'If I were a renter, I would not be rushing to buy my first house': Rob McLister

Canadian debt professionals are bracing for a torrent of bankruptcies and consumer proposals in the wake of the COVID-19 outbreak, particularly among renters in some of Canada’s most expensive cities.

Scott Terrio, manager of consumer insolvency at Hoyes, Michalos & Associates, he expects to see significant interest in bankruptcy filings from renters who don't have the collateral backstop of home equity to draw on.

“Renters who lose their jobs are going to be in big trouble [in major centres]” he told BNN Bloomberg in a phone interview.

“This is going to lead to huge increases in insolvencies, it’s just a matter of when. I think this is going to explode insolvency. I’m hoping they’re aiming more funds at people who don’t own homes. If 93 per cent of people filing insolvencies are renters, there better be support for renters.”

The federal government is introducing an emergency care benefit of $900 bi-weekly for up to 15 weeks for workers sick, self-quarantined for the COVID-19 virus, without EI sickness benefits who must care for an elderly parent and parents who must care for school-aged children, whether those caregivers qualify for EI or not.

Terrio said there will likely be a lag effect in those filings, given the disruptions to work and social interactions in a bid to stem the spread of the virus.

“Filings are going to drop, because we can’t file them enough, but [clients are] calling like crazy. Once people lose their jobs and absorb what happened, this is going to be crazy,” he said. “Could be summer, could be early fall. But I think it will happen within six months, and I think it’s going to be way more than we thought.”

According to data from Hoyes, Michalos and Associates, consumer insolvencies in Ontario jumped 17.5 per cent year-over-year in January. Terrio said he anticipates that figure to climb higher in the coming months.

“I think 20 per cent estimates will be drastically low if this drags on for months,” he said. “This [virus impact] is now drastically out of control.”

It’s not the only example where debt professionals are grappling with a surge in demand and consumer concern. Keith Emery, chief operating officer of Credit Canada Debt Solutions, said his office is fielding more calls from clients who are trying to triage their personal finances.

“We were seeing quite a few requests from clients looking to delay their payments so they have funds to meet their immediate payments,” he said in a phone interview with BNN Bloomberg. “People are in survival mode as they worry more about their immediate budget needs over making debt payments.”

Still, Emery said he’s seeing some lenience when it comes to lenders going after Canadians falling in arrears.

“What we’ve been seeing is a positive response from some of the creditors that they are understanding when it comes to what’ going on and the need to keep Canadians on their feet,” he said. “If creditors were to push too hard in this situation, we could see insolvencies rise. So we’ve had some receptiveness in keeping consumers financially afloat for when this subsides.

But Terrio said he expects significant disruption in Toronto and Vancouver if the economic shock subsists, predicting a wave of evictions if renters fall behind on their payments.

“I think you’re going to see a bloodbath in Vancouver and Toronto if renters start missing payments,” he added.