Consumer insolvencies are expected to spike in the wake of the pandemic as many Canadians were already feeling a tremendous strain on their pocketbooks, says a new survey by MNP LTD.

The survey found that seven per cent of respondents said they plan to file a consumer proposal or declare bankruptcy (six per cent) after government financial support ends.

“Even if it is generally responsible borrowing and interest rates remain low, it’s easy to get deeper in debt without realizing how difficult it is to get out.  We’re going to see the greatest amount of pain when the debts come due, deferred payments resume and collection activity returns to normal,” said Grant Bazian, President at MNP LTD, the country’s largest insolvency firm, in a news release.

“Job loss is the biggest catalyst for insolvency, so it’s likely that those who were already severely indebted and living paycheque to paycheque, will have to look at debt relief options. The best thing people in this situation can do right now is to get professional debt advice.”

Key findings of the survey include:

  • 46 per cent of Canadians said their work situation is affected by the pandemic;
  • 17 per cent are either working reduced hours or receiving reduced pay;
  • 16 per cent have lost their job;
  • 14 per cent say someone in their household has lost their job and nine per cent someone in their household is working reduced hours or receiving reduced pay;
  • When government support ends, 46 per cent said they will have to simply cut back any way they can; 32 per cent said  they will apply for Employment Insurance, followed by using their savings to pay bills (30 per cent);
  • 35 per cent of those surveyed said they plan to borrow more when COVID-related government financial support ends. That includes using credit cards (17 per cent), borrowing from friends or family (16 per cent), using a line of credit to pay bills (12 per cent), taking a bank loan (seven per cent), or using a payday loan service (four per cent);
  • 34 per cent say they are worried about the economic fallout from COVID-19, a whopping 17 point increase from March. They are also worried about the current state of the Canadian economy (29 per cent, +7), and the chances of a recession (25 per cent, +6).

“Those in need have certainly welcomed the federal government’s life raft of COVID-19 aid programs, recently extended into mid-July. However, while various relief measures are providing some much-needed breathing room for many Canadians, their underlying financial problems have not gone away,” said Bazian.