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More Canadians are in the 'financial sweatbox' as insolvencies rise

Shame and guilt keep many Canadians from asking for help with bankruptcy. (Getty)

New data from the Office of the Superintendent of Bankruptcy (OSB) show the total number of insolvencies, including bankruptcies and proposals, went up by 16 per cent in March compared to the previous month.

Bankruptcies increased by 13.4 per cent and proposals increased by 17.9 per cent.

The total number of insolvencies was 5.8 per cent higher compared to the same time last year. Business insolvencies increased by 9.7 per cent, while consumer insolvencies increased by 5.7 per cent.

Grant Bazian, president of insolvency firm MNP, says these figures are only the tip of the iceberg, because many Canadians struggling to keep up with their bills haven’t sought out help yet.

“Filing for bankruptcy can be seen as an admission of personal and financial failure,” said Bazian.

“This shame and guilt causes many people to sweat it out for years before reckoning with their debt.”

The period before someone files for bankruptcy is sometimes called the ‘financial sweatbox.’ It’s a time when creditors are calling and basic necessities are skipped to avoid bankruptcy.

“Based on our research since 2016, we know there are many Canadians experiencing this kind of financial distress,” said Bazian.

“This isn’t good news, but it’s something that needs to be discussed so we can eliminate the stigma associated with asking for help and – if it is the best course of action – filing a proposal or bankruptcy.”

Bazian wants to destigmatize asking for help and suggests turning to a licensed insolvency trustee when times get tough.

“An absolutely staggering number of people feel like they can’t make ends meet,” said Bazian.

Our hope is that by bringing this conversation to the forefront, more people will realize they are not alone and that debt help is available.”

The OSB says transportation, warehousing, and construction registered the biggest increase in business insolvencies. Accommodation and food services, as well as arts, entertainment and recreation experienced the biggest decrease.

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitte@jessysbains

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