Debtor Profiles: Who is at Risk and Why?

Debtor Profiles

Who is at risk and why?

www.hoyes.com

Table of ContentsThe Face of Bankruptcy

The Young Debtor

The Family Debtor

The Pre-Retirement Debtor

The Senior Debtor

The Student Debtor

The Self-Employed Debtor

The Female Debtor

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

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The Face of Bankruptcy

The Face of Bankruptcy

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Our analysis reveals several “at risk” groups:

• Young Debtors

• Family Debtors

• Pre-Retirement Debtors

• Senior Debtors

• Student Debtors

• Self-Employed Debtors

• Female Debtor vs. Male Debtor

60+ 50-59 40-49 30-39 18-290%

5%

10%

15%

20%

25%

30%

35%

10%

18%

30% 30%

12%

Bankruptcies By Age Group

The Young Debtor

Vital StatisticsYoung 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.

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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.

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.

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The Young Debtor

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The Family Debtor

Vital StatisticsThe 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.

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.

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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.

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The Family 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.

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The Pre-retirement Debtor

Bankrupt debtors aged 50-59 have the largest unsecured debt of all age groups, at an astounding $84,199!

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The Pre-retirement Debtor

18-29 30-39 40-49 50-59 60+ $-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

Average Unsecured Debt by Age Group

The most at risk group in our study!

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

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

The Pre-retirement 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.

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The Senior Debtor

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

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The Senior Debtor

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

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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.

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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.

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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

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The Student Debtor

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

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The Student Debtor

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. 18-29 30-39 40-49

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

Debt AmountPast debt amount

The average student loan has declined in recent years.

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The Student Debtor

• Female• 36 years of age• Single• With an average

unsecured debt of $50,791, of which $13,252 is student loans.

Those declaring insolvency with student loan debt are more likely to be:

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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).

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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.

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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.

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The Female Debtor

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

Roughly 40% of insolvent debtors are female

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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

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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.

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.

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There is hope. You can be debt

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