Insolvency of Canadian consumers

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The Office of the Superintendent of Bankruptcy Canada released statistics regarding the insolvency of Canadians during the month of April. With problems in the oil-producing provinces, the high level of consumer debt across the country and the volatility of the real estate market, these insolvency statistics provide a picture of the financial difficulties currently facing Canadians. At this time, the national average consumer insolvency is 3.3%. While in some provinces the percentage of insolvencies remains close to the national average, there are clearly other provinces that are struggling with debt. This is how the percentage of consumer insolvencies increased or decreased in the provinces in April:

  • 0.1% increase in British Columbia
  • Increase of 32.5% in Alberta
  • Saskatchewan increase of 5%
  • 15% increase in Manitoba
  • 1.9% decrease in Ontario
  • Increase of 1.4% in Quebec
  • Increase of 2.4% in New Brunswick
  • 0.6% increase in Nova Scotia
  • Increase of 8.2% in Prince Edward Island
  • 26.2% increase in Newfoundland and Labrador

Unfortunately, only the province of Ontario has been able to reduce its insolvency percentage in the month of April. British Columbia has remained relatively stable and this percentage has increased in the rest of the country and significantly in some provinces.

What is consumer insolvency?

Let’s take a look at what consumer insolvency is. Generally, it is a term used to describe a consumer who has debts of any kind and can not afford to continue to pay. The terms bankruptcy and insolvency are not synonymous; they have different meanings but it is likely that most insolvent people will have to file at one time or another, a consumer proposal or bankruptcy. Canadians who become insolvent generally have the following types of debt:

  • Credit card debts
  • Tax debt
  • Student Loans Debts
  • Automobile financing debts

While mismanagement of funds is the main reason Canadians become insolvent, emergencies, personal problems and job loss can also cause serious financial problems, leading to insolvency.

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Difference between a consumer proposal and a bankruptcy

A consumer proposal and bankruptcy are legally binding measures that must be filed by an authorized insolvency officer. The bankruptcy is a little more drastic than the consumer proposal and all the financial experts, credit counselors and insolvency trustees will suggest you fill out a consumer proposal before declaring bankruptcy (unless a bankruptcy is the best solution in your case).

Amount of debt

To declare bankruptcy, you must have a debt of at least $ 1000 but there is no maximum amount. To be able to file a consumer proposal, you can not have a debt of more than $ 250,000.

Advantages

If your consumer proposal is accepted by your creditors, you will not have to give up your assets, which is the biggest benefit of such a proposal. On the other hand, by declaring bankruptcy, your property will probably be seized to pay off your creditors.

The creditors

In general, anyone who needs to declare bankruptcy can do it with practically nothing. There is no guarantee that your consumer proposal will be accepted.

Credit rating

When you complete a consumer proposal, you will receive an R7 credit rating. This rating will have a negative impact on your credit score but is not the worst to receive. By declaring bankruptcy, you would receive a rating of R9.

How to avoid insolvency

Image result for solutionThere are, of course, circumstances where insolvency is not avoidable. In these cases, it is best to seek the professional help of an authorized fiduciary agent who will be able to guide you through the different options according to your situation. But for those looking to avoid insolvency or just to make sure they manage their debt levels properly, here are some tips and tricks:

  • Live according to his means. A nice car, a big house and personal belongings are nice, but at what price? If you are spending too much to maintain the lifestyle you have created or are starting to be late on your car or mortgage payments, you need to re-evaluate what your priorities are.
  • Your good intentions to save money or reduce unnecessary expenses will not be effective unless you stick to a budget. Make yourself a realistic budget and a weekly or bi weekly meeting with yourself to assess your attendance.
  • Pay off your existing debts as quickly as possible. Do you only make your minimum credit card payments? If so, start making larger payments now and as often as you can.
  • Set aside for financial emergencies. Having an emergency fund at your fingertips will save you from having to use your credit cards to cover unforeseen circumstances.
  • Go get help. If you can see for yourself that you are starting to lose control of your finances, it is always wise to seek the help of a professional, either a credit counselor or even an authorized insolvency officer. If you are currently facing debt or credit problems, Prêts Québec can help you find the help you need, regardless of the province in which you live.