Amid relief measures, Prince Edward Islanders more optimistic about debt

  • More rate their current debt situation as excellent (36%, +4) compared to pre-pandemic levels.
  • Fewer regret the amount of debt they have taken on (46%, -6).
  • Despite growing wiggle room in monthly budgets (+$73), more are $200 or less from financial insolvency (47%, +3).

CHARLOTTETOWN, PEI – July 20, 2020 – While the financial picture for many Atlantic Canadian households looked bleak last quarter, many have stayed afloat thanks to the current raft of pandemic-related support programs. The latest MNP Consumer Debt Index, conducted quarterly by Ipsos, found more Atlantic Canadians rate their current debt situation as excellent (36%, +4) compared to pre-pandemic levels. Three in 10 (30%, +4) feel their debt situation is better now than it was a year ago. And a third (33%, -1) believe it is better than it was five years ago. Almost six in 10 (59%) feel confident in their ability to cover living expenses for the next 12 months without going further into debt.

Downtown Charlottetown from above the water

The optimism is also visible in measures showing fewer regret the amount of debt they have taken on in life (46%, -6).

“That Atlantic Canadians are slightly more optimistic or even hopeful about their personal debt situation is the result of the pandemic relief measures. In addition, many found it easier to spend less over the last few months they were required to stay home,” says Walter MacKinnon, a local Licensed Insolvency Trustee with MNP LTD.

With widespread store closures leaving fewer opportunities for spending and many saving on gas and community costs while working from home, Atlantic Canadians say they have more wiggle room in their household budgets each month. On average, after paying bills and debt obligations, they report having $73 more at month-end than they did in early March.

“COVID-19 dramatically altered discretionary spending with the closure of restaurants, theatres, malls and other bastions of consumer spending. Even with marginal increases in groceries, utilities, and online shopping, many households have reported savings. In some cases, this has made them feel more capable of keeping up with previously unsustainable debt payments,” explains MacKinnon.

Support from the government, mortgage deferrals, and the flexibility of creditors have all contributed to a significant decline in insolvency filings since the pandemic began. In May alone, consumer filings in Nova Scotia declined 63 percent compared to the same month last year.

“It won’t take much to push many households back into dangerous territory. Just a few hundred dollars per month — less than one unexpected car repair or a loss in overtime pay — may be enough to tip the scales toward an insolvency scenario,” says MacKinnon.

The number of Atlantic Canadians who are $200 or less away from financial insolvency at month-end increased three points since early March (47%). This includes 17 percent who are already insolvent and unable to cover their bills and debt payments, a decrease of six points this wave.

“We will start to see a range of efforts from creditors to catch people up on payments that were deferred during the pandemic. Whether through increased monthly payments or extended loan terms, the net result is households will be further behind and deeper in debt.”

Given the already shaky ground Atlantic Canadians were standing on before the COVID-19 crisis — not to mention the magnitude of the virus, its economic impacts, and the government response — MacKinnon says it won’t be at all surprising to see insolvencies jump in Nova Scotia.

“At best, we will likely see these numbers rapidly return to normal as COVID-related stimulus dollars dry up and creditors return to pre-pandemic policies,” says MacKinnon.

Some households are bracing themselves for a crash landing when the current relief measures end and they face an uncertain post-pandemic economy. The number of Atlantic Canadians who expect their debt situation to improve a year from now has declined slightly (34%, -1) and one in 10 believe it will worsen (12%, +5).

Looking at their debt situation five years from now; four in 10 expect it to improve (42%), a decrease of nine points from pre-pandemic levels. As with the one-year timespan, one in 10 believe their debt situation will worsen (15%, +6).

For those who are struggling with debt, MacKinnon notes that Bankruptcy is not the first nor is it always the best option. Licensed Insolvency Trustees are the only federally regulated debt professionals empowered to provide a full range of debt relief options including Consumer Proposals, informal debt settlements, and bankruptcies. They take a customized approach and provide an unbiased opinion to help severely indebted individuals understand their rights and determine the best path forward.

About MNP LTD

MNP LTD, a division of the national accounting firm MNP LLP, is the largest insolvency practice in Canada. For more than 50 years, our experienced team of Licensed Insolvency Trustees and advisors have been working with individuals to help them recover from times of financial distress and regain control of their finances. With more than 230 offices from coast-to-coast, MNP helps thousands of Canadians each year who are struggling with an overwhelming amount of debt. Visit MNPdebt.ca to contact a Licensed Insolvency Trustee or use our free Do it Yourself (DIY) debt assessment tools

In light of the social distancing measures currently in place, MNP LTD is currently offering free consultations via videoconferencing (Skype, Messenger, Zoom, FaceTime, etc.) and by phone. Their team of Licensed Insolvency Trustees are empowered to help those struggling financially to make the most informed choices to deal with their debt during this time. Visit MNPdebt.ca to book an appointment or to start a live chat.

About the Survey

These are some of the findings of an Ipsos poll conducted between June 1-2, 2020, on behalf of MNP LTD. For this survey, a sample of 2,001 Canadians aged 18 years and over was interviewed. Weighting was then employed to balance demographics to ensure that the sample's composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.5 percentage points, 19 times out of 20, had all Canadian adults been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to, coverage error, and measurement error.

A summary of the provincial data is available by request.