Insolvency on the rise among older Canadians
The COVID-19 pandemic is taking its toll on older Canadians, driving their share of overall insolvencies higher for the first time in four years, according to a new report from licensed insolvency trustees Hoyes, Michalos & Associates Inc.
Canadians aged 50 and older accounted for 31.4 per cent of overall insolvencies in the wake of the pandemic, rising from 28.3 per cent in 2019 before COVID struck, reversing a trend of younger Canadians seeking debt relief.
Debtors aged 50 and older owed an average of $65,929 in consumer credit, 12.6 per cent more than the average insolvent debtor.
In a release, Doug Hoyes, a licensed insolvency trustee at Hoyes, Michalos & Associates, said that while income supports helped younger Canadians stave off insolvency, those of retirement age or approaching it fared poorly in the face of the economic and income disruption wrought by the pandemic.
“Despite pandemic supports, older debtors found themselves facing a race against time,” Hoyes said. “Payment deferrals and a closed court system certainly helped reduce the pressure to make payments. Unfortunately, pre-retirement debtors were looking at a shrinking window of opportunity to get out of debt.”
The study examined 3,900 personal insolvencies in Ontario between Jan. 1, 2020 and Dec. 31, 2020 and compared the results to Hoyes, Michalos & Associates’ annual studies dating back to 2011.
Overall, insolvencies plunged 29.5 per cent year-over-year in 2020, with Canadian consumers cushioned by income supports, courts closed in terms of handling insolvency claims, and some protections over evictions and acts by creditors to crack down on debtors. Those measures largely helped insulate working-age Canadians, who are also more likely to rent than own a home, contributing to the rising share of insolvencies for older Canadians.
Further exacerbating the pain is the fact older workers tend to occupy a higher income bracket than younger workers, leading to more pronounced income decreases in the event of a layoff in the household or the curtailment of wages. According to Hoyes, Michalos & Associates, non-retired senior debtors aged 60 and older reported a 10.7 per cent drop in income due to the pandemic.