Unemployment and Insolvency Often Go Hand in Hand

The link between unemployment and insolvency

Earning a wage enables us to pay for a mortgage, to put food on the table and to pay for clothing, water, gas and electricity.

Without a wage, it becomes virtually impossible to cover these costs, and there’s a high risk of getting into debt.

If you’re already in debt, and you lose your job, you may find yourself in a situation where you have no means of paying your creditors.

In this case, insolvency becomes a real possibility.

In Canada, the rate of personal insolvencies hit a 10-year high in 2019, and there could be worse to come, with global economies struggling to cope with the impact of Covid-19.

Unemployment is inextricably linked to insolvency, and more people struggle with debt when employment rates fall.

Data from May 2020 suggests that unemployment rose to 13.7%.

This is the highest figure since 1976.

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Is insolvency the only option?

If you have a substantial amount of debt, and you don’t have a wage coming in, you might feel like you’ve reached a dead end.

Insolvency is an option, but it is usually considered a last resort.

There may be alternatives that are viable, and it’s worth exploring all the options on the table before making a decision.

It may be possible to work with a credit counsellor to try and reduce debts or come up with a repayment plan that will enable you to pay bills over a period of time.

More and more Canadians are filing a consumer proposal, which offers an alternative to bankruptcy.

In January 2020, consumer proposals accounted for 60% of personal insolvencies.

A consumer proposal is a repayment plan, which is drawn up by a licensed insolvency trustee and presented to creditors.

The terms are favourable in comparison to bankruptcy and they benefit both parties. 

In some cases, where income levels drop significantly, the only viable option may be to file for bankruptcy.

Bankruptcy can be a terrifying prospect for many, largely due to the fact that most people assume that they are going to lose everything if they go bankrupt.

In truth, this is not what happens if you file for bankruptcy.

You are allowed to keep possessions and investments in line with a list of exemptions, and it can offer a chance to wipe the slate clean and build a more stable future.

Summary

Are you worried about dealing with debts because you’ve lost your job?

It can be extremely difficult to keep up with bills when you have no money coming in, but there are solutions.

Call us today to speak to our expert advisors. 

Information on Consumer Proposals

Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
How to Amend a Consumer Proposal
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
Consumer Proposal Eligibility
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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