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Debtor Profiles Who is at risk and why?

Table of Contents The Pre-Retirement Debtor

3 5 8 11

The Senior Debtor


The Student Debtor

18 22

The Face of Bankruptcy The Young Debtor The Family Debtor

The Self-Employed Debtor The Female Debtor



The Face of Bankruptcy Bankruptcy affects Canadians from all walks of life –all ages, all income brackets, married or single, working, retired or unemployed.


The Face of Bankruptcy Our analysis reveals several “at risk” groups:

Bankruptcies By Age Group

• Young Debtors 35%

• Family Debtors


• Pre-Retirement Debtors


• Senior Debtors • Student Debtors


25% 18%

15% 10% 5% 0%



10% 60+





• Self-Employed Debtors • Female Debtor vs. Male Debtor


The Young Debtor Vital Statistics Young debtors are single and equally likely to be female or male. They are mostly working and only 10% are unemployed. The average Young Debtor owes $32,686 in unsecured debt. They have the lowest average debt, but also the lowest income.


The Young Debtor Why They are in Financial Trouble Second only to Senior Debtors, Young Debtors were most likely to mention poor financial management, followed by income reduction as the cause of their bankruptcy. With a below-average take-home pay, after paying their expenses, the Young Debtor does not have enough leftover to repay debts. One in three Young Debtors has a dependent to support and 12% are single parents.


The Young Debtor Young Debtors are most likely to file bankruptcy over a consumer proposal, because their income level may not be sufficient to support a long term proposal to creditors.


The Family Debtor Vital Statistics The Family Debtor is between the ages of 30 and 49. In their 30s, 33% are single. By their 40s, only 18% are single. More than half have a dependent. At this stage, 1 in 3 will purchase a home and see dramatic increases in credit card use to cover home and living expenses.


The Family Debtor By their 40s, the Family Debtor’s credit card debts will have ballooned to $26,849 and unsecured debts will have reached over $67,000. The added stress of repaying such a large debt puts strain on the Family Debtor’s marriage and more than 1 in 3 will be divorced or separated by their 40s.


The Family Debtor Due to their income and assets (1/3 are homeowners) the Family debtor is more likely to file a consumer proposal to deal with debts than to file for bankruptcy. Over 58% of Family Debtors filed a consumer proposal to eliminate debts.


The Pre-retirement Debtor Although the majority of debtors in this age group are still working, their income falls below that of debtors aged 40-49. Pre-retirement Debtors are more likely to list job or health reasons as the primary cause of their bankruptcy.


The Pre-retirement Debtor Average Unsecured Debt by Age Group 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 18-29





The most at risk group in our study! Bankrupt debtors aged 50-59 have the largest unsecured debt of all age groups, at an astounding $84,199!


The Pre-retirement Debtor 30% of Pre-retirement Debtors still have a dependent at home. • • • •

A dependent parent An adult child retuning home or still in school A younger child A grandchild

The increased financial cost of supporting dependents can lead to the use of credit cards to meet daily needs.


The Senior Debtor Senior Debtors account for 10% of all insolvency filings, and owe approximately $68,776 in unsecured debt. This is the second highest amount of debt among all age groups.


The Senior Debtor At an average of $37,161, Senior Debtor’s credit card debt is the highest among all age groups.

At approximately 5 credit cards per debtor, Senior Debtors often rely on credit cards to pay for daily living expenses.


The Senior Debtor

50% of Senior Debtors are trying to maintain debt payments on a single income.

Senior Debtors have a high likelihood of citing illness, injury, and health related problems as a cause of their financial difficulties.

Only 56% of Senior Debtors had RRSP savings and the average total RRSP value was only $19,464.


The Senior Debtor Combine a high level of debt with a reduction in income or unexpected expenses due to illness or retirement, and the need to file for bankruptcy quickly becomes a reality.


The Student Debtor Vital Statistics • • • • •

57% Female, 43% Male Between 30 and 39 Single High likelihood of being a single parent With an unsecured debt of $50,791, of which $13,252 is student loans


The Student Debtor The average student leaves school with an estimated $28,000 in debt and will take 14 years to pay it back.


The Student Debtor The average student loan has declined in recent years. This is due to: • • •

Lower interest rates More older students than younger Changes to the Bankruptcy and Insolvency act that reduced the period of automatic discharge from 10 years to 7.

18000 16000 14000 12000 10000

Debt Amount Past debt amount

8000 6000 4000 2000 0 18-29




The Student Debtor Those declaring insolvency with student loan debt are more likely to be: • • • •

Female 36 years of age Single With an average unsecured debt of $50,791, of which $13,252 is student loans.


The Self-Employed Debtor On average, approximately 99,000 new small businesses are created each year, and just as many exit the market (through failures or closures).


The Self-Employed Debtor •

Bankruptcies for Self-Employed Debtors rose from 9.6% to 10.0% in the last year.

Debtors listing business failure as their reason for insolvency increased from 4.3% to 4.7%

Insolvent Self-Employed Debtors have an average unsecured debt of $87,253 –the largest of all risk groups.


The Self-Employed Debtor •

A significant part of this debt includes tax debts for unpaid income tax, HST and other business related taxes. 61% had tax debts compared to only 38% for the average debtor.


Often using credit to fund business expenses, insolvent Self-Employed Debtors had an average credit card debt of $31,917.


The Female Debtor Roughly 40% of insolvent debtors are female The Female debtor is: More likely to be divorced, single or separated than her male counterpart More likely to list marital or relationship breakup as a cause of their financial difficulties More likely to be a single parent


The Female Debtor • Female debtors are more likely to have higher credit card debt and student debt than male debtors • They are less likely to own a home • Female debtors are more likely to file bankruptcy than male debtors


The Female Debtor Female debtors (particularly single mothers) have a difficult time paying for basic expenses such as rent, food and utilities, let alone maintaining debt payments.


The Solution to problem debt! Worrying about money and debts has a devastating effect on individuals and families, alike. Recognizing the need for help and talking to a reputable professional, such as a trustee in bankruptcy, like Hoyes Michalos for advice is the first step in eliminating overwhelming debt problems.


There is hope. You can be debt free.

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Debtor Profiles: Who is at Risk and Why?  

Bankruptcy affects Canadians from all walks of life –all ages, all income brackets, married or single, working, retired or unemployed. Are...