superintendent of Bankruptcy
I can only tell you what I've heard anecdotally. Again, we don't have data on files that we haven't received. Anecdotally, we're hearing that creditors are forbearing and being reasonable on both the consumer side and the business side. I think the fact is that everybody realizes that this is an unprecedented, unfortunate situation that we hope is temporary.
Certainly the lockdown provisions are temporary and starting to ease. As they start to get lifted, we'll see what the future will hold. Will businesses be able to successfully pivot or weather the storm and emerge as viable businesses? In that case, as a creditor you're actually better off working with that debtor, because you continue to have a client rather than taking potential losses on the debt they owe you. On the consumer side, will consumers get their jobs back? I think the banks have been doing a fair job on deferring mortgages where necessary. We'll see where that ends up going over the long term.
Conservative
Michael Cooper Conservative St. Albert—Edmonton, AB
Right. I understand that you're not in the business of making projections. However...and in fairness, in terms of your answer to Mr. Poilievre, who asked whether you would anticipate a dramatic spike, you said not necessarily, even though you're not in the business of making projections. That's understandable, because filing for bankruptcy is not usually the first thing one does. It's usually a process of two, three, four or five years before one reaches that point.
Now, you did note that pre-COVID, the numbers were relatively stable from 2011 onward. However, I would note that looking at some numbers in October of 2019, there were 13,000 bankruptcies. That represented the highest number since September of 2009. That's concerning, given the situation we were in pre-COVID during relatively good economic times. Given that, would it be fair to say that although we might not see a dramatic spike—again, you're not in the business of making projections—it will be a rough few years?
While you answer that, maybe I could also get you to comment on any trends you see not on the consumer side but in terms of corporate insolvencies going forward.
Superintendent, Office of the Superintendent of Bankruptcy
I think we have to recognize that household debt levels were incredibly high and were continuing to rise over the past several years. While the number of filings were high, the per capita numbers were stable. People have been able to somehow manage those rising debt levels. As I said, on paper somebody might appear to be insolvent and not file. These are the things that make it very hard to predict. As I noted in my slide tracking the rates, and that has the GDP numbers, when you see a significant drop in GDP, you do see an increase in insolvencies. If that's where we're headed, then I think we can expect an increase.
On the corporate side, we do hear about a debt level. That's a concern, and we'll see how that plays out. But the important thing about corporate insolvencies is that largely we hope to see corporations go through a restructuring process, and particularly on the CCAA side. That's what it was really intended for—to see them restructure and come out the other side as a viable business, which saves jobs and contributes to the economy. That's what I hope we will be able to see. Again, creditors will play an important role in that, because it's very much a negotiated outcome.
Conservative
Liberal
The Chair Liberal Wayne Easter
Thank you, Mr. Cooper.
Jut on that, because you mentioned the CCAA, where do you stand in terms of farm financial issues? Are you involved in any way in that, or is it left mainly up to the farm debt review boards? Are you involved in that aspect?
Superintendent, Office of the Superintendent of Bankruptcy
Are you talking about farmers?
Superintendent, Office of the Superintendent of Bankruptcy
We are not involved in that aspect at all.
Liberal
The Chair Liberal Wayne Easter
Okay. That's what I.... Mainly it's the farm debt review boards in that particular area. That itself needs to be improved, in my view, but that's personal.
Mr. Fragiskatos, and then on to Mr. Cumming.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Thank you, Mr. Chair.
Thank you to the officials, and to Ms. Lang in particular for the presentation.
Ms. Lang, in the post-2008 period, where were we, as far as the numbers show, in terms of bankruptcies in Canada?
Superintendent, Office of the Superintendent of Bankruptcy
We reached about 158,000 total bankruptcies, and if I just open my slide, I can tell you where we were on the per capita number, because that was our apex. In 2009, we reached 5.83 filings on a consumer side per 1,000 adults.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Okay, I know you've said that there's no way you can project at this point. You don't have that ability to do so, but do you have any information that would allow us to make comparisons between then and now, or where we might be by the end of the year?
Superintendent, Office of the Superintendent of Bankruptcy
No, I'm sorry, I don't. Honestly, our office isn't really about that. We don't have a lot of economists and that's not really one of the jobs we do.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
No, that's fine. You've been very good to raise a number of important issues with the committee and you're doing a lot of hard work, so I understand you can't provide every piece of information that MPs may ask for.
I'm looking at an article here from Maclean's magazine. It does quote the Office of the Superintendent of Bankruptcy Canada, and it does so in the context of talking about what happens when one goes bankrupt. The heading at the top of the paragraph reads, “Bankruptcy is not the end of the world.” It then continues to say that a credit counsellor or a licensed insolvency trustee is where folks go if they find themselves in this very unfortunate situation. According to your office, in 2019 there were more than 137,000 Canadians who used these options to get a “financial fresh start", as the article puts it.
Do we have the capacity, if we do see a very high number of bankruptcies, to ensure that folks get that support, whether it is by accessing credit counsellors or licensed insolvency trustees?
Superintendent, Office of the Superintendent of Bankruptcy
Yes, it's a great question, and my office has been looking at that very carefully. We want to be sure that Canadians in need of help with their debts can get the help they need.
The licensed insolvency trustee community has proven to be very nimble. They've added significant efficiencies over the past number of years, so I do truly believe they will be able to do that.
My office will be there to support them by providing efficiencies as well. For example, in 2009, one thing that we were able to do was to put less of an emphasis on our rate of closing, which we pay close attention to because it's important not just to open files, but to close them in normal times. In 2009, we reduced the emphasis on that so that LITs could focus on opening files and doing that job effectively. That's an example of something we could do again to support the system.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Sure. The article, I don't think, is making light of the matter at all. I certainly don't mean to, but where it does read that bankruptcy is not the end of the world, I think it's an apt point. The reality is that people will find themselves in a position of bankruptcy. That is a fact, but we have seen situations before where people experienced that and were able to come back with assistance.
In fact, the Maclean's piece that I'm referencing does quote an individual who works in that sector as a licensed trustee, and I'll just read it to you here. He says that “we've got [enough] bench strength, experience and compassion to help Canadians going through this crisis [as well].”
The sector seems reassured, but I wanted to put the question to you. Perhaps I could pick up on this point and continue with it. In the 2009 period, as you said, this is where we saw the apex in terms of numbers when it came to bankruptcy post-2008. Did we have any challenges in terms of ensuring that people had access to credit counsellors and/or licensed insolvency trustees? Was that a problem at all during that time?
Superintendent, Office of the Superintendent of Bankruptcy
I was at the OSB at the time as a deputy superintendent and certainly not on the insolvency side. Things went extremely well in 2009 and we were able to help a lot of debtors get through their financial difficulties, either with a bankruptcy or at the time, consumer proposals, which were on the rise. They've now exceeded 61% of filings, which is a truly positive piece of policy development in that in those cases, if debtors actually have assets, they don't need to give them up. They need to negotiate with their creditors for what the creditors consider to be a fair and reasonable payment, often over a period of five years. I think that will be a positive development in the current situation as well.
On the credit counselling side, I'll just add, that's outside of my purview.