More Albertans teeter towards debt, fearing second shutdown

More Albertans going into debt There's growing concern about Albertans going into debt as the economic slide continues. Stephanie Thomas reports

Calgary — An increasing number of Albertans are on the brink of getting into debt or exploring financial restructuring — and concerns over a second lockdown or further economic slide is adding to concerns.

According to Statistics Canada, between June 2019 and June 2020, 5.7 per cent more Albertans are filing consumer proposals, which is a less drastic than bankruptcy in that it allows an insolvency trustee to work out repayment to creditors, so that an asset like a house is not seized.

Insolvency firm Bromwich & Smith released a survey that said 17 per cent of Albertans are likely to explore insolvency with one in 10 likely to do so next month.

“Under normal circumstances or pre-pandemic, we saw that five in 1,000 Canadians are likely to file for insolvency, so that’s 0.5 per cent and that’s quite a leap in the last year,” said Jasmine Marra, the firm’s vice president of marketing.

Some Calgarians are anxious about losing their jobs.

“There’s this heightened fear of ‘what if they shut you down,’ it’s always been there,” said Henry Nwosu, an apprentice aviation mechanic for Canadian North.

Air travel plummets

Statistics Canada reports there are 86.8 per cent fewer air travel passengers from August 2019 to August of this year — and this past summer was the industry’s worst-ever summer season.

His work continues to be steady, but his wife took a pay cut at her job since the pandemic started.

“That alone reduced our family income and immediately we had to start re-strategizing in how to manage the situation,” said Nwosu.

The added challenge of the pandemic compounded their economic difficulties since arriving to Calgary as newcomers from Nigeria two and a half years ago.

Nwosu will soon take exams for recertification, as his licence and experience did not directly transfer.

“We would basically run on deficit every month, month by month because there is no way my pay was going to (be enough) take home pay.”

Savings app

The family avoided sinking further into debt once they became clients of Momentum, a non-profit that offers support for low income residents — and by using the new savings app it recently launched.

The app developed by Canadian company QUBER, offers cash incentives from Momentum when users set money aside regularly, and is open to all Calgarians as an outreach during a particularly difficult economic time.

“We know that even $500 in an emergency savings account has a huge impact in reducing the risk of eviction or having to take out a high cost loan,” said Jeff Loomis, executive director of Momentum.

Some small businesses in the province are reporting they are not confident they will be able to maintain their workforce.

According the latest survey by the Canadian Federation of Independent Business (CFIB) 28 per cent are planning to reduce full-time employees in the next three months. Just 11 per cent would add staff.

“And a lot of that is pinpointed at the fact that (many businesses) are simply not operating at full capacity or fully open right now,” said Annie Dormuth, director of provincial affairs for CFIB.

She says at lot of concern hangs in the balance over whether the government will mandate sector-specific shutdowns at places like fitness centres and restaurants.

“We’ve had months and months of lessons to learn from the first shut down, so there’s really no excuse for the province if they are going to close businesses not to have supports in place.”

Of respondents surveyed, 60 per cent said it would not easily survive a second round of closures.

Dormuth added Alberta small businesses on average have added $40,000 more debt load due to the pandemic.