Home Consumer debt Insolvent Canadians have highest level of unsecured debt since 2016

Insolvent Canadians have highest level of unsecured debt since 2016


KITCHENER, ON, February 14, 2022 /CNW/ – The average insolvent debtor in 2021 had to $50,484 in unsecured debt, up 3.3% from 2020, the highest level we’ve seen since 2016, according to a to study led by Licensed Insolvency Trustees Hoyes, Michalos & Associates Inc. The increase in unpaid tax liabilities and student loans among insolvent debtors is driving the increase.

“Tax debt has once again become the main driver of consumer insolvency debt,” says Doug Hoes, Licensed Insolvency Trustee. “This is despite a slowdown in Canada Revenue Agency collection activity over the past two years.”

In 2021, 4 in 10 insolvent debtors owed taxes when they filed. Tax debtors owed on average $19,776 taxes and interest, going from a minimum of $15,866 the year before. Taxes owed may include personal income tax, HST, source deductions and property taxes.

“Much of the increase was due to tax liabilities created by CERB and CRB payments made in 2020, which had little or no withholding taxes,” adds Ted Michalos, Licensed Insolvency Trustee. “In our view, this increase in tax bankruptcies is just the tip of the iceberg.”

Another concerning trend is a record percentage of insolvent debtors struggling with student loan obligations. The average student loan debt among those who filed for student loans was $17,005up a staggering 11.5%, the highest level since our study began in 2011.

“Emergency student loan relief in the form of deferrals and interest relief available during COVID-19 has not helped everyone and was likely a factor in the increase in outstanding loan balances students when filing for insolvency,” says Doug Hoes. “The pandemic has worsened long-term repayment conditions for many millennials, as they are more likely to work in precarious jobs affected by COVID-19 lockdowns.”

“Highly indebted Canadians just can’t seem to take a break,” says Ted Michalos. “COVID-19 has caused our average customer’s income to drop, but their housing and other living costs continue to skyrocket, with no sign that inflation will slow anytime soon. Insolvent debtors are left with just $200 one month, after paying the necessities, to pay off their debts. It’s unmanageable.”

For more information, see Joe Debtor’s full study here: https://www.hoyes.com/press/joe-debtor/.

About Hoyes, Michalos & Associates, Inc.

Hoyes, Michalos & Associates Inc., a licensed insolvency trustee firm co-founded by Doug Hoes and Ted Michalos in 1999, established himself as the leading voice on personal debt issues in Ontario. Hoyes Michalos provides real debt management solutions to help Ontarians get out of debt, including consumer proposals and personal bankruptcy, with offices everywhere Ontario. Further information is available at www.hoyes.com

SOURCE Hoyes, Michalos & Associates Inc.

For further information: Douglas Hoyes, CPA, Licensed Insolvency Trustee, [email protected]; Ted Michalos, CPA, Licensed Insolvency Trustee, [email protected]1-866-747-0660