Young Canadians are fastest-growing insolvency group

by Steve Randall19 Mar 2019

Canada’s millennials are filing for insolvency at the fastest rate of any age group.

The worrying statistics come from insolvency specialists Hoyes, Michalos & Associates, and reveal that, while the among young Canadians owe on average is lower than other demographics, they are often using riskier borrowing such as payday loans.

Its survey of Ontarians found that 37% of insolvencies in the province in 2018 involved millennials, up from 35% in 2017.

"What alarms me most is the fact that almost half of Millennial debtors we see use payday loans," said Ted Michalos, Licensed Insolvency Trustee and co-founder of Hoyes, Michalos. "Access to quick, low credit-check money through a plethora of online payday lenders is the largest debt epidemic facing Millennials after student debt."  

Student debt was a factor for 31% of millennial debtors, up from 26% in 2017, and average unpaid balances increased 4.2% to $14,311.

Overall, millennial debtors owed an average $35,733.

"Millennials are graduating with much more student debt than previous generations and this is certainly a contributing factor," says Doug Hoyes, Licensed Insolvency Trustee and co-founder of Hoyes, Michalos. "As more Millennials pass the 7-year limitation for student debt forgiveness in a bankruptcy or consumer proposal, student debt insolvencies rise."

Millennial debtors with credit cards saw their average credit card debt increase 6.9% to $11,716 while their personal loans increased 3.8% to $14,370.

Working but no home equity
Most of the millennials filing for insolvency in 2018 were working (88%) but were earning 3.9% less (monthly: $2,431) than the average Joe Debtor and more than 10% less than Gen X debtors.

Just under 3% of all millennial debtors owned a home at the time of filing. Having been largely locked out of homeownership, they are unable to refinance their debt at lower rates through any rising equity in their home.

"Even those Millennials who have entered the housing market likely bought at higher prices, which has also limited their ability to refinance," adds Hoyes. "When they file insolvency, the average equity in their home in 2018 was only 7%. Really, they have no room to maneuver."

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