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Heavily-Indebted Boomers Increasingly The Ones Going Bankrupt: Study

Rapidly rising house prices are shielding indebted borrowers from insolvency, but for those without real estate, it’s a different story.
Senior man worried working at laptop
Senior man worried working at laptop

Amid the COVID-19 economic crisis, a lot of attention has focused on younger working Canadians, who have been disproportionately hit by job losses. But a new survey of consumer bankruptcies suggests it’s aging Canadians ― those over 50 ― who are increasingly ending up insolvent.

People aged 50-plus have seen their share of insolvencies jump since the start of the pandemic, from 28.3 per cent in 2019 to 31.4 per cent immediately after last year’s lockdowns, according to a study from insolvency trustees Hoyes Michalos. The study looked at 3,900 Ontario insolvencies filed with the firm.

This comes at a time when ― thanks to emergency pandemic income supports from the government ― the number of Canadians who filed for insolvency actually dropped by nearly 30 per cent, according to the Office of the Superintendent of Bankruptcy.

Watch: What’s the best way to pay off debt? Story continues below.

So why are Canadians over 50 going bust? According to insolvency trustee Doug Hoyes, co-author of the report, they are the ones carrying the most debt ― and the least likely to have had their living costs covered by the $2,000-a-month Canada Emergency Response Benefit (CERB).

For younger, lower-income earners, CERB payments often covered their lost income, but for older earners with higher income and higher expenses, CERB might not cut it, Hoyes said.

And a stark new divide is also forming between homeowners and non-homeowners, with those who own homes shielded from financial problems by rapidly rising house prices, he said.

Six or seven years ago, a third of the clients at Hoyes’ insolvency firm were homeowners; today, that has dropped to less than 5 per cent.

“It used to be people owned homes with not much equity (and if things went bad) they would file for insolvency,” Hoyes told HuffPost Canada.

“Now the average home is $1 million, and if you’ve owned a home for a few years you’ve built up lots of equity, even if you overpaid… You’ve got the ability to refinance, to get a HELOC, so if you own a home you are probably in good shape... It’s the seniors who have not owned a home, and didn’t share in asset bubbles, who are in greatest trouble today.”

The average age of an insolvency applicant has risen to just under 43 years, the study found, and the average “Joe Debtor” is slightly more likely to be male than female, and be single or separated.

On average, they had $58,555 in non-mortgage debt, including personal loans (79 per cent of all debtors) and payday loans (38 per cent).

If you’re worried you may be among the people headed for financial trouble, Hoyes suggests running a “stress test” on your finances. Imagine a shock of some kind ― getting laid off, or getting sick ― then crunch a few numbers to see how long you can keep paying the bills.

“If the answer is ‘I wouldn’t be able to pay my rent next week without a paycheque,’ that’s a sign,” he said.

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