COVID has shifted insolvency woe back towards older Canadians

Protection provided by government’s pandemic supports haven't shielded older age groups, finds new study

COVID has shifted insolvency woe back towards older Canadians

A multi-year trend of insolvencies disproportionately affecting younger Canadians has been reversed as the COVID-19 pandemic affects households in varied and unintended ways.

According to a new study from Licensed Insolvency Trustees Hoyes, Michalos & Associates Inc, the share of insolvencies among those aged 50 and older ticked up between 2019 and 2020, going from 28.3% in to 29.8%. After the pandemic, that share has risen further to 31.4%.

“Where younger debtors were filing insolvency at increasing rates before the pandemic, we saw a reversal of this trend and a shift towards older debtors post-pandemic,” said Doug Hoyes, Licensed Insolvency Trustee, in a statement. “Income supports and deferral programs were not enough to deal with a lifetime of debt accumulation.”

According to the firm, the rate of unemployment among insolvent debtors doubled to 12% in 2020. Job losses affected all age groups, but non-retired seniors who were at least 60 years old saw the largest drop in income, declining by 10.7%.

“CERB softened the financial impact of COVID-19 job losses for younger debtors but provided less cushion for older debtors whose income tends to be higher,” said Ted Michalos, Licensed Insolvency Trustee. “Combine this with a significantly higher debt load among older debtors, and you still have a debt repayment problem.”

The average amount of consumer credit debt carried by debtors aged 50 and older was $65,929, 12.6% above the mount owed by the average insolvent debtor. Credit card debt accounted for 41% of the overall debt load faced by the older age group, compared to 34% for the average insolvent debtor.

“We need to rethink how much debt we continue to carry and for how long,” Michalos said. “The impact of COVID-19 brought a level of job insecurity not felt by most Canadians for years. It should serve as a lesson that high levels of debt, at any age, can be catastrophic when combined with income loss.”


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