37% of Insolvencies are Filed by Millennials
KITCHENER, ON, March 18, 2019 /CNW/ - Updated research by Licensed Insolvency Trustee firm Hoyes, Michalos & Associates Inc. reveals that 37% of Ontario insolvencies in 2018 involved Millennials, up from 35% in 2017. On average, Millennial debtors owed $35,733 in unsecured debt, less than any other cohort, yet still an overwhelming burden that is causing Millennials to file insolvency at a faster rate than any other age group.
"Millennials are graduating with much more student debt than previous generations and this is certainly a contributing factor," says Doug Hoyes, Licensed Insolvency Trustee and co-founder of Hoyes, Michalos. "As more Millennials pass the 7-year limitation for student debt forgiveness in a bankruptcy or consumer proposal, student debt insolvencies rise."
More than three in ten (31%) Millennial debtors carried student debt, up from 26% in 2017 while their average unpaid student loan balances increased 4.2% to $14,311.
"What alarms me most is the fact that almost half of Millennial debtors we see use payday loans," added Ted Michalos, Licensed Insolvency Trustee and co-founder of Hoyes, Michalos. "Access to quick, low credit-check money through a plethora of online payday lenders is the largest debt epidemic facing Millennials after student debt."
In 2018, 46% of all Millennial debtors had at least one payday-style loan, up from 40% in 2017. Those using payday loans owed, on average, $4,792 on 4.1 loans or almost two times their average monthly net-income.
"As they become older, we also see a rise in the use of credit card debt and lines of credit among Millennial debtors," says Doug Hoyes. "What concerns me is that this is debt that is used to pay for everyday living costs like groceries, transportation and other personal living expenses. They view their minimum payments as just another monthly budget expense to be covered, often through the accumulation of more debt."
Millennial debtors with credit cards saw their average credit card debt increase 6.9% to $11,716 while personal loans among Millennial debtors increased 3.8% to $14,370.
"What's really driving all this is a lack of stable, secure income sufficient to pay down debt," says Ted Michalos. "The average Millennial we see has just $243 in income available after paying their living costs to pay an estimated $1,033 in interest costs alone".
While 88% of Millennials debtors are employed when they file insolvency, their average take-home pay of $2,431 is 3.9% less than the average Joe Debtor and 10.3% less than a Generation X debtor filing insolvency.
"Not only do Millennials have less income to work with than our average debtor, they face another problem that's accelerating the rate at which they file for insolvency: they have no assets to help them cushion the blow and refinance their debt," explains Doug Hoyes.
In 2018, just under 3% of all Millennial debtors owned a home at the time of filing. Having been largely locked out of homeownership, they are unable to refinance their debt at lower rates through any rising equity in their home.
"Even those Millennials who have entered the housing market likely bought at higher prices, which has also limited their ability to refinance," adds Hoyes. "When they file insolvency, the average equity in their home in 2018 was only 7%. Really, they have no room to maneuver."
In our study, Millennial debtors are defined as insolvent debtors aged 22 to 37 in 2018. For more detailed information on Joe Debtor and the insolvency risks facing Millennials, see our complete study here: https://www.hoyes.com/press/joe-debtor/.
About Hoyes, Michalos & Associates, Inc.
Hoyes, Michalos & Associates Inc., a Licensed Insolvency Trustee firm co-founded by Doug Hoyes and Ted Michalos in 1999, has established itself as the leading voice on personal debt issues in Ontario. Hoyes Michalos provides real debt management solutions to help Ontarians climb out of debt, including consumer proposals and personal bankruptcy, with offices throughout Ontario. Further information is available at www.hoyes.com
SOURCE Hoyes, Michalos & Associates Inc.