Income Insecurity Driving Insolvencies
Not everybody in debt will apply for a bankruptcy or consumer proposal, as some manage to find a way out of their debt situation before such an event needs to occur.
Money problems often arise because of situations out of a person’s control, and because of the income insecurity faced by many, more people are turning to credit to get themselves out of financial difficulty.
Needless to say, when their debts escalate, the chances of them one day becoming insolvent increase.
Cases Of Insolvency Are On The Rise
Just under 14,000 people filed for bankruptcy in Canada in 2019 according to the linked study.
And while some of these cases may have been to do with financial mismanagement, an increasing number of people are becoming insolvent because they don’t have the income to cope with the higher cost of living.
To survive, a vast amount of people are turning to credit as a lifeline, but this, of course, only makes matters worse.
When credit cards and payday loans are being used to cover everyday expenses, the person’s financial position worsens, as they then have to pay back the sometimes extortionate amounts of interest associated with their lines of credit.
The study pointed to those people most at risk of insolvency.
Seniors: People over the age of 60 make up 12% of all insolvent debtors. Due to credit card debt that has built up pre-retirement and because they are living on a subsidized income, they are less likely to cope financially than most.
Millennials: Those between the ages of 18 and 29 make up a high portion of insolvency cases, and this is because of student debt, easy access to payday loans, and an employment income that doesn’t allow them the opportunity to pay off their debts successfully.
Single parents: With a single income, and the same expenses as two-parent families, single parents are twice as likely to become insolvent than couples. According to the survey, one in five single parents facing insolvency have student debt, and many of them are women.
Those on a low income or who are in unemployment are more likely to become insolvent.
Without a monthly income that is higher than their monthly debt repayments, and without the option to borrow against their homes to pay off their debts, many Canadians are struggling.
Their lives are made worse when a financial disaster strikes, such as a house or car emergency, or a medical bill.
Finding Financial Freedom
If you are struggling with debt, for whatever reason, please give us a call.
While bankruptcy is one option, there may be other ways to handle your debt problem.
A licensed trustee will discuss your options with you, so call us on (877) 879-4770 (24/7) or use our contact form to arrange a free consultation with a trustee in your area.