Just how big of a role has the COVID-19 pandemic played when it comes to consumer debt problems across the province? What else has British Columbians seeking help to restructure their debts? The 2020 BC Consumer Debt Study released earlier this week by Sands & Associates provides insights into these important questions, and more.
Licensed Insolvency Trustees Sands & Associates released the findings of the latest annual BC Consumer Debt Study this week, highlighting the financial challenges many across the province have faced, and continue to deal with alongside the COVID-19 pandemic. Sands & Associates Senior Vice-President Blair Mantin joined CTV News Vancouver to share some of the key highlights from this new study.
Watch the clips here and read more below:
Key Findings from the 2020 BC Consumer Debt Study
The eighth annual study of its kind, the 2020 BC Consumer Debt Study polled over 1,800 consumers across BC who declared bankruptcy or consolidated debt using a Consumer Proposal.
In addition to individuals’ debt levels and demographics, the study explores causes of debt and sheds light on debt-stress impacts faced by British Columbians during personal financial crises. Additionally, this year’s study highlights the COVID-19 pandemic’s role in consumer debt issues in the province to date.
Main Causes of Debt as Reported by Consumers
The highest proportion of BC residents (34%) said they were carrying between $25,000 and $49,999 of debt (excluding vehicle loans and/or mortgages) at the time they began an insolvency proceeding.
A wide range of main causes of debt were cited by participants, with several key causes emerging, as below:
- One-fifth of survey respondents stated their debt was directly due to an overextension of credit and general financial mismanagement.
- Following this, survey respondents highlighted four other main causes of debt. Particularly note-worthy is that each of these causes could be considered outside of an individual’s general control:
- Illness, injury or health-related problems
- Overextension of credit due to costs of living outpacing income
- Marital or relationship breakdown
- Job-related / job loss
Whether due to traditionally high interest rates, the “snowball effect” of compounding interest where debts can increase rapidly and/or overall easy accessibility to credit – the BC Consumer Debt Study underscores how problematic credit card debt can become. Over half of those polled said credit card debt was the main type of debt they had – five times more than other debt types reported such as lines of credit and tax debt.
Almost 30% of respondents describe their credit rating as ranging between “good” and “excellent” at the time they started a Consumer Proposal or personal bankruptcy, defying the common misconception that individuals reaching bankruptcy or legal debt relief have very poor credit ratings.
Impact of COVID-19 Pandemic on BC Consumers’ Debt Problems
The ongoing COVID-19 pandemic has presented major financial challenges for consumers around the globe, particularly as many were ill-prepared to withstand even a minor disruption to their regular income and/or expenses. Although far from over, the pandemic is notably consequential for indebted BC consumers, as outlined below:
- More than half (54%) of study participants who filed bankruptcy or made a Consumer Proposal since BC’s initial lockdown in March 2020 said the COVID-19 pandemic was a contributing factor to them needing to seek debt relief.
- 58% of these consumers noted the pandemic caused a loss of income, making pre-existing debt loads unmanageable.
- 19% said the pandemic caused them to use credit to make up for lost income.
- 4% stated they had had no debt before the COVID-19 pandemic.
For those BC residents concerned about their ability to weather the pandemic’s long-term financial impacts, a formal insolvency filing may hold the key:
- Roughly 3 in 4 individuals who had filed a Consumer Proposal or declared bankruptcy expressed overall positive sentiments of their choice in relation to their ability to manage their finances during the pandemic.
- Nearly 1 in 3 consumers said filing allowed them to manage their finances despite an impact to their income from the pandemic.
- Around 10% said that being debt-free put them at an advantage to manage during the pandemic (having already completed a Consumer Proposal or bankruptcy prior to the COVID-19 pandemic).
BC Consumer Debt Study Findings Year-Over-Year Trends
Examining BC Consumer Debt Study findings since the study’s inception in 2012 reveals long-term shifts in insolvency filings for consumers, including:
Ageing with debt an increasing concern:
- In 2020’s study 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 strong 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 2012’s study where nearly 80% of respondents had chosen bankruptcy over a Consumer Proposal.
Managing Financial Stress and Solving Money Problems
British Columbians continue to face alarming, severe impacts when a debt problem is unmanageable:
- Over 3 in 5 participants said “overwhelming stress” was the indicator of how they knew their debts were a problem, and ‘only making minimum payments’ was reported by 59% of respondents as the trigger for them to realize their debt situation had become untenable.
- 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.
Despite the serious impacts of struggling under unmanageable debt loads, 95% of people did not seek professional debt help right away. Above all it’s important to know two things: You are not alone, and there are solutions.
Whether you are facing financial stress and a money problem because of personal hardships or you’re treading water with never-ending payments because of a slow build-up of high interest debts, you have rights and remedies under Canadian legislation that can help you deal with your debt problem and achieve a financial fresh start.
You can seek confidential advice and a full suite of online services exploring your legal debt options with a Sands & Associates Licensed Insolvency Trustee. We understand the emotional hardship of carrying debt and offer our support and services with an emphasis on non-judgmental kindness and caring. Again, know that you are not alone – we are here for you.
To learn more about debt management options accessible to BC residents or get advice about dealing with debt book your free confidential consultation today.