Ontarians with higher earnings filing for insolvency: study

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The average person who is filing for insolvency or bankruptcy in Ontario is earning more money and skewing younger, according to a new study released by one of Ontario’s larger insolvency trustees.

Hoyes Michalos has been releasing the results of its Joe Debtor study of its clients since 2011, and one of the company’s principals says that he has seen a dramatic shift in his clientele since it began.

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“This year, the trend, which is different than what we’ve seen in past years, is that more prosperous people are getting into financial trouble and having to file a bankruptcy or a consumer proposal,” Doug Hoyes told Global News.

The firm, whose offices span from Windsor to Ottawa, dealt with 5,800 personal insolvencies in 2019. Hoyes says that number represents about 15 per cent of the total filed in Ontario.

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“Our average client household income is up 5.5 per cent,” Hoyes noted. “It doesn’t mean they’re getting a raise of 5.5 per cent, it means it’s a more affluent person.

He says that while he his clientele has more take-home pay, they also have less earning power.

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“Their expenses are up 6.4 per cent,” Hoyes said. “So when you have rising expenses, that are rising faster than your income, you end up resorting to credit to survive and get into these kind of problems.”

He believes the number one culprit for people getting running into a credit crunch is the rapid rise in the cost of property rent.

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“The vast majority of our clients, 95 percent of them are renters,” he said.

Last November, BMO chief economist Douglas Porter issued a note to clients which said rental costs were up 3.7 per cent last month compared to the same period in 2018 — the fastest annual increase since 1991.

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While that average may not seem too steep, marry that with other rising costs and you will see why people are having issues, Hoyes believes

“Grocery store and transportation costs, again for our clients are up about 8 percent. So, you know, TTC raises fares, you know, costs of car loans are going up, all those sorts of things,” he explained.

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“So even though the economy is doing well and incomes are also going up, they just aren’t going up fast enough.”

Hoyes said his clientele is also trending younger as the average age has dropped by a year, from 43.5 to 42.5 in just the last year alone.

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“Almost half of our clients now are 40 years or under, 47 per cent,” he said. “It’s never, ever been that high a percentage in the past.”

Hoyes noted that the decreasing age is in part due to student loans.

“They graduate from school with massive student loans,” he explained. “So I’m starting off behind and I’m just never able to catch up.

“So people in their 30s now and early 40s are filing insolvency where they didn’t have to in the past.”

Hoyes said his company publishes the study in an attempt to let people know they aren’t alone as they try to deal with debt issues.

“We feel that by putting this out there, at least people can see: ‘I’m certainly not alone.’”

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According to numbers released by the Office of the Superintendent of Bankruptcy on Monday, 137,178 Canadians filed a bankruptcy or consumer proposal last year.

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“So it is not an isolated thing,” Hoyes noted.

“And unfortunately, the trend is moving in the wrong direction.”

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