The stories of four Albertans working to slay their debt demons
A Troy Media Special Report – Part One
Albertans are drowning in debt and many don’t even realize it until the creditors come knocking.
Almost every week, another distressing report emerges about Canadians’ rising household debt. Albertans consistently sit at the top of the in-the-red list.
This province has just come through the worst recession in a generation, during which thousands of jobs were lost. Many people found themselves in deep financial holes, unable to support themselves or their families.
But it’s not just tough economic times that have ratcheted household debt to record highs. Encouraged by low-interest rates and the ease of acquiring credit cards, Albertans have been racking up record debt loads. For some, it’s the drive for instant gratification: wanting to have it all, a big house and a shiny, new car – just like their parents did.
According to consumer credit reporting agency Equifax, Alberta’s non-mortgage per-person debt was highest of all the provinces in 2017, at $28,240, an increase of nearly two percent over 2016. And with the end of historic low-interest rates, the cost of servicing debt is steadily rising.
Heavy debt loads can also leave people highly vulnerable if they get blindsided by one of life’s harsh realities, like divorce, illness or fraud.
When people can’t keep up with their monthly bills, it wears them down psychologically, creating a domino effect.
“Debt takes a huge emotional toll. It’s the number one reason for divorce,” says Nicole Olsen, an insolvency solutions learning and development specialist with Calgary-basedBromwich + Smith.
Olsen points to research done by Harvard economics professor Dr. Eldar Shafir, an expert in behavioural economics who coined the term “scarcity mindset.” His theory is that when people have limited resources, they become fixated on it, which reduces their IQ and erodes their ability to make good decisions.
“(Their debt) wakes them up at night. They get into arguments with friends and family … it drills down into every part of your life,” says Olsen.
In many cases, people remain in denial about their dire finances until wages are garnished and creditors cut them off. Ironically, Olsen says, people who work in finance often delay seeking help the longest because they think they can fix the problem.
“It can take years for people to seek help,” she says. “People only change when they are uncomfortable, but they may not realize it because it’s been such a slow, gradual change.”
Waiting too long to get help can lead to bankruptcy as the only option. The stigma of filing for bankruptcy can cause feelings of grief, shame, and guilt, says Olsen. But when they realize this will ease their situation, they feel relieved.
Bromwich + Smith offers free consultations for clients. It involves talking to a debt relief specialist to determine how much you owe and discussing options. In an hour phone meeting, a debt relief specialist gathers all the client’s details and finds a custom option for the client. This is usually a choice between filing for bankruptcy or a consumer proposal, both of which are legally binding ways to pay off your creditors over an allotted period, depending on the circumstances. Once a solution is decided, clients, meet face to face with a consultant or trustee to finalize the details and sign the necessary paperwork.
“People think it will affect their credit if they call but there are no consequences for asking for help,” says Olsen.
There are other options for managing debt repayments:
- A Canadian-accredited credit counselling society can help you eliminate your debt in full by negotiating lower interest rates.
- Most banks offer consolidation loans, allowing a person to pay off debts at a much lower interest rate than a credit card company.
Amy Mahon, 41, made the “tough choice” to declare bankruptcy after discussing her options with a financial counsellor.
“It wasn’t that I was irresponsible … it was a series of circumstances that was unmanageable and I needed help.” (Read more about Amy Mahon’s story in Part 2 of the Back in Balance series.)
“The advantage to getting third-party help is the objectivity you get,” says Lesley-Anne Scorgie, founder of mevest.com financial advice site and author of several books, including Rich By Thirty: A Young Adult’s Guide to Financial Success.
Olsen says clients also get two financial counselling sessions that help them figure out why and how they got so deep into debt. The coaching focuses on behaviours and helps a person learn why they’re in debt.
They also discover that high-interest credit-card rates can turn simple debt into bad debt. Good debt, to Scorgie, is incurred as an investment – such as to fund education or a mortgage, as long as you have a realistic plan to pay it back.
“Almost every client I talk to says, ‘I should have done this sooner,’” says Olsen. “It’s the most courageous step … it’s not going to make things worse.”
Next, read how Amy Mahon fell deeply into debt, dug her way out, and is now optimistic about her financial future.
This Troy Media Special Report is produced in partnership with Bromwich + Smith.
Albertans on the brink of insolvency
Recent reports show just how close to the financial edge many Albertans are:
- Excluding mortgages, the average personal debt of Albertans living in cities was higher than those living in other Canadian cities: Fort McMurray: $38,359 Calgary: $29,478 and Edmonton $27,241.
- Albertans have a 20.4 per cent debt-to-asset ratio, the highest of any province in Canada says StatsCan in a January 2018 report.
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