COVID-19 Pandemic Leads to Generational Shift in Consumer Insolvencies
KITCHENER, ON, Feb. 8, 2021 /CNW/ - For the first time in four years, insolvencies shifted back to an older demographic, according to a study conducted by Licensed Insolvency Trustees Hoyes, Michalos & Associates Inc. The share of insolvencies among those aged 50 and older increased from 28.3% in 2019 to 29.8% in 2020. Post-pandemic, this share rose to 31.4%.
"Where younger debtors were filing insolvency at increasing rates before the pandemic," says Doug Hoyes, Licensed Insolvency Trustee, "we saw a reversal of this trend and a shift towards older debtors post-pandemic. Income supports and deferral programs were not enough to deal with a lifetime of debt accumulation."
The unemployment rate among insolvent debtors doubled to 12% in 2020. While job losses impacted all age groups, non-retired seniors aged 60 and older experienced the largest drop in debtor income, down 10.7%.
"CERB softened the financial impact of COVID-19 job losses for younger debtors but provided less cushion for older debtors whose income tends to be higher," adds Ted Michalos, Licensed Insolvency Trustee. "Combine this with a significantly higher debt load among older debtors, and you still have a debt repayment problem."
Debtors aged 50 and older owed an average of $65,929 in consumer credit, 12.6% higher than the average insolvent debtor. Credit card debt accounted for 41% of their overall debt load, compared to 34% for the average insolvent debtor.
"Despite pandemic supports, older debtors found themselves facing a race against time," says Doug Hoyes. "Payment deferrals and a closed court system certainly helped reduce the pressure to make payments. Unfortunately, pre-retirement debtors were looking at a shrinking window of opportunity to get out of debt."
"We need to rethink how much debt we continue to carry and for how long," says Ted Michalos. "The impact of COVID-19 brought a level of job insecurity not felt by most Canadians for years. It should serve as a lesson that high levels of debt, at any age, can be catastrophic when combined with income loss."
For more information, see the complete Joe Debtor 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 Hoyes and Ted Michalos in 1999, has established itself as the leading voice on personal debt issues in Ontario. Hoyes Michalos provides real debt management solutions to help Ontarians climb out of debt, including consumer proposals and personal bankruptcy, with offices throughout Ontario. Further information is available at www.hoyes.com
SOURCE Hoyes, Michalos & Associates Inc.
Douglas Hoyes, CPA, Licensed Insolvency Trustee, [email protected]; Ted Michalos, CPA, Licensed Insolvency Trustee, [email protected], 1-866-747-0660
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