British Columbians Debt Anxiety Rise Amid Inflation, Rising Rates: Study

Debt anxiety is growing as people in British Columbia deal with the twin pressures of inflation and rising interest rates, two new studies show.

Accounting firm MNP Ltd. released its latest quarterly consumer debt index on Monday, showing just half (52%) of respondents in British Columbia said they would be able to cover their expenses this year without borrowing more. I found myself convinced. This was down 7% from the previous quarter.

The index, compiled from an Ipsos poll, also found that three out of five B.C. respondents are worried they won’t be able to pay their debts due to rising interest rates.

Fifty-five percent said they would be in financial trouble if interest rates rose significantly, and 65% said they were already feeling the effects of the hike.

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“This has long been anticipated, especially as interest rates have risen,” said MNP senior vice president and licensed bankruptcy trustee Linda Paul.

According to the report, two out of five B.C. respondents said they had $200 or less left to go bankrupt, and 15% said they used a credit card to pay their bills.

“Today, many British Columbians live from paychek to paychek, and I think that is a result of the very high cost of living,” said Paul.

“While you’re buying more expensive groceries and putting more expensive gas in your car, the price of everything is skyrocketing, leaving you with even less money to work each month to pay off your debt.”

Debt consultancy Sands & Associates released Monday its own research drawn from a survey of more than 1,400 British Columbia people who have recently declared bankruptcy or sought debt restructuring at the suggestion of a consumer. Did.

Blair Mantin, president and bankruptcy trustee, said the survey found that more people over the age of 55 have debt problems.

Just over a third of respondents to the company’s survey said they were between $25,000 and $50,000 in debt.

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Majority of respondents (59%) said credit card debt was the main cause of their financial problems, 11% reported payday loans and 6% reported problems related to the COVID-19 pandemic Did.

“Part of the reason is that people continued to accumulate debt throughout their working lives and were unable to reach debt-free status when they retired. Yes, but your pension stays the same and your income stays the same year after year,” Mantin said.

“And unexpected things can happen, especially as we age. Health can get a little precarious. The thing can be completely devastating from an economic point of view, not to mention an emotional point of view.

Just over a quarter (28%) report that their debt is the result of excessive credit due to general financial mismanagement.

On the other hand, the survey found that many people are in debt due to factors beyond their control. 20% used credit to meet basic living expenses, 10% went into debt due to health or injury-related problems, 8% due to a broken marriage or relationship, and 6% due to work was caused by a problem with

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Mantin said many people find themselves in more debt because they don’t have three to six months of financial headroom in emergency funds to get them through a catastrophic life event. .

Many others spend more than 50% of their income just to cover shelter costs, he said.

“When you’re spending so much money just to keep the lights on, that emergency fund doesn’t stack up, and when a real emergency strikes, you’re left with nothing but the ability to rely on. On credit.” ” he said.

“It can become a vicious cycle.”

The survey painted a dark picture of British Columbia’s debt concerns, but both trustees said it didn’t have to be painful to get out of debt with the help of qualified professionals. said.

“The government has really, really good legislation to help you get out of debt,” Mantin said.

As many as 85% of his clients were able to create consumer proposals for debt restructuring without declaring bankruptcy.

With professional help, many people can be completely debt-free in as little as five years with consumer suggestions, and it could be even faster if they declare bankruptcy, Paul said.

“If we take proactive steps to restore credit, we can restore credit within two years and bring back the best interest rates and terms for lenders,” she said.

“Credit reports should never get in the way of your peace of mind that you are debt-free and can just sleep at night.”

The MNP Consumer Debt Index Update is based on data generated from a sample of 2,000 Canadians aged 18 and over collected by Ipsos between 1 December and 6 December 2022. rice field. Data are weighted according to census data. Polls are considered accurate 19 out of 20 times within +/- 2.5%.

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