In Ontario, 37% of bankruptcies in 2018 involved Millennials, up from 35% in 2017, according to updated research by insolvency trustee firm Hoyes, Michalos & Associates Inc.
The study also found that 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.”
More student debt
“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.”
Thirty-one per cent of Millennial debtors carried student debt, up from 26% in 2017 while their average unpaid student loan balances increased 4.2% to $14,311.
Using payday loans
“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, says the research. Those using payday loans owed, on average, $4,792 on 4.1 loans or almost two times their average monthly net-income.
Credit card debt
“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.
Lack of stable income
“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.”
To learn more, consult the full study here.