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Tuesday, September 28, 2021

Pattie Lovett-Reid: Should debt be forgiven? Maybe!

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Lending money is tricky at the best of times. During a pandemic, the tension is heightened.

I’ve witnessed family members debating how to continue to bail out other family members without compromising their financial future.

Some have worked so hard to get by, but let’s face it: others have not.

The pandemic has masked the severity of those struggling financially, due in part to government support measures, absence of the typical insolvency triggers, interest-free loans, creditor flexibility and even provincial grants. In an ironic sort of way, insolvency filings hit a 20-year low in 2020 as all this pandemic aid cushioned the financial blows at least temporarily.

Things are starting to change.

According to the Canadian Association of Insolvency and Restructuring Professionals, “after a very long pause, we are starting to see individuals with judgements obtained against them as creditors attempt to catch them up on their payments.”

The pandemic has prolonged, not eliminated, the distress for those who were previously on the verge of financial ruin.

The rhetoric has ramped up. Should the government forgive CERB overpayments? Will there be compassionate support for families impacted by COVID-19? What about student loans, small business debt and mortgage and rent relief?

These are not easy questions to answer, and debate is raging as a day of reckoning is rapidly approaching for many families and small business owners.

Dinner-table conversations are heated over who to help and how to help those who need it the most. Sadly debt continues to carry a stigma, but that may be changing. In fact, it speaks to financial maturity to reach out for help.

A recent survey by licensed insolvency trustees Bromwich + Smith found support for the following forms of debt forgiveness:

  • 80 per cent supported debt forgiveness for critical illness
  • For death of a spouse or loved one, 72 per cent
  • For job loss, 63 per cent
  • For student loans, 52 per cent
  • For small business debt, 44 per cent
  • For mortgage and rent, 39 per cent

The least popular causes for debt forgiveness were divorce, substance addition, consumer debt and gambling debts.

Prior to the pandemic, the debt levels of Canadians were already rising uncontrollably, with many scraping by and living in a form of financial prison, feeling paralyzed and prolonging the ultimate insolvency result.

It doesn’t have to be this way.

I believe everyone deserves a fresh start, especially given the challenges of the past year. Every situation is personal, and the sooner you reach out for assistance, the sooner you can restructure your debt and the more options you will have.

Family and friends may want to help financially and if they can afford to, great. However, they likely aren’t experts.

Before you think your only course of action is to hope for debt forgiveness, know that the insolvency process in Canada works to protect you and your creditors. Now is the time to reach out to a licensed insolvency trustee to map out a course of action.

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