Recession drags rising number of Albertans into financial ruin

[taco.vidal]

http://calgaryherald.com/business/lo...financial-ruin

July 30, 2016 7:08 AM MDT

At the beginning of the year, Spencer Bownes and his wife each had a steady job as they cared for their two children, aged seven and four, at their Evergreen home in southwest Calgary.

Just seven months later, the family home is on the edge of foreclosure and their banks have called in their debts. Even after handing out countless resumes, Bownes hasn’t found work after he was laid off from Husky Energy in February.

“We’re going to be renting a house in the interim,” said Bownes, a human resources professional who didn’t get any severance because his position was considered temporary.

“It could be 10 years before we fix our credit. We’re just taking it one day at a time. We’re trying to rebuild in this new world.”

Alberta’s recession is dragging rising numbers of consumers like Bownes into the throes of financial ruin.

In May, the province posted 1,150 personal insolvencies — cases where people couldn’t pay their debts — which marked a 37 per cent increase over the same month a year ago, according to the Office of the Superintendent of Bankruptcy Canada.

“Unless numbers for employment change, we’re going to see more filings and more difficulties with individuals right now,” said Vicky Samuels, an insolvency trustee with MNP Debt.

Samuels said she’s seeing greater numbers of Albertans looking for a way out of their insurmountable debt. The oil and gas industry has been a major source of her clients throughout the recession, but she has also seen unemployed restaurant workers and cab drivers suffering the trickle-down effects of tighter consumer spending.

Reduced worker pay in Alberta is expected to be another driver behind personal bankruptcies in the coming months, according to MNP Debt. Average weekly earnings in the province slid to $1,150 in May, still the highest among the provinces but four per cent lower than what they were a year earlier, according to Statistics Canada.

Alberta is also struggling through a period of high unemployment. Its jobless rate last month, 7.9 per cent, was the highest among all provinces west of Atlantic Canada.

[GGG]

This is sad but 7 months before foreclosure doesn't seem like very much savings when including RRSPs and credit cards which I'd assume you'd max before letting your house go into foreclosure.

If they were earning 50k a year each they would have gotten 4k per month in EI payments to help as well. It essentially means they had zero savings

[OMG!WTF!]

They probably had very little equity in the house too which makes foreclosures go a lot quicker. They probably just realized there's no point in throwing good money after bad and stopped paying anything while saving as much as possible and getting as much free living as possible. And Evergreen is up to #142 this year so I'm sure the bank was all over that.

[CliffFletcher]

I don't think it's mean-spirited to say that, for the most part, the people hit earliest and hardest by the downturn are those who were bad with money and living beyond their means. And there were a lot of those people in Alberta during the boom.

[foshizzle11]

Originally Posted by GGG

This is sad but 7 months before foreclosure doesn't seem like very much savings when including RRSPs and credit cards which I'd assume you'd max before letting your house go into foreclosure.

If they were earning 50k a year each they would have gotten 4k per month in EI payments to help as well. It essentially means they had zero savings

Would you let your house go to foreclosure or rack up insane debt on a borrowing plan like credit cards? Seems a bit silly to me to ruin your credit or fall into bankruptcy before selling off your house. You can always buy again when things in your life are more stable, why jeopardize that chance to save your house now?

I know I would sell first and rent before I have to foreclose on my mortgage. Or rack up insane debt to stay afloat.

[AcGold]

So I don't get it FoShizzle. Break it down, they had the option of selling the house to get back what they invested in the mortgage but chose to take nothing when they couldn't make payments? (I'm still just a renter and haven't had to deal with mortgages yet)

[FlamesAddiction]

Not just an Alberta thing I am sure, but there are a lot of people who qualify for stupid high mortgages and then buy the maximum they can. I mean, just because a lender is willing to give you $600k for a mortgage, it doesn't mean you need to take it.

Same thing with cars. I am not a super high earner, but I know I could go into a car dealership and buy a new truck on credit. But I also know that it wouldn't be wise.

While I feel for people who lost a lot during the recession, a lot of it comes down to poor decisions.

The conservative nature of the government over most of the boom played a role as well. When the money was coming in, they should have been collecting more taxes and investing more in diversifying the economy. Obviously there was nothing anyone could do about the price of oil, but you can't have all your eggs in one basket and not know that busts follow booms.

[GirlySports]

i dont have numbers but i dont see a change in spending habits. I went out for dinner last night, had to line up. I wanted to go camping today, campsites, all booked solid.

unless people are just spending money they don't have now compared to money they did have before.

[OMG!WTF!]

Originally Posted by AcGold

So I don't get it FoShizzle. Break it down, they had the option of selling the house to get back what they invested in the mortgage but chose to take nothing when they couldn't make payments? (I'm still just a renter and haven't had to deal with mortgages yet)

Chances are good they would not have been able to sell the house because after real estate fees, legal fees and the fairly dramatic loss in market value they would not have gotten enough to pay the mortgage in full. Unless you can make up the difference in cash, the bank won't allow the sale to happen. Some people are just dolts and will waste their equity away while living every last second in their house. But most people understand selling and realizing some of their equity is better than a total loss plus bad credit.

[AcGold]

Oh ok so what were their options?

[polak]

Wow some harsh people in here. Maybe they didnt make enough to save large chunks of money with two kids? Maybe that home was a starter home? You don't know how old they are even. Maybe they haven't been working long enough to have significant savings.

I guess not everyone is a financial wizard like CP.

[OMG!WTF!]

Originally Posted by AcGold

Oh ok so what were their options?

