The last few years have been hard financially for many. Coping with the pandemic and job losses hasn’t been easy. As a result, many Canadians are finding themselves in financial difficulty, with personal insolvency in New Brunswick increasing at the highest rate among the provinces.
The strong response to Covid-19 helped control the spread of the virus in the Maritimes. But unfortunately, the economic impact of the pandemic has contributed to increasing rates of personal insolvency in New Brunswick and elsewhere. If you feel your finances have fallen off track, you are not alone. Many factors are creating financial pressure for Canadians right now such as inflation and interest rate increases.
Insolvency and its Causes
Insolvency really means that you cannot pay your bills as they come due. Currently, personal insolvency in New Brunswick is rising faster than in any other province in Canada. There may be several contributing factors to this situation.
Mortgage payment deferrals
During the pandemic, you could apply to defer your mortgage payments for up to six months . The purpose of mortgage payment deferrals was to provide some financial relief because of the uncertainty caused by Covid-19. However, interest still accrued on the mortgage, and the payment deferral program soon ended. Making mortgage payments again put a strain on finances already stretched thin.
The end of government supports
The Government of Canada granted financial support in the form of the CERB. Then CRB replaced the CERB. The CRB ended on October 23, 2021. Many Canadians found that the CERB and the CRB weren’t enough to replace their lost income during the pandemic. In addition, after the support programs ended, many still didn’t have a job to return to.
Extra debt
Job losses and reduced hours left a lot of people with reduced income during the pandemic. As a result, more Canadians took on extra debt by accessing credit cards or lines of credit to help make ends meet. Unfortunately, having to repay these extra debts now can make budgeting unmanageable.
Inflation and rising interest rates
Prices increased by 7.70% from May 2021 to May 2022. Disruptions in supply chains, labour shortages, climate change and high consumer demand have led to price hikes. Higher prices are everywhere from the grocery store to the gas station.
Additionally, interest rates have increased several times in 2022, and more hikes are expected. Many businesses use credit to fund their operations. When interest rates increase, the cost of their borrowing increases as well. This adds to inflation because businesses pass on the added costs to the consumer in the form of price increases.
Interest rate increases are adding more financial stress since they affect your payments. If you have credit products tied to the prime rate like a line of credit, variable rate loan, or variable rate mortgage, your payments will go up.
Inflation outpacing income
While wages have increased a bit, most workers haven’t gotten a raise that comes close to the inflation rate. The average pay increase in New Brunswick is .60%. And a .60% pay raise is nowhere near the inflation rate of 7.70%.
Personal Insolvency in New Brunswick
The factors affecting insolvency filings apply to Canadians everywhere, but New Brunswick consumer insolvencies are increasing at the highest rate in Canada. The Maritimes didn’t escape the economic effects of the pandemic even though their response to Covid-19 was well managed.
New Brunswick experienced a decline in investment in the province and business closures. Also, wage increases are not keeping up with the cost of living. No wonder personal insolvency in New Brunswick is on the rise. If you’ve found yourself in a difficult financial situation, there are ways to get debt relief. Options you may want to consider include debt consolidation, a Consumer Proposal, or Bankruptcy.
Debt consolidation
Taking out a loan, mortgage, or line of credit to pay off all your debt and have only one payment is a way to consolidate your debt. There are things to consider before taking out a consolidation loan. These are the interest rate, the term you need to pay off all your debt, and if the payment will fit into your budget. If the rate is too high, the term too long, or the payment more than you can afford, a debt consolidation loan may not help you.
Consumer Proposal
A Consumer Proposal is a way to stop creditors from pursuing you for payment. Consumer Proposals let you make lower payments over a longer time or pay only a percentage of the total amount you owe. A Licensed Insolvency Trustee files the proposal on your behalf.
Bankruptcy
Like most people, the thought of filing for Bankruptcy can bring up feelings of failure. But in this economic climate, many Canadians are having to look more closely at that option. Bankruptcy doesn’t have the negative connotations it did in the past. It simply is a legal process that helps get you out of debt and gives you a fresh start.
There are a lot of myths surrounding Bankruptcy. Some common misconceptions are that you will lose your house, your Bankruptcy filing will be published, or you’ll lose everything you have. None of this is necessarily true. Getting the real story is important, which is why consulting with a Licensed Insolvency Trustee can be very helpful.
How a Licensed Insolvency Trustee can help you
You’ll benefit from exploring your options when you’re overwhelmed with debt. Debt Consultants and Licensed Insolvency Trustees are two common places where people seek help. They sound similar, but, in reality, they offer different services.
Debt Consultants
There’s no regulating body for debt consultants and their services can vary considerably. However, they are typically for-profit and they can charge clients for their services. If you use a debt consultant, you might also find they offer fewer options to offer than a Licensed Insolvency Trustee.
Licensed Insolvency Trustee
A Licensed Insolvency Trustee provides advice and services to personal and business borrowers with debt problems. There is no charge for the first consultation. They are federally regulated and must follow the federal standards of practice. In addition, LITs have to adhere to the Code of Ethics for Trustees.
Ready to Deal With Your Debt?
You’ll find a team of professional and supportive Licensed Insolvency Trustees here at Allan Marshall & Associates. In the first free initial consultation, we will meet with you to understand your unique circumstances. Then, we’ll work with you to develop the best plan of action to help you manage and pay off your debts.
Contact a Licensed Insolvency Trustee at Allan Marshall & Associates so you can get back on track financially. We Can Help™
