Credit card debt five times more problematic than other types of debt reported; COVID-19 pandemic called out as factor in over half of personal insolvency filings since March 2020.
The 2020 BC Consumer Debt Study conducted by Licensed Insolvency Trustee firm Sands & Associates examines causes and circumstances commonly faced by British Columbians during personal financial crises. Additionally, the latest study highlights the severe realities of being in debt and offers insights into the COVID-19 pandemic’s role in consumer debt issues in the province.
Sands & Associates Releases Findings from 8th Annual BC Consumer Debt Study
If you’re a British Columbian struggling to see the end of credit card payments through ever-increasing household expenses or feeling a financial burden from the COVID-19 pandemic – you are not alone.
- Over 55% of polled BC residents who eventually consolidated debt with a Consumer Proposal or filed bankruptcy for debt relief said credit card debt was the main type of debt they were carrying – far outpacing other types of debt such as lines of credit (11%) and tax debt (10%).
- The unanticipated events of 2020 further struck consumers – the COVID-19 pandemic was a contributing factor for over half (54%) of participants who filed insolvency since BC’s major lockdown in March 2020. 58% of these consumers noted the pandemic caused a loss of income, making pre-existing debt loads unmanageable.
Other notable findings from the 2020 BC Consumer Debt Study include:
- 4 of 5 top main causes of debt reported could be considered outside an individuals’ general control: Illness, injury or health-related problems (14%); Overextension of credit due to costs of living outpacing income; Marital or relationship breakdown; Job-related / job loss (each at 11%)
- 20% stated their debt was due to an overextension of credit and general financial mismanagement
- Problem-debt may be impacting BC renters disproportionately, with fewer than 6% of respondents describing their housing situation as “homeowner”.
- More than two-thirds (66%) of individuals worried about being able to meet their basic costs of living prior to formally resolving their indebtedness.
- Most respondents said they were working full-time (53%) when they sought debt management solutions. A further 8% said they were self-employed, and another 8% said they were working part-time.
- Despite the serious impacts of struggling under unmanageable debt loads, 95% of participants did not seek professional debt help right away.
Perhaps one of the most important questions posed in the 2020 BC Consumer Debt Study: What does it feel like to have a debt problem? Findings point to alarming realities for indebted consumers. Some critical highlights include:
- More than 3 in 4 respondents said their debt-stress resulted in anxiety or depression.
- Roughly 1 in 6 people said the stress of debt resulted in them experiencing thoughts of suicide.
- Over 3 in 5 participants claimed “overwhelming stress” was the indicator of how they knew their debts were a problem.
- Other top-reported signs of a debt problem were: “Only making minimum payments” and “Accumulating more debt”.
- Over two-thirds of study participants said their self-esteem suffered because of being in debt, and 65% said their health suffered.
- Nearly 70% of respondents indicated that their relationships with family and others were negatively impacted by being in debt.
For those concerned about their ability to weather the pandemic’s long-term impacts, a formal insolvency filing may hold the key. Related observations from the 2020 BC Consumer Debt Study:
- Roughly 3 in 4 individuals who had filed a Consumer Proposal or declared Personal Bankruptcy expressed overall positive sentiments of their debt management solution in relation to their ability to manage their finances during the pandemic. Notably:
- Nearly 1 in 3 consumers said filing allowed them to manage their finances despite an impact to their income from the pandemic.
- Approximately 10% said that being debt-free put them at an advantage to manage during the pandemic (having already completed a Consumer Proposal or Personal Bankruptcy prior to the COVID-19 pandemic).
Lastly, examining past BC Consumer Debt Study findings has revealed long-term shifts in insolvency trends for consumers, including:
- At roughly 11%, 2020 had the lowest number of respondents attributing the main cause of their debts to job-related challenges in the study’s 8-year history.
- Nearly 40% of individuals who filed a Consumer Proposal or Personal Bankruptcy were in a 55+ age group, a significant increase from the first year of the study (2012) where just 26% of individuals filing insolvency proceedings were 55 years of age or older.
- Consumer Proposals in BC continue to gain popularity as a debt consolidation option and bankruptcy alternative; 65% of 2020 study respondents chose to file a Consumer Proposal, compared with 32% who chose to file a Personal Bankruptcy. This is a significant shift from the results of 2012’s study where nearly 80% of respondents had chosen Bankruptcy over a Consumer Proposal.
According to Senior Vice-President of Sands & Associates and Licensed Insolvency Trustee Blair Mantin, “The COVID-19 pandemic hit some already-vulnerable consumers like a freight train. Though payment deferrals and income replacements like CERB blunted the initial impact, it was startling to learn that the pandemic was a factor in more than half of the insolvencies filed since March 2020. Sadly, it does not take much to push people into financial crisis where they can no longer service their debts, or into situations where they feel they must choose between paying their debt or meeting basic living costs. As deferrals come to an end and government income replacements are made more restrictive, we expect to see a surge of consumers who are barely hanging on at present take the necessary step of restructuring their debts in 2021.”
“Too often people focus on numbers and not enough on the problems that cause and come along with debt. We want consumers to know that they have support, where the qualified solutions are found, and above all that there is light at the end of the tunnel.”
Explaining his firm’s decision to include a focus on participants’ personal experiences and advice to others, emphasizing emotional and psychological impacts of debt he notes:
“This study is in its eighth year, and we hear each year that people just didn’t know what their options were – or where or how to get help without fear of judgment or shame. Debt still carries a lot of shame and confusion for consumers. If a friend came to you and said they were wracked with anxiety and depression, struggling to pay off a credit card that they had used because their partner or child was sick, or they lost their job – would you react with judgment or criticism? No, of course not.
Normalizing conversation around debt and its impacts is key here. The accepted silence allows negative self-talk to overrun people, and then on top of that the confusion allows noise of the unregulated debt industry to clutter access to legitimate legal debt solutions. We must keep trying to get the word out, we need to do a lot better for British Columbians.”
“Consumers need to know what their rights and remedies are when it comes to debt – and in broader conversation what our loved ones, friends, neighbours, coworkers might be going through,” he says, “We’re extremely proud to offer a safe space where people who have faced their financial challenges can offer their own words of advice and share their personal experiences – and truly there can be a restorative effect in telling your story.”
He urges consumers: “Don’t wait until you’re experiencing constant debt-stress and anxiety about your financial situation to seek advice. I would really encourage everyone to explore their legal debt options with a Licensed Insolvency Trustee – and above all know that you are not alone.”
For further details about BC Consumer Debt Studies or media inquiries contact Sands & Associates Senior Vice-President Blair Mantin.
About Sands & Associates and BC Consumer Debt Studies
Sands & Associates is the province’s largest firm of Licensed Insolvency Trustees focused exclusively on debt help services for individuals and small businesses. A multi-year Consumer Choice Award winner and industry leader, Sands & Associates takes a supportive and empathetic approach to debt help services, with an emphasis on boosting consumers’ knowledge and personal empowerment.
The only BC-specific annual study of its kind, the 2020 BC Consumer Debt Study is the eighth annual study conducted by Sands & Associates, polling over 1,800 consumers around the province who declared Bankruptcy or consolidated debt using a Consumer Proposal.
Sands & Associates’ annual BC Consumer Debt Studies aim to provide insights into the financial challenges faced by people across the province, and highlight the human elements of a debt problem, which are too often overshadowed by numbers and statistics. We continue to take aim at dismantling preconceived ideas of “who has a debt problem” and strive to destigmatize conversations about debt and financial literacy.
Get debt advice and explore your options to become debt-free today – book your free confidential debt consultation now.