COVID-19 & Bankruptcy in Edmonton
The COVID–19 pandemic has significantly disrupted the lives of Edmontonians since the start of March 2020. COVID-19 and bankruptcy in Edmonton have cost people their jobs, cost businesses their customers and put a large percentage of the population in financial hardship.
In addition to the global pandemic, the price of oil dropped sharply in February of 2020. Difficulties with the export of Alberta oil and gas, loss of investors as well as the price of oil bottoming out, cost Albertans 117, 000 jobs in March 2020. Oil and related industries counted for over 27% of Alberta’s economy last year. With the 2020 price war going on between Saudi Arabia and Russia, the price of oil has plunged to historic lows.
We spoke to Licenced Insolvency Trustee, Rhonda Fox-Miles, about how COVID-19 will affect Bankruptcy in Edmonton. With her financial advice, we hope this guide will help you through this tough time.
We asked Rhonda Fox-Miles what has changed for Insolvency trustees due to COVID-19?
“We’re receiving more calls, the Government of Canada has relaxed a few of their rules and normally you have to meet your trustee face to face but now meetings can be conducted over the internet.”
The monthly insolvency statistics from the Government of Canada show the number of insolvencies in Alberta to be up 7.4 percent in February of this year. With the COVID-19 crisis, this number will rise substantially.
Oil & Gas affects on the Alberta Economy
Oil is one of the significant drivers of prosperity in Alberta. In the last couple of years, Alberta has suffered due to problems in the Oil and Gas industry. From excess supply to issues with distribution to loss of investors, Alberta has struggled. This year looked like a positive growth year with the Government of Alberta forecasting an over 2% GDP growth rate. In actuality, it will be an over -2% GDP growth rate.
RBC has predicted the following:
“Three new economic forecasts issued Friday point to another difficult year for Alberta, including a return to recession and thousands of job losses.
A new outlook from RBC Economics states that all provinces will feel the pain of COVID-19, but economies on the Prairies will be hit by a double whammy that includes plunging oil prices.”
All of this turmoil with oil has had an enormous impact on individual Albertans and their ability to stay solvent. Albertans were stretched to their financial limits prior to the COVID-19 health crisis, and now that this extra pressure is here, many will have to declare bankruptcy.
PERSONAL BANKRUPTCY & COVID-19 IN ALBERTA
Alberta is in the midst of an unprecedented financial crisis. The collapse of the price of oil, as well as the COVID-19 turmoil, has become too much for many Albertans. The unemployment rate could reach 13.5%, which is the highest level since the Second World War. 44% of Canadian households have suffered job losses or reduced hours.
This massive change in personal financial position is putting many Albertans at risk for Insolvency or Bankruptcy. Half of Canadians say they are on the brink of insolvency. There is a staggering amount of people who cannot afford to be off work due to this virus.
Albertans were already dealing with a higher number of Insolvencies than usual with 16,181 insolvencies in 2019. That number was a 15 percent increase compared with 2018. The cost of living, layoffs, decreased wages, and higher than usual personal debt all contributed to this number.
When asked about what her thoughts on the COVID-19 pandemic and insolvency in Alberta, Rhonda Fox-Miles, Licenced Insolvency Trustee stated;
“The stress of the pandemic and dealing with creditors is too difficult for most. We expect that once life gets back to “normal,” whatever that is, we will be busy. Too many are stretched too thin. I note that the Government is getting funds to the citizens, reducing interest rates for mortgages. etc. which will help some. The big banks have said they are going to reduce credit card interest as well as defer mortgages but nothing from the other credit cards.”
What does all this mean to individuals regarding Personal Bankruptcy in Alberta?
2020 is a time of unprecedented financial crisis. Many Albertans face insolvency in the coming months. This problem will persist for a long time and will become the new normal.
Fortunately, there are some tools to help prevent insolvency.
What tools does the Government have to help me through this tough time?
- The province of Alberta has a one-time Emergency Isolation Support Payment if you qualify.
To qualify, you need to meet these criteria:
- experienced total or significant loss of income as a result of having to self-isolate, or are the sole caregiver of a dependent who is self-isolating and
- have no other source of compensation, such as workplace sick leave benefits or federal employment insurance benefits
- Utility Payment Deferral. Utility payments can be deferred up to 90 Days, and no services will be terminated regardless of missed payments.
- Student Loan Payment Deferral. There is an across the board 6-month pause to all Alberta student loan Payments. Alberta student loan deferral mirrors the Canada Student Loan Program.
- Education Property Tax Freeze. Property Taxes will be frozen and charged at last year’s rate. Property Taxes will reverse the 3.4% increase from last year’s taxes.
The Federal Government has rolled out many programs to help ease people through this difficult time.
- Canada Emergency Response Benefit. The emergency response benefit is for people who have lost income due to the COVID-19 virus. IT can provide up to $500 a week for 16 weeks.
- Employment Insurance. Employment Insurance can help if you are ill, under quarantine, or injured.
- Canada Tax Benefit. Eligible recipients will receive $300 more per child with their regular CCB payment.
- Canada Student Loans. All payments, as well as interest, are suspended for six months.
