New study details impact of debt to consumer wellbeing and beyond. Credit card debt called out five times more than other types of problem debt by insolvent consumers; using credit for essential costs of living the main cause of debt reported by 18% – and more than 3 in 4 study participants say being in debt negatively affected their mental health.
Complete findings from the 2021 BC Consumer Debt Study were released today, offering an invitation to explore and better understand some of the many challenges faced by British Columbians dealing with a debt problem. In addition to highlighting the causes of problem debt and their impacts to British Columbians, the latest annual BC Consumer Debt Study marked other notable trends in consumer debt habits.
Conducted by Sands & Associates, BC’s largest firm of Licensed Insolvency Trustees focused on debt services for individuals and small businesses, the 2021 BC Consumer Debt Study polled over 1,700 consumers from across the province who declared personal bankruptcy or legally consolidated debt with a Consumer Proposal and provides a unique perspective on consumer debt issues.
Highlights from the 9th Annual BC Consumer Debt Study
You have credit card debts that total over $25,000 and have just been told you’re losing your job…
Following a marital breakdown you used credit to cover your added expenses and adjust to the increased costs of living. Now you’re only able to afford the minimum monthly payments on your credit card, and your line of credit is close to maxxed-out…
Just as you’re back to work and tackling your priority in paying off the debt you accumulated making up for lost income during a shutdown, you suddenly must choose between debt payments and helping an ill family member…
So what happens next? Is there a way out? What can you do?
These situations may be more commonplace than many are comfortable admitting, and a highlight of key findings from the 2021 BC Consumer Debt Study offers some challenge to misconceptions about debt, and insights for consumers to confront debt problems early on.
According to Sands & Associates President and Licensed Insolvency Trustee Blair Mantin, “Consumers may often be lulled into thinking their debt isn’t “too much”, not realizing how easily problem debt gets out of control, or how common life challenges can leave people facing unimaginable financial difficulties and overwhelming stress.”
- Almost 30% of survey respondents described their credit rating as ranging from ‘good’ to ‘excellent’ at the time they sought legal debt relief.
- The highest proportion of respondents (32%) said when they began their formal debt relief process they had $25,000-$49,999 of debt (excluding vehicle loans/mortgages).
- Over 56% of the consumers polled said credit card debt was the main type of debt they had, far outpacing other most-reported types of debt – tax debt (11%) and lines of credit (10%).
- “Last resort” financing use is continuing to increase, with payday or instalment loans (9%) taking fourth place in top-most reported types of debt for insolvent consumers.
- Roughly 6% of polled consumers in 2020’s study and 5% for 2019’s said payday loans were their main type of debt.
Top Causes of Consumer Debt
Less than a third (28%) of respondents said their debts were caused by overextended credit due to general financial mismanagement – and the other 4 of top 5 most reported main causes of debt could be considered outside an individual’s control:
- Using credit for essential costs of living income could not cover (18%)
- Illness, injury or health-related problems (10%)
- Marital or relationship breakdown (8%)
- Job related issues (unemployment, lay-off, reduction in pay, etc.) (8%)
Effects of Debt-Stress on Wellbeing
Many British Columbians end up overburdened with debt and facing multiple challenges and impacts to their quality of life as they attempt resolution. Findings from the 2021 BC Consumer Debt Study uncover the human elements and the costs of living with a debt problem.
- 77% of survey participants said their mental health suffered being in debt, 68% said their self-esteem suffered, and 53% said their physical health suffered.
- Debt effects spread with 39% saying they had to put life events on hold, and 33% that their relationships suffered because of being in debt.
- Constant worry about debt was reported by over 4 in 5 people, anxiety for more than 3 in 4 and depression for 3 in 5.
- Roughly 1 in 6 respondents said the stress of debt resulted in them experiencing thoughts or contemplation of suicide.
Warning Signs of Debt & Delaying Professional Debt Help
When survey respondents were asked how they knew their debts were becoming a problem:
- Over two-thirds (68%) said their realization was driven by feelings of overwhelming stress.
- Only making minimum payments was a key indication for almost 60% of participants, and 50% said it was seeing debt balances remain almost the same every month, despite their making payments.
Most survey participants indicated they had initially opted for a self-directed approach to debt management strategies, often turning to more borrowing as a debt solution:
- Roughly 34% said in attempting to deal with their debt they applied to extend credit limits on existing debts.
- 30% said they applied for consolidation financing.
Although severe debt impacts were experienced by the majority, only 5% of consumers polled said they sought professional debt help right away. Self-imposed hurdles stopped many people from getting help early on:
- Wanting to manage debt on their own (63%).
- Feeling ashamed about not being able to handle debts incurred (51%), being embarrassed to ask for help (50%).
Noteworthy for financial sector professionals, policymakers and consumers alike, other reasons for delaying seek professional debt help:
- 29% said they didn’t know where to seek help.
- Roughly 16% said they had misinformation about how the Consumer Proposal and/or Bankruptcy process worked.
Post Debt Solution Outlook
The 1,700+ BC consumers polled ultimately decided to resolve their debt by Consumer Proposal consolidation or filing personal bankruptcy, and 90% expressed that they were satisfied if not extremely satisfied by the outcome of their decision. Other positive outcomes conveyed by respondents include:
- 71% saying they had improved budgeting and/or savings skills.
- More confidence in day-to-day financial management (59%), and better understanding about credit and borrowing (54%).
Of particular note is the successful encouragement of conversations around money and seeking support, with over one-third (39%) of respondents saying they were more open in discussing finances and general money matters with others following their experience receiving professional debt help.
For further details about BC Consumer Debt Studies or media inquiries contact Sands & Associates President Blair Mantin.
About Sands & Associates and BC Consumer Debt Studies
Since founding in 1990 Sands & Associates has grown to become an industry leader, multi-year Consumer Choice Award Winner and BC’s largest firm of Licensed Insolvency Trustees focused on debt management aid for consumers and small businesses.
Sands & Associates aims to blend consumer empowerment and financial literacy with Canadian resources, providing an overall supportive – and effective – approach to legal debt help solutions.
On Sands & Associates annual BC Consumer Debt Study, Sands & Associates President and Licensed Insolvency Trustee Blair Mantin notes, “Through these annual studies we’re able to gain and share invaluable insights into the challenges being faced by people in virtually every community. Being able to share in this knowledge helps others to empathize, increasing awareness that is so needed to step up and help people get the resources and solutions they need to regain their lives and move forward without the overwhelming burden of a debt problem.”
If you are struggling with debt, you are not alone. Connect with a BC debt help expert today – book your free non-judgmental debt consultation with a Sands & Associates Licensed Insolvency Trustee here.