Albertans fret over debt as consumer insolvency rate spikes 14%

Albertans fret over debt as consumer insolvency rate spikes 14%

Consumer insolvencies in Alberta were up 14 per cent in the second quarter of this year, compared with the same period in 2017, according to statistics from the Office of the Superintendent of Bankruptcy.

And a survey conducted by Ipsos on behalf of MNP Ltd., Canada's largest insolvency firm, found that 50 per cent of Albertans are not confident they would be able to cover their expenses in the next year without going further into debt.

"A lot of people are living pay cheque to pay cheque, and just a small increase in interest rates or unexpected debts — or unexpected expenses, more to the point — will basically take them over," said Zaki Alam, a senior vice-president at MNP Ltd.

"If you are using debt to supplement income, then there is a serious issue which needs to be addressed sooner than later. One of the mistakes which some people do is they wait too long, allowing their debt to snowball."

Consumer proposals rose 20%

For the 12-month period ending in June, total insolvencies were up five per cent compared with last year. The number of consumer proposals was up more than 20 per cent in the second quarter of 2018.

Distinct from a bankruptcy, a consumer proposal is a legally binding process, administered through a trustee, in which debtors make an offer to creditors to pay back a percentage of what is owed to them or extend the length of time over which the money is paid back.

Creditors as a group choose to accept or reject the proposal. If there is disagreement, a vote is taken, and votes are weighted by the dollar amount that is owed.

A survey by the Canadian Payroll Association also found that 43 per cent of Albertans surveyed report feeling overwhelmed by debt, and that 37 per cent said their debt levels increased in the past year.

The survey also found that 72 per cent of Albertans say they have saved only a quarter or less of the money they will need to retire, and that 37 per cent predict they will have to work longer than they planned.

"We certainly encourage Albertans to be saving through their pay," said Frank Lilley with the Canadian Payroll Association. "There's different options; you may able to contribute more to your pension plan, there could be a savings plan, a group RRSP. A lot of employers offer you the opportunity to split pay between savings and chequing."

On a more positive note, Albertans have the strongest levels of economic confidence nationally, with 60 per cent saying that they think their local economy will improve in next year, the Payroll Association survey found.

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