Hoyes, Michalos & Associates Inc. has provided consumer proposal and personal bankruptcy services to individuals in Ontario since 1999. We are one of the largest firms in Canada practicing in the area of personal insolvency, and work exclusively with people, not corporations.
As required by law, we gather information about each debtor who files with us. We know their income, family size, age, gender, assets and what debt they carry. Every two years we examine this data from debtors that we have assisted to gain an understanding of how consumer debt, and other socio-financial factors, lead to consumer insolvencies in Ontario and Canada.
UPDATE: Our 2017 study will be released the last week of March. We have pre-released data as it relates to payday loan use by Joe Debtor and have submitted that data for consideration by the Standing Committee on Social Policy as they review Bill 59 in relation to payday loans.
This is our most recent Joe Debtor study, conducted in 2015. Please use the navigation menu on the right hand side of this page to access a summary of our study.
Download our full report: Joe Debtor: Marginalized By Debt in pdf format.
Joe Debtor Study 2015 infographic
At-Risk Canadians Drawn Into Cycle of Debt
Imagine the stress of dealing with the never-ending financial burden of overwhelming debt. This is the experience of people our trustees meet with and help each and every day. But what brought them to this point? Who is the average insolvent debtor – or Joe Debtor as we will call him?
The typical insolvent debtor is carrying a substantial amount of debt (on average $56,545 of unsecured debt in our 2015 study). The servicing costs on this debt are extreme and that leads to insolvency. While this can happen to anyone, there are certain at-risk groups increasingly needing to file insolvency. In addition, our newest study showed a concerning increase in the use of high-cost, sub-prime debt.
Here is a summary of our key findings:
- Seniors and pre-retirement debtors are still the fastest growing risk groups. On average Joe debtor is 44 years old and getting older. While the majority of debtors are between the ages of 30 and 49, the trend toward more older Canadians filing bankruptcy continues. Older debtors, aged 50 and up accounted for 30% of all insolvency filings, an increase from 27% two years ago.
- Seniors increasingly using payday loans. With a total unsecured debt load of $69,031, seniors 60 and older were the most heavily indebted of all age groups. Almost half of this debt was credit card debt and seniors reported the highest overall payday loan debt at $3,693.
- More lone parents getting by on credit. While families make up 57% of all insolvent debtors, there has been a marked increase in the percentage of lone parents filing insolvency. Lone parents (either divorced or single) made up 18% of all filings, up from 16% two years earlier. Lone parents owe $52,928 in unsecured debt, less than the average Joe Debtor. However, with a household income 4% lower than Joe Debtor they are more likely to struggle with term loans like car loans or student debt and are more likely to have accounts turned over to a collection agency.
- Women struggling with student debt repayment. Just over 13% of all debtors carried a student loan and their average student debt, at $13,818, was 4% higher than in our previous study. Women are much more likely than men to file bankruptcy due to student loan debt and in fact, six in ten student debtors are female. While all student debtors struggle to pay off heavy student loans with a below average income, Jane Student is much more likely to experience time off work due to periods of unemployment or maternity leave. This income instability makes it difficult to keep up with student debt payments and may be one reason why female student debtors owed $14,748, 19% more than male student debtors.
- Fixed income more of a problem than no income. While 81% of insolvent debtors were working at the time of their filing, 10% of insolvent debtors were on disability leave or were retired, up from 9% two years earlier. Debtors on a fixed income are marginalized even further by overuse of credit to make ends meet as the cost of living rises and their income stays the same.
- The good news is average credit card debt is down. Joe Debtor has a total unsecured debt load of $56,545; a decrease of 2% over two years ago, suggesting that consumers may be listening to the warnings about credit card debt. The average owing on credit cards fell for the third consecutive study to $20,776, down 12% from our study two years earlier. The percentage of debtors with credit card debt amounting to more than 50% of their total unsecured debt dropped from 43% two years earlier to 38% in our 2015 study. However, it is also possible that this reduction is partially caused by a tightening of traditional credit by lenders for high-risk borrowers.
- Payday loan and easy instalment loans a growing concern. As credit card debt decreased, sub-prime debt increased. Currently, 18% of insolvent debtors have at least one payday loan, up from 12% two years ago. The average payday loan debt increased to $2,749, up 12%. Furthermore, the use of "fast cash" instalment loans has increased significantly from 1% two years ago to 5% in our most recent study. These high-risk, high-cost instalment loans have jumped from $2,199 to $3,608 in a short amount of time and we have found that debtors are using fast cash loans not to replace payday loans, but rather, to supplement them.
- Vehicle loan risk rising moderately. Auto loans are one of the fastest growing consumer loan areas in Canada. Our study revealed that almost half (46%) of all vehicles listed by debtors were financed at the time of insolvency. On average, debtors still owe 89% of the realizable value of their car or truck. They are also borrowing more; the average vehicle loan amount increased 12% over two years, to $11,358.
- Tax debts a growing problem for self-employed and seniors. More than four in ten insolvent debtors (42%) have tax debts. For those with a tax debt, the average outstanding tax liability increased 21% to $21,907. Self-employed and small business owners reported the largest tax debt at $33,767. Seniors also reported a higher than average tax liability of $12,571.
- Joe Debtor paying higher than average debt servicing costs. Joe Debtor is not benefiting from our low interest rate environment. In fact, on average he pays a blended rate of 19% or more on his almost $57,000 in unsecured debt. Interest payments alone use up 37% of his take-home pay. Those using payday loans pay an average of 56% on their total unsecured debt, or almost $1,700 a month in interest alone. To keep up, insolvent debtors borrow more, with the average payday borrower owing 3.5 payday loans by the time they file insolvency.