Illiteracy, credit card woes spur bankruptcy shield
The Office of the Supervisor of Insolvency (OSI) has reported that since the COVID-19 pandemic, 44 individuals and companies have sought protection under its regime.
The OSI is a department under the Ministry of Industry, Investment and Commerce, which has the licensing authority for practitioners to supervise the administration of insolvent estates and to ensure that trustees act in compliance with the Insolvency Act.
The OSI explained that the primary reason for individual protection or bankruptcy filings continues to be financial illiteracy and inappropriate use of credit.
“Persons continuously borrow to satisfy reasonable personal expenses. In other words, to supplement their salaries. Over time, monthly loan payments alone average 65 per cent of income, making it impossible for them to meet other monthly obligations as they become due,” the OSI said in an emailed response.
Last year, 19 individuals and 10 companies filed for bankruptcy, while two individual filings have been made since 2022.
For the first six months of the pandemic, March to August 2020, appointment of trustees was suspended. Therefore, no filings were done.
Later in 2020, 13 bankruptcy filings were made, the majority (10) by individuals.
The businesses which filed for bankruptcy in 2021 fall under the fashion, tourism, entertainment, mining, manufacturing, and airline industries.
Among the entities, 39 per cent of filings were small businesses.
However, in 2020, the medium-enterprise businesses that filed for bankruptcy were part of the marketing and advertising sector.
The largest filing for 2021 was approximately $1 billion.
Meanwhile, the average amount filed by individuals was $27 million.
In 2020, average filings among individuals was $4.2 million.
For businesses, the average amount filed was $208 million, an increase from $78.3 million in 2020.