Insolvent Canadians Owe Highest Level of Unsecured Debt Since 2016

KITCHENER,ON, Feb. 14, 2022 /CNW/ - The average insolvent debtor in 2021 owed $50,484 in unsecured debt, up 3.3% from 2020, the highest level we have seen since 2016, according to a study conducted by Licensed Insolvency Trustees Hoyes, Michalos & Associates Inc. What drove the increase was higher outstanding tax obligations and student loan debt among insolvent debtors.

"Tax debts have returned as a primary debt driver of consumer insolvencies," says Doug Hoyes, Licensed Insolvency Trustee. "This is despite a slowdown in collection activity by the Canada Revenue Agency these last two years."

In 2021, 4 in 10 insolvent debtors owed taxes at the time of their filing. Tax debtors owed an average of $19,776 in taxes and interest, up from a low of $15,866 the year before. Taxes owing can include personal income tax, HST, source deductions and property taxes.

"Much of the increase was due to tax obligations created by CERB and CRB payments made in 2020, which had little to no taxes withheld at source," adds Ted Michalos, Licensed Insolvency Trustee. "In our view, this increase in tax insolvencies is just the tip of the iceberg."

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

"Emergency student loan relief in the form of deferrals and interest relief available during COVID-19 did not help everyone and was likely a factor in higher outstanding student loan balances upon filing insolvency," says Doug Hoyes. "The pandemic has made long-term repayment conditions worse for many millennials, since they are more likely to work in precarious employment affected by COVID-19 lockdowns."

"Heavily indebted Canadians just can't seem to catch a break," says Ted Michalos. "COVID-19 has caused a decrease in income for our average client, yet their housing and other costs of living continue to soar, with no sign that inflation will slow down any time soon. Insolvent debtors are left with just $200 a month, after paying for necessities, to put towards their debts. It's unmanageable."

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