Alberta insolvency rates rise as oilsands slump

For the past two months, every time Jama Dirie had to make a purchase, he pulled his red Visa card out of his wallet.

He used it to pay for all his food and gas, but didn't make any payments on it.

So it is no surprise that his only credit card is now maxed out at its $4,000 limit.

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"I finish it now, and I don't know what is next," he says, standing outside a provincial employment office in Edmonton.

Dirie used to work at a camp in Alberta'soilsands, but has been unemployed for nearly a year.He has been trying to land a job with a security company, but remains out of work, with no income and a credit card he can't afford to pay off.

Common occurrence

It's the type of story that Freida Richer hears every day in her downtown Edmonton office where she works as a bankruptcy trustee with the firm Grant Thornton.

"With the economic downturn, people are relying more and more on credit to supplement their income and to supplement their habits and lifestyles, which they aren't able to adjust or change."

According to Industry Canada data, insolvency rates in Alberta were up 8.3 per cent during the first quarter of this year compared to the same time in 2014.

Richer says that increase has translated into more people struggling to make their minimum monthly payments and turning up at offices like hers looking for help.

She blames easy access to credit and the "buffet" of available cards, each with its own incentive and rewards.

That coupled with low savings has left people overextended, and Richer stresses it's not just an issue for those who have suddenly found themselves out of work.

Generations hooked on credit

According to a recent report by Statistics Canada, Canadians carry nearly $520 billion in consumer debt. Richer says she sees that burden spread across the generations.

"I see them come in younger and younger in my office and that is really troubling."

Her youngest client was just 20 years old.

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Richer says young adults are left squeezed by record levels of student loans. Because they are used to making purchases online, they also frequently rely on credit cards instead of cash.

At the other end of the spectrum, she says, is another worrying trend. Seniors are coming in with low-fixed pension incomes, "carrying debt that they simply can't continue to pay."

She says what is encouraging is that unlike the downturn in 2009, she is seeing more Albertans avoid full bankruptcy by opting to file a consumer proposal.

The legally binding process is often a lesser known alternative to bankruptcy.

Working with a trustee, a person makes an offer to creditors, agreeing to pay off a portion of the outstanding debt in monthly payments.

It generally has a less severe effect on a credit rating because a person is able to pay off a part of what is owed, instead of walking away from all of the debt.

Richer says because filings of consumer proposal are up, she believes that while people are struggling with their finances, most aren't in a completely desperate situation.

"It tells me that there is still money here in Alberta."

Watch Briar Stewart's report on The National on July 20. (Check local air times.)