Canada’s recently released unemployment numbers show that the jobless rate jumped from 7.8 per cent in March to 13 per cent in April – nearly matching the highest ever recorded data dating back to the mid-1970s.
Yet despite this, the number of Canadians filing for insolvency has decreased significantly.
First-quarter numbers released by the Office of the Superintendent of Bankruptcy show that insolvencies are down 5.5 per cent compared to the previous quarter. Insolvencies include both bankruptcies and consumer proposals.
In Atlantic Canada, the decrease in insolvencies from the first quarter of 2020 compared to the last quarter of 2019 is significantly higher than the national average:
- In Newfoundland, insolvencies dropped by about 19 per cent
- In PEI, insolvencies were down nearly 32 per cent
- Nova Scotia saw an 18.4 per cent decrease
- New Brunswick was the only province lower than the national average, with a 4.7 per cent decrease
Prior to the COVID19 pandemic, Canada was seeing record-breaking numbers of insolvencies due to high household debt levels. In fact, just six months ago, October was the highest monthly reading in insolvencies for a decade. But now, it appears those numbers have slowed, despite the fact that millions of Canadians are out of work.
“The pandemic has given people a steady income through government benefits and the flexibility to stop paying bills for the time being,” says John Eisner, President of Credit Counselling Services of Atlantic Canada. “What worries me is what happens when the government benefits dry up and creditors start asking people to start paying again.”
While governments and creditors have been accommodating during this time, the pandemic will eventually end. When this happens, millions of Canadians will still be in debt – perhaps even more so than before – and insolvencies are likely to start rising again.
Eisner recommends that those who were struggling financially before reach out for help now, instead of waiting until the pandemic passes.
“It’s probably safe to say that if you were concerned with your debt levels before the pandemic, those problems will still be there later this year – perhaps even worse than before. Don’t ignore your financial situation because you’re doing okay right now. You need to plan ahead for what’s to come.”
Credit Counselling Services of Atlantic Canada is offering free consultations to help people address their financial struggles. The not-for-profit organization has seven offices across Atlantic Canada but is offering telephone counselling sessions right now. Their goal is to help people with their budgeting and money management skills in the hopes that Canadians will bounce back from this.
“We haven’t yet seen the financial outcome of this – we’re still in the middle of it all. Those that ignore their financial situation will fare worse than those who address it now.”
If you need help with your finances, contact us today!