Dealing with the debt
Covering living expenses concern for almost half of Atlantic Canadians surveyed
Government income assistance programs and payment deferrals have helped people struggling with debt keep their heads above water so far during the pandemic.
But as Walter MacKinnon notes, the debt hasn't gone away. People who were on those income programs, such as the CERB (Canada Emergency Response Benefit), will be facing higher tax bills this year. And mortgage deferral programs, for example, have either come to an end or are expected to do so.
Both programs have given some people a false sense that they are somehow better off now than before, said MacKinnon, a licensed insolvency trustee with MNP Ltd. in Charlottetown and the company's national vicepresident.
"We're six or eight months down the road, collection activities are starting to ramp up. Mortgage deferrals are coming to an end. And, although some people are back to work, not everyone's back to work and certainly not back to work full time," said MacKinnon.
DEBT SURVEY
Last Monday, the company released its Consumer Debt Index, which surveyed 2,000 adult Canadians and was conducted by Ipsos on Dec. 1-3.
The survey found that nearly half of Atlantic Canadians (47 per cent) are not confident they can cover their living expenses this year without going further into debt. As well, only one-third said they were confident coping with life-changing events without increasing their debt burden and one-fifth said they could cope with losing their job, a change in their wages. Twenty-nine per cent surveyed also said they have taken on more debt, such as credit cards or lines of credit, to pay bills.
On the other hand, of those surveyed, 41 per cent said they weren't concerned about their debt level or regret how much debt they've added to their life.
LOWER FILINGS
The false sense by some people that they are better off or unconcerned about their increased debt level is reflective in the lower number of insolvency and bankruptcy filings during the pandemic compared to the previous year, said MacKinnon.
According to the Office of the Superintendent of Bankruptcy Canada's November 2020 year-to-date numbers, P.E.I. had 447 consumer bankruptcies and insolvency proposals - a 41.3 per cent decrease compared to the first 11 months of 2019. The other Atlantic provinces saw similar year-to-date consumer trend in November. Newfoundland and Labrador's 1,969 filings were down 38.2 per cent compared to 2019 whereas Nova Scotia's 3,728 filings were a 37.4 per cent decrease and New Brunswick's 3,422 filings were down 29.5 per cent.
"The debts they had last March and April are still there. Maybe they've got a little bit higher if they used their credit cards and interest has been added ... The honeymoon - if it's not over, it's soon going to be over. I think people are starting to get pretty nervous," said MacKinnon.
Rent, wage and loan government assistance programs have also helped Atlantic Canadian businesses stay afloat. P.E.I. had three business bankruptcies year-to-date in November compared to seven during the same period in 2019. Similarly, Nova Scotia had 21 bankruptcies, a 56.4 per cent decline compared to 2019, Newfoundland and Labrador had 13 bankruptcies (down 61.8 per cent) and New Brunswick had 15 bankruptcies (down 57.1 per cent).
GET HELP
His advice is for people struggling with debt to see a licensed insolvency trustee to discuss their options. MacKinnon notes that MNP's initial consultation is free, and the solutions could be as simple as creating and sticking to a budget and may not involve bankruptcy.
"I compare it to a funnel. If you're at the top of a funnel and you're going around the circumference, there's more choices, more options. But the longer you leave it to get help, you end up sliding down that funnel to the little spout at the bottom, and there's no room to manoeuvre. Their choices aren't as varied."
MacKinnon said that some people take too long to get good information about debt solutions. The best advice is to deal with debt problems sooner rather than later.
"(Debt) owns them 24-7 until they get to a solution," he said. "It makes a big difference when people get out of that financial sweatbox and see the light at the end of the tunnel."