LONDON, Ontario (PRWEB) September 21, 2020
According to the Office of the Superintendent of Bankruptcy Canada, in April 2020 bankruptcies were down nearly 36 percent from the previous year. This may seem like good news, but the springtime decline in bankruptcies may be fleeting at best. Licensed Insolvency Trustee, John Adamson of Adamson & Associates, was recently interviewed by the London Free Press. He warns, “Although bankruptcies are historically low now, businesses are hurting. I worry about the tsunami that’s coming in the fall.”
CERB payments and other government assistance have kept many unemployed Canadians afloat in the midst of the recent pandemic as they await the return of their jobs. For those who were struggling financially prior to the pandemic, deferred payments, too, offered a reprieve from many of the monthly bills. Once paychecks stopped coming, creditors could no longer garnish wages. With the courts closed, consumers couldn’t file for bankruptcy either.
But once jobs return, CERB payments cease, and the cadence of life resumes, many people may discover that the economic implications of the pandemic are long-lasting.
The crisis in Ontario began in March 2020. The province has been among the hardest hit by measures to contain Covid-19. However, when restrictions started to ease in late May, employment rose by nearly 5.9 percent the following month. Also, the number of people working less than half their normal hours decreased by 6.5 points to 14.1 percent.
Current financial indicators show that employment is indeed rebounding in Ontario and throughout Canada. Although due to social distancing measures, it’s not an ideal time to be job hunting, companies are hiring. In April 2020, unemployment numbers in Canada dropped from 5.5 million to 3.1 million in mid-June. Prior to Covid-19, unemployment was 5.6 percent; by June it was 12.3 percent. That’s down from a high of 13.7 percent at its peak.
Many Canadians became discouraged or stopped trying to find employment during the pandemic. Going into June, there was renewed hope: the number of people who wanted a job and were actually looking increased by 12.6 percent.
Households with Too Much Debt
According to an Equifax study, consumer debt fell by .5 percent in the first quarter of 2020, bolstered by the 18 to 25-year-old age group. With the onset of the impending crisis, one of the first cuts made by consumers was to reduce spending in stores and restaurants. Although this may have taken the strain off some discretionary budgets, it certainly was not enough to make up for significantly reduced income.
Also, the study notes that there was no debt reduction for the most burdened group of all. For ages 46 to 55, already shouldering an average debt per person of $35,818, the amount of debt actually grew during the early days of the pandemic. Predictably, households that had too much debt before the pandemic are in even worse shape now.
Not Enough Savings
According to Statistics Canada, the average Canadian household has only $852 in savings. This means that most Ontarians are only a paycheck away from the inability to pay their bills. In other words, they are perilously close to being insolvent. In fact, Licensed Insolvency Trustees expect bankruptcies to burgeon in the fall. Adamson agrees, adding “Deferred payments allow people to put off dealing with their finances.”
Life may have seemingly paused during the pandemic, but the bills did not disappear. From the moment that first paycheck resumes, creditors will start to call once again. For some people, it may seem impossible to catch up on their rent or mortgage, make amends for deferred bill payments, and resume all of the normal household expenses. Experts advise that now is the time for struggling consumers to reevaluate their financial situation.
Asked what advice Adamson can offer unemployed individuals with too much debt now, Adamson is measured in his response: “It simply doesn’t make sense to wait until you are employed once again, yet still struggling to catch up on payments and make ends meet.”
Debt Solutions During Covid-19
Bankruptcy is not the only option. Licensed Insolvency Trustees are licensed by the federal government to assist consumers who are unable to meet their debt obligations. LITs are the only people in Ontario who can help with bankruptcy, consumer proposals, debt counselling and more. It’s important to be proactive, though, particularly before the anticipated onslaught of consumers requiring debt relief threatens to overwhelm the court system.
Adamson & Associates have been helping consumers get out of debt since 1996. They have offices throughout Ontario. During this period of social distancing and caution due to the coronavirus, Adamson & Associates Trustees offer a free, no-obligation consultation by phone or video-conference at convenient times. For more information, call John Adamson at 1-519-310-JOHN(5646).