Alberta's young, well-paid workers racked up the highest debt levels in the country when oil was at $100 (U.S.) a barrel.
Unending work and wages meant Albertans were once able to manage their higher-than-average consumer debt loads. But with crude touching 11-year lows in December, capital investment in energy projects down by 25 per cent and the ranks of the jobless in the oil and gas sector growing by the month, collection agencies are now doing brisk work. Insolvencies and delinquencies are on the rise, with no sign of slowing down in 2016.
"Unfortunately, Alberta had the highest debt rates going into this current economy," said Donna Carson, senior vice-president for insolvency and restructuring at business advisory firm MNP LLP.
"Sometimes the more we have the more we spend. And we've always had the income, for the most part – we've had the income to service that debt," said Ms. Carson, who is based in Calgary. "That's why our delinquency rates were lower than the national (average). But now a lot of people don't have the income to service that debt load."
Much of the debt was accrued before the oil- and gas-focused economy was beaten down, she said. Even after losing their jobs, many people have been able to continue to pay their bills through a combination of severance, employment insurance and/or living off savings. "But we are now, the last couple of months, seeing a lot of people asking questions – 'What do I do when the RRSP I've been living on runs out,' or 'The waiting period for EI is just taking too long,' and 'The EI benefits aren't enough to live on.'"
Albertans carried an average of $27,599 in consumer debt (excluding mortgages) in the third quarter of 2015, according to credit monitoring agency TransUnion – slightly less than one year earlier but still significantly higher than the national average of $21,247. According to the BMO Annual Debt Report, Alberta also has the highest average household debt, inclusive of mortgages, of any province.
Todd Hirsch, chief economist with ATB Financial, points out it's not necessarily alarming that Albertans have more debt relative to counterparts in other parts of the country. Housing prices increased rapidly when the energy industry was strong, and young workers in general are more likely to have more debt as they start out their working lives and buy their homes. Alberta has the youngest population of all the provinces.
"We have a lot of those young families starting out in life. We have the fewest retirees," Mr. Hirsch said. "So all other things being equal, with the demographics of Alberta, you would expect household debt, on average, to be higher here."
Perhaps more worryingly, the Bank of Canada reported this month that Alberta registered the biggest jump among the provinces in the number of "highly indebted" households – with debt-to-income ratios of 350 per cent and above.
And until this year, Alberta had a lower-than-average rate of delinquencies – the percentage of debt payments overdue by 90 days or more — than the rest of Canada. But the opposite is now true, according to TransUnion, and Alberta surpassed the Canadian average in delinquencies in the third quarter of 2015.
At MNP, Ms. Carson said insolvency rates still have not hit the levels seen during the downturn of 2009. With data to the end of September, Alberta has averaged about 800 insolvencies – consumer proposals or bankruptcies – each month in 2015, with September spiking to 922. In 2009, there were about 1,050 per month. In contrast, in 2013 and 2014, years when oil averaged well above $90 per barrel U.S., there were about 700 insolvencies per month.
But with a deteriorating economic picture and rising unemployment, Mr. Hirsch said he has no doubt that 2016 is going to be a grim year for many Albertans, and bankruptcies will rise.
"We are moving into the worst of the downturn, I think, this winter," he said.
Some are already comparing this downturn to the bust that hit Alberta in the early 1980s. Even though housing costs have increased significantly in the decades since, Mr. Hirsch said "what will save us from a catastrophe like that this time is the fact that interest rates are extraordinarily low, and they're not going anywhere."
One of Ms. Carson's clients, Leroy Rempel, 52, of Sylvan Lake, Alta., went through a consumer proposal process in August. A general contractor who has lived in both Alberta and British Columbia over the past 15 years, he said his credit card and credit line debt got to be too much, and he needed a "reset."
"With what I earn and the energy that I have at this moment, I'm not going to catch up on this for a long time – unless I get into a situation where the economy does change and I can build 12 homes in a year," Mr. Rempel said in describing his decision to pursue the proposal, which is used for people whose debts are unmanageable but are still able to make some form of payment to creditors.
"But with the economy dumping on us here in Alberta, it made me look at the whole situation and go, 'This isn't going to change for a long time. I better check out my options.'"