By Mark Roberts, Head of Business Development, Aryza Canada.
Despite insolvencies temporarily falling during the height of the COVID-19 pandemic, the Office of the Superintendent of Bankruptcy (OSB) recently reported a rise in the number of business and consumer insolvencies being filed, up 35.9% and 19.6%, respectively.
This increase has highlighted the key role that Licensed Insolvency Trustees (LITs) play in helping individuals and business owners struggling to manage their debt – providing vital advice and guidance during challenging times.
However, it has also placed additional pressure on LITs from a resource point-of-view. With a rising number of insolvency cases to process, specialist software is proving a vital ally, helping LITs to improve efficiency, accuracy and to manage the ever-increasing demand.
The challenge facing Licensed Insolvency Trustees
Like many other countries, the economic outlook for Canada continues to change at a rapid pace. While the Canadian economy is not expected to re-enter a recession, experts are predicting a steep decline in growth next year, which will impact business and consumers alike.
The Canadian Consumer Debtor Profile – a study based on insolvency stats from 2021, is designed to reveal key facts about insolvent Canadians. Perhaps unsurprisingly, credit cards were the most prevalent cause of debt, with 86% of those filing for insolvency holding some form of credit card debt. Bank loans were second (53%), followed by company loans (42%) and student loans (14%) – less than 5% of debtors owed money to individuals.
Looking more closely at the reasons people fell into debt, loss of income was the primary cause, jumping from just 11% in 2019 to 48% in 2021. This was followed by medical reasons (21%), the COVID-19 pandemic (16%), relationship breakdown (12%) and financial support of others (5%).
As we look ahead, rising inflation is likely to fuel further economic uncertainty, with the Canadian population having to navigate the many challenges created by ongoing supply chain issues, the lasting impact of the pandemic, Russia’s invasion of Ukraine, the tightening labour market and, of course, higher costs and interest rates.
Ensuring positive outcomes
With this cocktail of issues forcing creditors to re-evaluate their approach to issuing credit and debt recovery, there is likely to also be a rise in insolvencies across Canada, placing pressure on practitioners.
The key issue for LITs reliant on manual processes will be the time-consuming nature of collating and managing the relevant information required for each case. As volumes increase, so too will the pressure. Similarly, paper-based processes leave room for human error and inaccuracies. Not only can this result in additional work later down the line, but the time also spent resolving administrative oversights could be much better spent supporting consumers.
Through the deployment of an automated case management system, the processes associated with managing Consumer Proposals can be streamlined. Not only will this free-up valuable time, but specialist technology can also provide LITs with a more accurate picture of an individual’s financial circumstances and level of affordability, helping to prevent arrangement failure in the future.
These solutions will also provide a more accurate and straightforward method of gathering and managing customer data, removing the need for paper-based filing systems, or having to draw through endless online documentation. Especially for those who are working over several systems that are dated and cannot provide an end-to-end solution, these systems can remove a huge administrative hurdle, and improve the management information available.
As the case progresses LITs can view accurate information on an ongoing basis, while creditors can easily forecast returns. Features such as task management and case workflows, secure and fully digital documentation collection, and automated contact strategies, ensure that every customer is messaged at the right time via email or SMS, helping to ensure that the Consumer Proposal is progressing as expected.
With a key focus on bringing transparency to the personal insolvency sector, Aryza’s solutions are designed to streamline the entire debt cycle. To find out more about the Aryza products and how they can help your business, click here, or to arrange a meeting with Mark Roberts, simply fill out our contact form here.