Causes of Consumer Debt
As consumer debt continues to rise across the country, more Canadians are inching closer to declaring bankruptcy. In this unprecedented situation we are facing, many people are feeling uncertain about how their finances and employment will be affected. We are here to help you.
If you are worried about your financial future, we want you to know there are options available to support you. Let’s take a look at some of the main causes for consumer debt and the resources that are available.
An unexpected change in income due to a shortage or loss of work is one of the most common issues we encounter with clients. After years of trying to manage many types of consumer debt - credit cards, car payments, personal loans - they have reached a point where their financial situation is a constant, overwhelming struggle. This is the reality for many Canadians who are carrying more debt than ever. In September 2019, Canada’s total consumer credit debt reached $782 billion. At the same time, the number of insolvencies in the last quarter of 2019 increased by 10% compared to the same period last year.
Without a steady income, payments that were once manageable are now a financial burden. Car payments start to fall behind, credit card debt grows out of control, and utility bills go unpaid. Some of our debtors have used one source of debt to pay for another, which often causes them to spiral further into debt. For example, they may use their credit card to keep on top of their cell phone bills but now face a higher minimum monthly payment. Or, they obtain a payday loan to cover their car payment but find themselves paying more interest on the loan than it was worth.
The emotional toll of being unemployed can be even more damaging. It’s not unusual for people to experience feelings of grief after losing their job. Becoming unemployed is a stressful situation that requires you to adjust your life unexpectedly. In addition to the financial loss, you may feel like you’re missing a part of your identity or purpose now that this job is no longer part of your life.
If you find yourself in this situation, we want you to know that there are many supports to help you regain your stability. The Government of Canada has announced new measures to assist people with the financial hardships caused by COVID-19. Canada’s Economic Response Plan provides improved financial supports for people who are facing employment and lower income. These temporary solutions can help alleviate some of the stress of your situation while you prepare a plan for moving forward.
We also suggest applying to programs that can assist in reducing your utility bills. For example, the Ontario Energy Board offers an assistance program for households living on a reduced income. Known as the Ontario Electricity Support Program, this program provides eligible households monthly credit that is applied directly to their electricity bill each month.
As Licensed Insolvency Trustees, we also encourage you to reach out to us for help. We offer free consultations to review your financial situation. Our trustees are federally regulated professionals who will work to find the best debt relief solutions for you, such as a consumer proposal or personal bankruptcy. We can work with you to reduce monthly payments and consolidate your consumer debt.
Crawford, Smith & Swallow Inc., has consumer debt solutions that help you regain control over your finances. Contact us today to learn more about our services.