Over half (53%) of Quebecers within $200 of financial insolvency; up six points since December

Montreal skyline during a fall sunset

One in three already technically insolvent, up three points.

MONTREAL, QC – April 8, 2021 – As pandemic-related government aid and loan deferral programs begin to wind down, the latest MNP Consumer Debt Index finds more than half of Quebecers are hovering close to financial insolvency. Fifty-three percent say they are $200 or less away from not being able to meet all of their monthly bills and debt obligations, a six-point jump from December. This includes three in 10 (30%, +3pts) who report already being insolvent with no money left to cover their payments at month-end.

“Pandemic-related financial relief measures provided some breathing room over the last year, but now we’re seeing a reversal,” says Frederic Lachance, a Licensed Insolvency Trustee with MNP LTD in Montreal. “With virtually no wiggle room in household budgets, there is increasing anxiety about making ends meet. We may see many falling behind on payments or defaulting on loans, mortgages, car payments, or credit cards.”

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, Quebecers say they are left with $532 after making their payments, down by $73 (or 12 percent) from December. The decline is likely a reflection of the government aid programs, eviction bans, and payment extensions that are now ending.

“Some may be seeing their bills coming due, even if they are not back to full-time work,” says Lachance. “Though many are spending less and saving more as a result of pandemic measures, others are taking on more debt to stay afloat.”

One in five (21%) Quebecers say they have taken on more debt because of the pandemic. This includes using their savings to pay for bills (16%), using credit cards (13%), using a line of credit (5%), taking out a bank loan (4%), or deferring mortgage payments (2%).

“When households than are already stretched take on even more debt, they become increasingly vulnerable to interest rate increases in the future; and their debt may become unaffordable when that happens,” explains Lachance.

Nearly half of Quebecers(45%) are concerned about their ability to repay debts if interest rates rise. This includes one in three (33%) who say they worry rising interest rates could move them towards Bankruptcy.

Despite the concern, about six in 10 (57%) believe now is a good time to buy things they otherwise couldn’t afford (unchanged from December). In addition, Quebecers are the most likely (60%) compared to the other provinces to say they’re more relaxed about carrying debt as by-product of low interest rates.

“Using credit has become a reflex for many Quebecers. Some households need to start thinking of debt as a trap, rather than a solution,” says Lachance, who urges Quebec residents to be proactive about improving their financial positions and to seek professional advice to deal with concerning consumer debt.

However, the survey found very few Quebecers plan to get professional advice (5%) or contact a Licensed Insolvency Trustee to discuss debt relief options (2%) over the next year. Instead, it seems many plan to do exactly what Lachance cautions against: taking on even more credit to pay their expenses. About one in five (17%) say they plan to take on more debt to pay bills over the next year, including using high-interest options like credit cards (8%).

“Deeply indebted individuals — particularly those who find themselves taking on more debt to pay bills —would be wise to seek professional debt advice right away. Licensed Insolvency Trustees offer free, unbiased advice about your individual situation and the options available,” says Lachance. 

Government-regulated Licensed Insolvency Trustees are empowered to help Quebecers 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.

Lachance 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.

“Everyone’s situation is different, which why it is important to get customized, unbiased advice from a Licensed Insolvency Trustee. We offer the full range of debt-relief options and help severely indebted individuals understand their rights when it comes to dealing with debt,” adds Lachance.

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.