New Brunswickers among six in 10 (58%) Atlantic Canadians within $200 of financial insolvency; up three points since December, reaching a five-year high

Atlantic Canadians are the most likely (30%) to say they have taken on more debt as a result of the pandemic  

SAINT JOHN, NB – April 8, 2021 — As pandemic-related government aid and loan deferral programs begin to wind down, the latest MNP Consumer Debt Index finds the number of Atlantic Canadians hovering close to financial insolvency has reached a five-year high. Nearly six in 10 (58%) say they are $200 or less away from not being able to cover their monthly bills and debt obligations, a three-point jump from December. This includes three in 10 (30%, +1pt) who report they are already insolvent with no money left to cover their payments at month-end.

“Government financial relief measures provided some breathing room over the last year, but now we’re seeing a reversal,” says Tara Silliker, a local Licensed Insolvency Trustee with MNP LTD. “The number with virtually no wiggle room in their household budgets has reached a five-year high and this tells us we might start to see households falling behind on payments.”

Conducted quarterly by Ipsos and now in its sixteenth wave, the Index finds households report having less money left over at the end of the month. On average, Atlantic Canadians say they are left with $426 after making their payments. That is the lowest compared to the other provinces and is down by $40 (or 9 percent) from December. The decline is likely a reflection of government aid programs, eviction bans, and payment deferrals now coming to an end.

“Even though some Canadians are spending less and saving more as a result of pandemic measures, others are sinking further into the red and taking on more debt to stay afloat after job, wage, or small business loss,” says Silliker.

Compared to the other provinces, Atlantic Canadians are the most likely (30%) to say they have taken on more debt as a result of the pandemic. This includes using credit cards (14%), using a line of credit (9%), taking out a bank loan (3%), or deferring mortgage payments (3%). Nearly one in five (17%) report using their savings to pay for household bills.

Atlantic Canadians are also the most likely to be concerned about their ability to repay debts if interest rates rise (57%) and worry that rising interest rates could move them towards Bankruptcy (42%).

“Increasing debt levels make many Atlantic Canadians increasingly vulnerable to interest rate increases in the future. The debt may simply become unaffordable and impossible to get out of,” explains Silliker.

Despite the concern, six in 10 (60%) believe now is a good time to buy things they otherwise couldn’t afford (-6), while nearly half (48%) say they’re more relaxed about carrying debt than they usual (-1).

“Those already concerned about mounting debt should not consider taking on more. Rather, it’s probably a good time to get professional debt advice,” says Silliker, who urges Atlantic Canadians to be proactive about improving their financial positions.

The survey found nearly one in 10 (7%) Atlantic Canadians plan to get professional debt advice over the next year. Still, it seems many plan to do exactly what Silliker cautions against: taking on even more credit to pay their expenses. One in five (21%) say they plan to take on more debt to pay bills over the next year, including using high-interest options like credit cards (8%).

“Shame and guilt prevent many deeply indebted individuals — particularly those who find themselves taking on more debt to pay bills — from seeking professional debt advice right away. They think Bankruptcy is the only option. But it’s not, nor is it always the best option for dealing with debt,” says Silliker.  “Everyone’s situation is different, which why it is important to get customized, unbiased advice from a Licensed Insolvency Trustee.”

Silliker says a Licensed Insolvency Trustee may recommend one or a combination of the following depending on the extent of the debt and the individual’s overall financial situation:  

Budgeting — Setting up a monthly financial plan to help balance and monitor income and expenses and potentially free up more cash to pay down debt.

Refinancing — Re-negotiating the term and interest rate on existing credit accounts to reduce the monthly cost of debts and make them easier to repay.

Liquidating — Selling high-value assets such as non-essential vehicles, recreational properties, sporting goods, and jewelry to provide the financing to pay down debt.

Consolidating ­— Combining all debts into a single monthly payment with a lower average interest rate to reduce the number of payments and their total cost.

Consumer Proposal — Working with a Licensed Insolvency Trustee to negotiate a legally binding debt settlement with creditors that will reduce the amount owed and can be paid over a maximum of five years. Consumer Proposals can only be administered by Licensed Insolvency Trustees.

Bankruptcy — A legal process of liquidating assets and potentially making monthly payments to eliminate outstanding debts and help insolvent consumers achieve a financial fresh start. A Bankruptcy may only be administered by a Licensed Insolvency Trustee.

Government-regulated Licensed Insolvency Trustees are empowered to help Atlantic Canadians reorganize their financial affairs and, where appropriate, can even help them avoid Bankruptcy by facilitating an agreement with their creditors. They can also guarantee legal protection from creditors through the Consumer Proposal or Bankruptcy processes.

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 240 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. For regular, bite-sized insights about debt and personal finances, subscribe to the MNP 3 Minute Debt Break Podcast.

About the MNP Consumer Debt Index

The MNP Consumer Debt Index measures Canadians’ attitudes toward their consumer debt and gauges their ability to pay their bills, endure unexpected expenses, and absorb interest-rate fluctuations without approaching insolvency. Conducted by Ipsos and updated quarterly, the Index is an industry-leading barometer of financial pressure or relief among Canadians.

Now in its sixteenth wave, the Index currently stands at 96 points, up seven points compared to the last wave conducted in December 2020. Visit MNPdebt.ca/CDI to learn more.

The latest data, representing the sixteenth wave of the MNP Consumer Debt Index, was compiled by Ipsos on behalf of MNP LTD between March 4-9, 2021. 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.