Millennials Dominate Insolvencies In Canada As Credit Card, Student Loan And Other Debts Pile Up
As US millennials distinguish themselves as the 'buy now, pay later' generation, their Canadian counterparts are leading the way when it comes to insolvencies, according to Ontario-based insolvency trustee firm, Hoyes Michalos, which performs an annual "Joe Debtor" analysis.
According to Doug Hoyes, millennial Canadians have been dealt a generational losing hand, as debts from credit cards, high-interest loans and tax debt, and debt owed from the country's taxable financial support during the pandemic known as the Canada Emergency Response Benefit (CERB).
"I think there’s a whole bunch of whammies that have hit millennials," said Hoyes. "The CERB was the final straw that broke the camel’s back."
The 2022 Joe Debtor study examined 2,700 personal insolvencies filed in Ontario. Hoyes Michalos says 49 per cent were filed by millennials aged 26 to 41, even though they make up 27 per cent of adult Canadians.
The study found that on a per−population basis, millennials were 1.4 times more likely to file for insolvency than people in generation X aged 42 to 56, and 1.7 times more likely than baby boomers aged 57 to 76.
Insolvent millennials were on average 33 years old and owed an average of $47,283 in unsecured debt. -Canadian Press
According to Hoyes, many people didn't set aside taxes when they received CERB and other pandemic-related relief funds. Now, a flood of young Canadians have found themselves insolvent and unable to continue paying down their various debts.
Hoyes says the millennials have been given a bum rap, and didn't enjoy the same societal benefits as older generations - whose wages kept up (better) with inflation, and went to college when tuition didn't require student loans - allowing graduates the ability to enter the workforce and start saving and investing right away, as opposed to having to service large debts in addition to pulling off a house.
He also says there's no 'safety valve' like there use to be.
"Anything goes wrong like a pandemic, or you lose your job or you get sick or you get divorced and boom, there is no safety valve there," said Hoyes, who added that filing for bankruptcy is an option to eliminate debts, however most people end up working with insolvency trustees to file proposals to manage their debt.
"It becomes an affordable way to eliminate the debt, and that’s why we’re seeing more and more millennials resorting to consumer proposals," he said. "They really have no other choice."
According to Winnipeg-based credit counselor Sandra Fry, many young people are looking for ways to manage debt without declaring bankruptcy.
"Unfortunately, a lot of people out there are living on the edge of their affordability," she said, adding that inflation is "really squeezing Canadians in general from all sides."
Millennial clients she’s dealt with lately have often had variable interest rate mortgages, and rate hikes “caused huge strain on their budget because their payments just went up like crazy.”
Dave Locke, 31, lives with his wife in Coquitlam, B.C., east of Vancouver, and the couple sought Fry’s help when their mortgage payments jumped dramatically in the middle of a costly renovation.
Locke, who works for a real estate brokerage, got into the housing market at a young age having worked in the oil and gas industry after high school.
He ended up buying a home in Coquitlam with his wife Tara, who works in labour relations, and the Bank of Canada’s rate hikes eventually saw their monthly mortgage payments jump 40 per cent.
The couple had a construction loan with their bank to fund the renovations, and as interest rates climbed and the price of construction materials ballooned, Locke realized something had to give, even with their relatively high combined incomes. -Canadian Press
"I’m still paying the full balance," said Locke. "I’m just not paying any additional interest."
He says that while it's embarrassing to be in so much debt, "it's just the way it goes."
"You have to kind of swallow your pride."
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