Canadian insolvencies plunge in April
Prior to the pandemic, consumer insolvencies and proposals were on the rise and the debt levels of Canadians were continuing to climb. Conventional wisdom would suggest with an unemployment rate climbing due to pandemic-related shutdowns, the situation was likely to become even more dire for many households.
But not so fast. New government statistics reveal total insolvencies sank 38.7 per cent month-over-month in April and 43.5 per cent year-over-year – an improvement for both individuals and consumers.
Is this the payoff from the federal government’s emergency aid strategy?
In part, yes. The government aid is just enough to help families get by. But that's not all. Banks have implemented mortgage deferrals, calls on defaulted loans have temporarily halted and creditors know there is little point calling for a payment right now due to the employment landscape.
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The April numbers at a glance might seem encouraging and could lead you to believe Canadians are handling their money better, but it could also simply be the calm before the storm.
The global pandemic will likely be the tipping point for many Canadian households. Families will have to face the reality of income interruption coupled with unsustainable consumer debt levels they have been carrying for years.
In the next few months insolvencies will likely be on the rise. It’s just a matter of time.