With the Bank of Canada expected to continue hiking interest rates this year, and inflation still making basics like groceries unaffordable for many, debt-holders are at a greater risk of going insolvent.
The new MNP Consumer Debt Index suggests Atlantic Canadians are more concerned about their ability to pay off debt than anyone else in the country. Seventy-three per cent of people in the region say their concerns about debt are tied to rising interest rates. That’s a nine per cent jump from last quarter when MNP did the same survey.
Seventy-one per cent, meanwhile, say they already feel the squeeze from previous rate hikes. Half of Atlantic Canadians say they are worried about the debt they’ve already accrued.
The level of debt being carried by the work-a-day Atlantic Canadian can have major effects on the economy. People can only pile on debt until they must make lifestyle and budgetary changes. MNP’s survey suggests 36 per cent of people in the four Atlantic provinces plan to spend less because of their debt situation.
Perhaps most concerning is the survey’s finding that 62 per cent say they will be in “financial trouble” if interest rates go up higher. Twenty-seven per cent of people in Atlantic Canada say they already don’t make enough money to cover all their expenses. An increasing number of respondents say they have borrowed money that will be difficult to pay back quickly, have taken loans from friends or family, and are dipping into their savings.
Tina Powell, a Halifax-based insolvency trustee with MNP, warns that in times like these people can end up in a “debt spiral” to make ends meet.
“Households that are putting all their incomes towards bill payments just surviving have very little wiggle room and may have to resort to taking on more debt just to make ends meet,” she says.
“They can get into a debt spiral and they may not be able to get out of it. I’m just really surprised by these numbers. I’m also concerned that individuals may not recognize the red flags or early warning signs that they should be seeking help with their debt; that could be anything from not being able to pay their bill or even anticipating a missed payment.”
As an expert in solvency issues, Powell knows that talking about debt problems can be taboo. But she says the sooner someone sees the red flags of debt problems, the more options there are in fixing it.
“The longer somebody waits to seek help with their debt, the fewer options that become available.”
“There doesn’t always have to be formal options; there could be informal debt settlement with creditors. There could be advice from an insolvency trustee on budgeting. Or maybe you can access some equity.”
If that doesn’t work, more formal options are available, like writing a payment proposal to one’s creditors, or consolidating debt.
“Then there is bankruptcy, which is always a last resort,” says Powell.
Powell notes that many insolvency specialists offer free consultations, so it doesn’t hurt to see what options are out there. The biggest thing is getting over the uneasiness of talking about money and debt.
“There is no shame in seeking help to deal with your finances. We’re in the business of helping people, we’re not in the business of judging anybody,” says Powell.
“There are provincial nuances to insolvency laws. So, making sure that you’re speaking to a local individual can certainly provide you with the correct advice.”
Derek Montague is a reporter with Huddle, an Acadia Broadcasting content partner.
