Insolvencies in Kelowna rising with provincial trend

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More B.C. households are expected to become insolvent as rising interest rates and the high cost of living puts bank accounts under pressure.

In May 2023 there were 1,135 consumer insolvency proposals or bankruptcies in B.C., up from pre-pandemic figures of 911 during the same month in 2019.

Insolvency professional Mike Wright, who serves the Thompson-Okanagan and Vancouver, says inflation and interest rates are making an obvious impact, but says another factor is the ending of pandemic-era government support and lender accommodations.

“During COVID, there were a lot of collectors who were very gentle with people, who were getting a lot of leeway. That has ended.” Wright said, noting the CRA resumed collecting on all accounts in October 2022.

“People who would normally have needed to go through the (insolvency) process didn’t. That has likely created a bubble, and we're probably still on the front end of that… as cost of living stays high as interest rates continue to rise.”

The six postal codes in the Central Okanagan reported 91 consumer insolvency proposals or bankruptcies in May 2023, compared to 54 in the same month in 2019. In general though, there are more insolvency proposals and fewer bankruptcies taking place as a part of a long term trend.

Wright says insolvency proceedings can be a difficult step to take, but they can allow families to restructure debt and protect assets like a family home.

This week MNP published a poll that showed more than half of British Columbians (52%) are $200 away or less from not being able to pay their monthly bills. That’s an 8% increase from the prior quarter.

Jeane Herman, a Kelowna-based licensed insolvency trustee and vice president of MNP Insolvency and Corporate Recovery, said a broad segment of society comes through her doors looking for help with debt.

But recently, things have been trending younger.

“It used to be a lot of retirees in the Okanagan reaching out for help… more working people, and fewer retirees now,” she said.

Herman pointed to the rising cost of groceries as a major factor in what is pushing households over the edge.

“When we ask people ‘how much do you spend on food and groceries?’ It used to be around $300 or $400 a month per person in the household unit,” she explained.

“And it's gone up to where people say maybe $500 or $600 — I had a single person last week say he thinks he spends $1,000.”

Herman says households are also feeling more regret about the debt they have taken on. The MNP survey found that 49% of B.C. residents have debt regret, up 6% from last quarter. 60% say they are worried about their ability to pay their debts as interest rates rise.

The Bank of Canada raised its key interest rate on Wednesday to 5% in its fight against inflation. It now expects inflation to stall around 3% for the next year before steadily declining to its target 2% by mid-2025.

That means interest rates are expected to stay high for the foreseeable future.

“We're expecting the insolvency businesses to get busier,” said Wright.