Self-Employed and Dealing With Debt

According to Statistics Canada there were $2.8 million self-employed workers in Canada in 2016, an increase of 0.4% from the year before. The number of self-employed workers in Canada is increasing however the financial risks can sometimes lead to insolvency. Contract employees and small business owners risk insolvency if they mix personal debts with business debts and delay tax installments.

Mixing Personal with Business Debt and Delaying Tax Payments

Earning less than the average Joe Debtor, the average self-employed debtor has a substantially higher debt-to-income ratio due to business related debts. Unpaid tax installments become a cash flow tool on top of maxed out credit card debt and personal loans.

Two-thirds (67%) of insolvent self-employed and small business owners have tax debts and those who do owe a total of $51,535 in tax debts. The self-employed debtor, however, is not declaring insolvency due to tax debts alone. The self-employed debtor and insolvent small business owner owes an average of $98,382 in unsecured debts. These debts arise from the use of personal credit to fund business operations as well as from a failure to submit tax installment payments, often to finance operations when cash flow runs short.

The self-employed debtor has a total debt-to-income of 1,132%.  He has non-mortgage secured debts of $11,367; 33% higher than the average Joe Debtor.  These are largely business related debts secured by his personal assets.

Women entrepreneurs are slightly less likely to file insolvency per capita than males. Women make up 37% of self-employed persons in Canada as a whole, but make up only 34% of insolvent self-employed debtors.

self-employed and bankruptcy

Personal Information
Male 66%
Female 34%
Average Age 45
Marital status
   Married/Common Law 47%
   Divorced or Separated 25%
   Widowed 1%
   Single 26%
Average family size 2.2
Likelihood of having dependant 41%
Average monthly income $2,242 net of deductions
Total unsecured debt $98,382
Unsecured debt-to-income ratio 366%
Likelihood they own a home 20%
Average mortgage value $232,720
Detailed Information on the amount of average unsecured debt:
Personal loans $24,563
Credit cards $23,543
Taxes $34,605
Student loans $1,337
Other $14,335