More than a million Canadians believe they are on the verge of having to declare bankruptcy, according to the findings of a new poll released Thursday.
The survey conducted by DART & maru/Blue found an even larger group — 4.2 million Canadian adults — said they consider themselves to be heading towards bankruptcy over the next three months unless their personal financial conditions improve.
Middle-aged and younger Canadians with middle-to-lower incomes appear “most vulnerable to bankruptcy,” the survey found.
This will be the next wave that we will have to keep a close eye on over the next couple of months
“This middle-age, middle-income group is going to get hammered the hardest with the reduction of jobs and lost income,” said John Wright, a partner at DART.
“This will be the next wave that we will have to keep a close eye on over the next couple of months.”
He said his group’s polling from the outset of the pandemic crisis in North America has consistently shown that between four and five per cent of the Canadian population believes themselves to be in “either dire or desperate circumstances over the next three months.”
Geographically, people who consider themselves headed towards bankruptcy in the short-term are most likely to be found in Alberta, Saskatchewan and Manitoba, the survey released Thursday found. This is perhaps not surprising, given that western Canada has been hit by a second economic shock from low oil prices at the same time as the economy ground to a near halt.
With the widespread shutdowns of non-essential businesses halting or crimping paycheques across the country, and government aid just beginning to roll out, many financial institutions have made concessions for their customers during the COVID-19 outbreak. This has included allowing many to defer payments on personal loans including mortgages and credit cards.
Nevertheless, the survey found almost one in 10 primary residence mortgage holders believe default is imminent over the next three months.
“After examining their current financial situation over the next three months — including all government measures to support them and their home ownership including payment deferrals — eight per cent affirm they won’t be able to pay the mortgage and will begin to default without greater help,” the survey found.
A small fraction of those believe they will have to sell their house because they won’t be able to cover any loans.
The poll was released as new unemployment figures showed that Canada lost over one million jobs in March, the largest monthly employment decline ever.
Wright said the unemployment numbers released Thursday are the “thin edge of the wedge” as cascading effects of the clampdown have yet to emerge in official figures.
“I suspect that we will see a widespread increase in these numbers — and in bankruptcies, and in (defaults on) mortgages — over the next 30 to 60 days,” he said. “That’s the simple math of how much income people have and how much debt they are carrying.”
He added that the number of such “financial casualties” could increase over the next year, with Prime Minister Justin Trudeau indicating Thursday that restrictions, in some form, could remain in place for a year or more while a vaccine against COVID-19 is developed and made available.
The Dart survey was conducted April 1 and 2 among 3,030 Canadian adults randomly selected from maru/BLUE‘s online panel. A subset of more than 1,000 who own a primary residence with a mortgage were surveyed, with results of that sub-sample considered accurate to within 3.4 percentage points. The results were weighted by education, age, gender, and region to match the Canadian population, according to Census data.