The pandemic unexpectedly saved thousands from financial ruin. But what happens now? – CBC News

CBC Morning Brief, December 11, 2020

Early in the Maritime provinces’ COVID-19 lockdown this spring, people who help the most vulnerable awaited a tidal wave of financial hardship and despondency. And then something unexpected happened: Nothing.

Few people reached out for help, CBC’s Richard Cuthbertson reports. Insolvencies dropped like a stone. Many of the most financially vulnerable, it seemed, were doing OK.

Hidden behind the dire number of COVID-19-related job losses is a paradox: the pandemic helped thousands of debt-ridden households in Atlantic Canada avoid financial collapse. Many low-wage workers were better off after losing their jobs. But the contradiction has a giant caveat, too: the financial distress that was expected at the beginning of the pandemic may instead wallop those households near its end.

A combination of factors has kept many above water: Banks offered mortgage and credit card payment deferrals. Cooped up at home, many people spent less. Government aid programs kept money flowing into households. As jobless numbers began to soar in April, bankruptcies did the opposite, plummeting across Canada, and particularly in Atlantic Canada. Four thousand fewer people in the region filed for insolvency in the first six months of the pandemic than in the same period the year before.

In Nova Scotia, there were fewer consumer insolvencies in May than in any other month in the last 20 years. Food bank usage was down “across the board” this summer in New Brunswick, by as much as 25 per cent in some locations, according to Chantal Senecal, executive director of Food Depot Alimentaire. She attributes some of that to the Canada emergency response benefit (CERB) and argues the success of the benefit is proof that a guaranteed living wage for Canadians would work.

Now, many of those who welcomed the financial resiliency of the spring and summer worry about a reckoning. Since CERB ended in October, as Ottawa moved to a modified EI system and different benefits, there’s been an uptick at many food banks. The second wave of the virus is adding another layer of uncertainty. Household debt is still high. Banks will eventually come looking for their money, and government benefit programs have expiry dates next year. All this, some warn, means the tidal wave that was dammed off in the spring could lead to a new tsunami of bankruptcy, debt and tax problems soon

This story is part of The Big Spend, a CBC News investigation examining the unprecedented $240 billion the federal government handed out during the first eight months of the pandemic.