Why millennials in Canada are hardest hit by debt: ‘Living on the edge’ – National

Bankruptcy trustee Doug Hoyes says that while many Canadians face money problems, he is especially sympathetic to the plight of economically disadvantaged young people.

For more than a decade, his Ontario-based company Hoyes Michalos has been processing bankruptcies and bankruptcies for its annual “Joe Debtor” analysis, the latest of which comes ahead of tax season. It was announced last month.

He argues that millennial Canadians are generationally disadvantaged as they face student loans compounded by bad debts from credit cards, high-interest loans, and post-pandemic tax liabilities from CERB collections. It concludes that

“I think there are a lot of issues that have hit millennials hard,” Hayes said. “CERB was the last straw to break a camel’s back.”

The 2022 Joe Debtor investigation examined 2,700 personal bankruptcies filed in Ontario. According to Hoyes Michalos, from age 26 he makes up 27% of Canadian adults, while millennials between the ages of 41 apply for 49% of him.

According to the study, millennials are 1.4 times more likely to file for bankruptcy than Gen Xers aged 42 to 56, and 1.7 times more likely than baby boomers aged 57 to 76. It turns out that there is

Millennials who went bankrupt had an average age of 33 and had an average of $47,283 in unsecured debt.

According to Hoyes, many people raised CERB and other pandemic relief funds without fully understanding the tax liability these programs created, becoming insolvent and paying off credit cards, student loans, high-interest loans, and more. And finally, he said that he could no longer pay his tax obligations.

By 2022, more than 100,000 Canadians of all ages have filed for bankruptcy or bankruptcy.

However, according to Hoyes, the older generation has enjoyed many benefits.

House prices have kept pace with wages. Tuition didn’t require student loans, graduates didn’t have to pay off large debts years after completing their education, and they were able to start saving and investing as soon as they got a job.

Hoyes said these situations represent a “safety valve” that young people cannot currently rely on.

“If something goes wrong like a pandemic, you lose your job, you get sick, you get divorced and the economy booms, there is no safety valve there,” he said.

Filing for bankruptcy, he said, is one option for getting rid of debt, but most people end up filing consumer proposals with the help of bankruptcy trustees like him to make them manageable. You will have to pay it back over time.

“It’s become an affordable way to get out of debt and that’s why more and more millennials are turning to consumer propositions,” he said.

Sandra Frye, a credit counselor at the Winnipeg-based nonprofit Credit Counseling Association, said many young people looking for bankruptcy or alternatives to bankruptcy are coping with the shock of rising interest rates.

“Unfortunately, a lot of people live on a budget,” Fry said.

Fry said the Credit Counseling Institute sees people of all types struggling financially with rising costs that “generally weigh on Canadians on all fronts.”

The association not only helps those struggling with debt, negotiates with creditors to eliminate interest on loans, but also introduces them to bankruptcy trustees and bankruptcy trustees, depending on the circumstances.

The millennial clients she recently worked with often had variable-rate mortgages, and interest rate hikes “have put a huge strain on budgets as payments have increased like crazy.”

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Dave Locke, 31, lives with his wife in Coquitlam, B.C., east of Vancouver, and when his mortgage payments skyrocketed amid a costly renovation, the couple fell in love with Fry. I asked for help.

A real estate broker, Locke entered the housing market at a young age after working in the oil and gas industry after high school.

He ended up buying a house in Coquitlam with his wife, Tara, who works in labor relations, and a Bank of Canada interest rate hike ultimately boosted his monthly mortgage payments by 40%.

The couple had taken out a construction loan from the bank to finance the renovation, but as interest rates rose and the price of construction materials skyrocketed, Locke realized that even though the couple’s combined income was relatively high, they could not do anything. I realized that I need to provide a .

Bankruptcy or bankruptcy weren’t an option as the couple wanted to keep their assets, but the credit association struck a deal with the bank so they could get rid of the interest on the renovation loan.

“I’m still paying full price,” Locke said. “I am not paying any additional interest.”

Locke said the stress and stigma of debt is embarrassing, but “but it’s just the way it is.”

“You have to swallow your pride,” he said.

Grant Bazian, a licensed bankruptcy trustee and president of Vancouver’s MNP Ltd., said many of his clients “keep up with the Joneses” but live beyond their means and payday loans. He said he has seen him stuck in a cycle of high-interest debt from his bank and credit cards. , superimposed on top of the “ridiculous” housing costs.

Bhajian said there is probably no “magic bullet” that will ease the debt problem of young people.Many of them come to see him struggling with anxiety and other mental health issues.

For Hoyes, an accountant back in Ontario, releasing the company’s Joe Debtor survey each year is a way to let people know they’re not alone and remind them of their legal options to start fresh financially. .

Hoyes said it would be a mistake to automatically blame millennials for their money problems.

“You don’t have to keep two jobs for the next 20 years,” he said. “There are legal ways to get rid of some of the debt. Sure, it’s temporary damage to your credit and you don’t want to do it, but sometimes surgery can be the solution.”