Rising household debt hurting Albertans

By Tiffany Goodwein and The Canadian Press

Statistics Canada says the amount Canadians owe relative to their income moved higher in the second quarter as the level of debt grew faster than their earnings.

Those rising debt levels, coupled with interest rates at a 14-year high, have some Canadians feeling the financial squeeze.

The agency says there was about $1.82 in credit market debt for every dollar of household disposable income in the second quarter.

Marie Kozlowski, a licensed insolvency trustee with BDO Canada, says in Alberta, the number of insolvency filings rose to its highest level since before the pandemic — an increase of 12.8 per cent from the first to second quarter of this year.

“When rates rise, so does the cost of servicing debt,” Kozlowski said.

She explains it mainly affects millennials and Gen Xers.

“Those groups tend to have children, they’re carrying mortgages, they’re carrying other debt, car loans, et cetera. So, when you see debt levels rising, you see consumers turning to credit to keep up with the cost of living, you know they are at the financial edge,” Kozlowski said.

With pandemic benefits and loan deferrals long gone, she says things are starting to fall a part for people with debt, and high rates of inflation make everything worse.

“Many individuals … can only make minimum payments on their credit cards, they are using one credit card to pay off another,” she explained. “They are skipping bills or paying them after they’re due which means their interest rates … go up.”

Kozlowski encourages anyone thinking of making a large purchase and taking on debt to reconsider.

“Take a look at your household budget. If you don’t have one, create one,” she said. “See if you can find areas where you can trim your spending.

“Now is the time to put in place a plan to pay down debt.”

She adds reaching out to a licensed insolvency trustee or a financial planner with your bank can make all the difference in the long run.

“Even if people think, ‘I don’t need to do a bankruptcy or file a consumer proposal,’ that isn’t necessarily the end game,” Kozlowski said.

She explains even people who just need a little help organizing their finances can reach out to licensed professionals before it’s too late, adding it doesn’t have to be a last resort.

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