In February, the Office of the Superintendent of Bankruptcy released Canadian insolvency statistics for 2016. While consumer insolvency rates continue to increase in many provinces, consumer insolvencies (bankruptcies and Consumer Proposals) filed in B.C. were down almost 7% from 2015. That’s a good thing isn’t it?
If we look at other data available to us, however, we know that British Columbians continue to pile on the debt. According to TransUnion, British Columbians had the second-highest non-mortgage debt balances - $23,375 - at the end of 2016. As for big cities, Vancouverites’ non-mortgage debt was $25,717 at the end of 2016, second only to Calgary.
Moreover, according to Canadian Mortgage Professionals, home-equity lines of credit were the fastest growing type of debt in Canada and the second biggest reason homeowners took equity out of their house was to repay debt. Without a doubt, many British Columbian homeowners have been using their homes as ATMS following a meteoric increase in property values.
However, experts are warning that British Columbia may see a double-digit price drop in property values in the coming year. Homeowners who have seen increased personal wealth and have amped up their spending and lifestyle – while taking on more consumer debt – should exercise caution. While the solvency of many homeowners will be unaffected if property values decrease, those who have taken on too much consumer debt may find themselves in trouble.
Of course, not everyone in British Columbia has won the homeowner lottery. An increasing number of British Columbians feel they have no choice but to use consumer debt simply to get by. Renters have seen a significant increase in rental rates - particularly in the Lower Mainland – in addition to a constantly increasing high cost of living. Many of these consumers feel they will never get ahead.
While we cannot predict exactly what will happen to British Columbia’s consumer insolvency rates in the event of a housing correction or interest rate hike, it is likely that we will see a spike in insolvency filings. Like most Canadians, many British Columbian consumers are living paycheque to paycheque. Moreover, too many consumers are on a minimum payment treadmill – paying their debts on time but not making any significant progress in paying down the principal owing. For consumers in this predicament, there is little room to maneuver in the event of economic change, whether on a larger or more personal scale.
Whether you are a homeowner or not, if you are struggling with consumer debt in British Columbia, it is important to seek professional advice on the various debt reduction strategies that are available. A Licensed Insolvency Trustee will provide a free, confidential, no-obligation consultation to any consumer wanting to get out of debt. The earlier you seek advice, the sooner you will be able to understand your options and make an educated decision to relieve the stress of debt.
Consumer bankruptcies specifically have been declining in British Columbia for several years, while various alternatives to bankruptcy – such as Consumer Proposals – are on the rise. While debt consultants may appear to be a viable option, it’s important to note that only a Licensed Insolvency Trustee (LIT) is legally authorized to administer a Consumer Proposal or a bankruptcy. Given that debt consultants charge fees for financial advice, whereas MNP’s LIT’s provide free, no-obligation advice and information surrounding the options available to you, visiting an LIT first could end up saving you unnecessary spending in the long run. After all, why pay a consultant who advises you to seek out the assistance of a Trustee? For more information about consumer debt reduction strategies and how they could best apply to your unique financial situation, contact a Licensed Insolvency Trustee today.
Lana Gilbertson is a Licensed Insolvency Trustee with MNP Debt in Greater Vancouver and on Vancouver Island. For more information, contact Lana at 604.637.1599 or firstname.lastname@example.org.
This article was originally published for MNP Debt.