Steps Albertans can do on their own;
- Credit Counselling. A qualified credit counsellor can help you look at your financial situation with expert eyes. They can help recommend credit strategies to help you through this difficult time. Credit Counselling is the best proactive step you can make to take control of your finances.
- Consumer Proposal. If you are having trouble paying off all your creditors in the timelines, they dictate this might be the solution for you. A consumer proposal restructures your debts and allows you to meet your obligations.
- Debt Consolidation. A Debt consolidation loan can bring all your debts into one place, which makes it easier to pay down. There are disadvantages, however, so talk to an expert on which option is best for you.
- Deferred mortgage. Canada’s banks are offering a six-month mortgage deferral program for people affected by COVID-19. This program will allow you to defer your mortgage payments, but the principle will still incur interest.
Sometimes insolvency or bankruptcy is your only option. In that case, you will need a Licenced Insolvency Trustee. Contact Fox-Miles & Associates Licenced Insolvency Trustee.
CORPORATE BANKRUPTCY & COVID-19 IN ALBERTA
Due to the economic climate in almost half of businesses face Corporate Bankruptcy in Alberta. Even before this crisis, Alberta businesses had a 10% increase in insolvency from 2018. We could see an unprecedented number of insolvencies in Alberta. The price of oil plus the COVID crisis has created a problematic situation for all Albertans.
We asked Rhonda Fox-Miles what advice she could give businesses to help prevent insolvency at this time?
“Apply for all the funds you qualify for. Make business decisions, not emotional ones. Look at your balance sheet and determine, can you continue?”
What Can you do to prevent Commercial Bankruptcy in Alberta?
- Canada Emergency Business Account can provide interest-free loans of up to $40,000 to small businesses. Up to 25% of it can be forgiven if repaid by December 31, 2022.
- Canada Emergency Wage Subsidy (CEWS). CEWS can help businesses with wages. Applied at a rate of 75% on the first $58,700 earned by employees, represents a benefit of $847 per week.
- New Loan Guarantee provides operating credit and cash flow term loans up to $6.25 million
- Deferred all Payments of GST/HST and Import Duties for all businesses until June 30.
- Reduced the Administrative Burden on businesses by extending the filing deadlines for returns for charities, trusts, partnerships and NR4 information.
- Enhanced the Work-Sharing Program to support employers and their workers who are experiencing a downturn in business.
- Defer Tax Payment Obligation until August 31, 2020, to help businesses with cash flow.
Steps Alberta Businesses can do on their own;
- Credit Counselling. A qualified credit counsellor can help your business look at your financial situation with expert eyes. They can help recommend credit strategies to help you through this difficult time. Credit Counselling is the best proactive step you can make to take control of your finances.
- Division One Proposal. If your business is having trouble paying off all your creditors in the timelines, they dictate this might be the solution for you. A proposal restructures your debts and allows you to meet your obligations.
- Debt Consolidation. A Debt consolidation loan can bring all of your corporate debts into one place, which makes it easier to pay down. There are disadvantages, however, so talk to an expert on which option is best for you.
CERB (Canadian Emergency Response Benefit) Guidelines
“Pursuant to the COVID-19 Emergency Response Act, the CERB:
- is not subject to the operation of any law relating to bankruptcy or insolvency;
- cannot be assigned, charged, attached or given as security;
- cannot be retained by way of deduction, set-off or compensation under any Act of Parliament other than this Act; and
- is not garnishable moneys for the purposes of the Family Orders and Agreements Enforcement Assistance Act.
“Superintendent of Bankruptcy”
What has changed with the Office of the Superintendent of Bankruptcy Canada?
- LITs or Licenced Insolvency Trustees will determine where flexibility within existing rules can be of most benefit to individual and commercial debtors impacted by COVID-19
- In many provinces, including Alberta, all non-essential businesses are directed to close. LITs are essential; however, significant efforts to have staff work remotely are of primary concern.
- Software updates which will help forms submitted online and by phone
- Flexible payment options to support individuals or payment relief
- Timelines with the courts may be extended or made adjustable. LITs can file necessary extensions with the courts.
- Swearing documents may be conducted virtually during this time.
In the future, students will study the COVID-19 crisis as a significant moment in history. It will cause a permanent change in Canadian culture as well as finances. Now is the time to take all possible precautions and actions.
Rhonda Fox-Miles gave some advice;
“Many people are stressed right now, and we can reduce that stress by at least informing people what their creditors can and can’t do. The pandemic is enough of a burden that we can’t control. Find out their options; the debtors are in control and can make their own decisions when it comes to finances. Suicides are a risk at this time as many see no way out.”
Be safe; take care of yourself and your families.
Flow Chart for People in Personal
Financial Crisis during COVID-19
Check to see what Government programs apply to you
- Emergency Isolation Support Payment
- Utility Payment Deferral
- Student Loan Payment Deferral
- Canada Emergency Response Benefit
- Employment Insurance
- Canada Tax Benefit
Flow Chart for Businesses in
Financial Crisis during COVID-19
Check to see what Government programs apply to you
- Canada Emergency Business Account
- Canada Emergency Wage Subsidy (CEWS)
- New Loan Guarantee
- Enhanced the Work-Sharing Program
- Defer Tax Payment Obligation until August 31