Not much. In the states you can apply for a short sale....the bank agrees to take less and somewhat spare your credit. In return they save on legal fees and get the house back in better condition usually. I think we have a vaguely similar option here but it's entirely too cumbersome legally to make it worthwhile for most banks. In a sense, the smartest thing to do is not challenge anything in court, live there as long as you can while saving money to rent a place. If you want to be a jerk about it, sell the appliances and fixtures while you still own them.

[Locke]

Originally Posted by CliffFletcher

I don't think it's mean-spirited to say that, for the most part, the people hit earliest and hardest by the downturn are those who were bad with money and living beyond their means. And there were a lot of those people in Alberta during the boom.

Well that goes without saying. We all have to find that happy medium, technically if you're not saving every penny or using every last cent to pay down debt then you're being 'fiscally irresponsible.'

Remember that last beer you bought? You didnt need that beer, that $6 could have been saved to reduce debt service payments which over time would amount to savings considerably in excess of that initial $6 What a waste....and on and on it goes.

How much is reasonable? I mean, do people really have enough savings to be able to live a few years without income?

[Ahuch]

Originally Posted by GGG

This is sad but 7 months before foreclosure doesn't seem like very much savings when including RRSPs and credit cards which I'd assume you'd max before letting your house go into foreclosure.

If they were earning 50k a year each they would have gotten 4k per month in EI payments to help as well. It essentially means they had zero savings

“We’re going to be renting a house in the interim,” said Bownes, a human resources professional who didn’t get any severance because his position was considered temporary.

Depending on how temporary he might not have gotten any EI either? Not sure.

[calgaryblood]

Originally Posted by polak

Wow some harsh people in here. Maybe they didnt make enough to save large chunks of money with two kids? Maybe that home was a starter home? You don't know how old they are even. Maybe they haven't been working long enough to have significant savings.

I guess not everyone is a financial wizard like CP.

Way to throw everyone in the same category. "Like CP", what does this even mean? There were 9 total replies before you chimed in, and not all were harsh. Glad you could make a statement for an entire board with that.

[btimbit]

Originally Posted by polak

Wow some harsh people in here. Maybe they didnt make enough to save large chunks of money with two kids? Maybe that home was a starter home? You don't know how old they are even. Maybe they haven't been working long enough to have significant savings.

I guess not everyone is a financial wizard like CP.

No kidding. How many people here could honestly survive with zero income for a long period of time? Don't think I could.

[GGG]

Originally Posted by btimbit

No kidding. How many people here could honestly survive with zero income for a long period of time? Don't think I could.

I think you'd last longer than you think.

You get roughly 2k per month with EI per person if your spouse works.

Plus you can each earn another 250 before tax per week before EI starts clawing money back.

So that's about 5k after taxes per month at least until EI runs out.

I think you should be able to survive a year before losing everything based on the above assumptions or you should be doing more to save.

[MoneyGuy]

These financial woes are not just economic but also people's bad money skills. People seemed to think the good times would never end and they spent crazily. What was that bumper sticker? Please give me another boom and I promise I won't pee it away again. Well, we peed it away.

This is one reason crime is way up in Alberta. People are turning to theft for money. I think it will get worse before it gets better.

[Street Pharmacist]

It amazed me after I left Alberta in 2007 whenever I came back just how much stuff everyone I knew before suddenly had. Some of that is simply the age I left and returned, but still amazed me

[btimbit]

Originally Posted by GGG

I think you'd last longer than you think.

You get roughly 2k per month with EI per person if your spouse works.

Plus you can each earn another 250 before tax per week before EI starts clawing money back.

So that's about 5k after taxes per month at least until EI runs out.

I think you should be able to survive a year before losing everything based on the above assumptions or you should be doing more to save.

Reading the article it doesn't sound like the guy was eligible for EI.



But still, to settle my curiosity, say you're about 25, rent a decent townhouse, and have a cheap older car that's completely paid off.

Max EI - $475/week ($950 every 2 weeks)

Monthly expenses:

Rent: $1500
Insurance: $50 (assuming no collision or comprehensive, perfect driving record)
Cell phone: $50
Gas: $100-$200
Cable/Internet: $30
Utilities: $100 - $150

Sure doesn't leave you much for food. Add a kid or two in there and that's a complete nightmare. If you're lucky you have a wife/girlfriend, say they are also on EI, but that also effectively doubles a lot of the bills. Then God forbid any extra expenses pop up (My basement flooded when I was EI. Not fun).

And that's assuming you have zero debt. I dunno, I don't see many options for that guy. Move to a cheaper place? If you're lucky your lease is coming up and that's an option. Find a roommate? Sure, if your lease even allows it (none of mine ever did when I was renting) Get rid of the car entirely? That'd free up some money for sure, plus make you some. Say public transit isn't an option though. Plus in my experience a lot of employers aren't too keen to hire someone relying on bus times to show up to work on time.

Definitely not sure I could do that. I was on EI for a little during the spring, luckily I have some savings, my wife works, and I could have easily sold/downsized some stuff like vehicles if it came to that.


So in my scenario above, people will still claim that guy was living beyond his means. "Where were his savings?" He's 25, what savings? Maybe he'd have $5000 in an account. Should he have had a crappy apartment in a crappy neighborhood with a ####ty roommate? Maybe. But if before losing his job he could afford to not have to life like that, why wouldn't he?



I do agree, it's pretty hard to feel bad for the people that claim they're broke, when in the last 4 years have bought a $500k house, a $50k RV, $120k in vehicles and another $20k in dirtbikes or snowmobiles or something. But that's the minority here. Not everyone struggling to make ends meet on EI was living beyond their means.