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The NL budget is going to bankrupt people

Unintended consequences? The impact on the average household is severe
Newfoundland and Labrador’s 2016 budget includes fee and tax hikes on everything imaginable. The impact on the average household is going to be severe. Let’s look at an example…

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A significant part of my job is credit counselling and sitting down with individuals and families and working on their household budgets.

A lot of households were struggling before the budget was even announced and bankruptcy and insolvency rates increased dramatically last year.

The 2016 provincial budget is going to severely impact the average household and its ability to pay their monthly bills.

Let’s look at an example:

A husband and wife with one young child, expecting a new baby in January of 2017.

The husband makes $75,000 a year; the mother has decided to stay at home while the children are of childcare age.

It is not far fetched that this budget could “cost” this family $6,085 in 2017 alone (see assumptions at bottom of page).

Loss of baby bonus $2,200
Income Tax $1,172
Levy $750
Vehicle fuel charge $660
HST increase $500
Vehicle Insurance 2 cars $375
Drivers licence renewal 2 people $30
Vehicle Registration 2 cars $20

Total “cost” to family in 2017 $5,707

This $5,707 expense (even if you take out the baby bonus amounts we are talking about $3,885.) is an incredible burden on an average family. This amounts to $475 per month ($292 without the baby bonus money).

By my calculations, an average family such as the one illustrated above, spends 96% of their after-tax income on household essentials leaving only $207 per month for entertainment, kids’ activities, emergencies, gifts and debt servicing (aside from vehicle and mortgage payments meaning: student loans, credit cards, lines of credit etc.). This would be stressful for households even before the impact of the 2016 NL provincial budget is factored in.

Instead of families being able to pay their bills and service their debt we are going to see them relying on credit cards and lines of credit to get from month to month eventually leading them to bankruptcy.

*Obviously not every household renews each drivers licence every year, nor do they have a baby each year. However, a lot of households will see fees not listed above including: cigarettes, hunting, fishing, marriage, death, birth, camping, ferries and so on.
*2017
*online renewal
*average Canadian drives 20,000km per year
*10 Litres per 100 km fuel consumption
*HST amount assumes no large purchases (car, reno, newly built house)
*Family expecting new baby January 2017
*Based on budget information available by media April 14th, 2016.

Did You Know?

1

Many people who file for bankruptcy get to stay in their home.

2

In Newfoundland and Labrador, you can keep your RRSPs – even if you file for bankruptcy.

3

Many people who file for bankruptcy are able to keep their vehicle.

4

Most bankruptcies are NOT published in the newspaper.

5

Student loans can be included in a bankruptcy if they are more than seven (7) years old.

6

A consumer proposal is an alternative to bankruptcy that can only be filed with a licensed trustee in bankruptcy.

7

In NL, people ages 30 to 39 years old file for bankruptcy more than any other age group. [source]