The average Canadian who files for bankruptcy owes $59,800 not counting his mortgage and is a 41-year-old married man with four credit cards, according to a report by a Kitchener-based bankruptcy trustee.
The information, released Monday by Hoyes Michalos & Associates, says this amount owed by the average bankruptcy filer is about three-and-a-half times more than the debt level of the average Canadian.
The report is based on an analysis of 8,000 insolvency filings the firm dealt with in 2009 and 2010 and offers a profile of men, women, and seniors.
“The current economic climate, combined with easy access to credit has increased the risk of insolvency for the average Canadian,” the report said. “It now takes more of each Canadian’s take-home pay to service the debt that they have accumulated. If anything interrupts the average
person’s income, even for as little as a month or two, they find themselves unable to meet their
The report, calledJoe Debtor: The Face of Bankruptcy found:
58 per cent of those who file for bankruptcy are male and they take home $2,240 a month after tax, slightly less than the national average;
60 per cent are between the ages of 30 and 59;
The average bankrupt has credit card debt of $24,400, owes $13,800 to banks, $5,400 in back taxes, and has other debts worth about $16,200, owed to finance companies, payday loans, for student loans, and to family and friends;
The number of over-55s in financial trouble is increasing and their debts are greater.
The report takes aim at the assumption that people who file for bankruptcy are unemployed: in fact, the average insolvent person is working and earns close to the Canadian average of $2,419 per month.
“The principle difference between our debtors and the average Canadian is their debt,” the report said.
The report found that between 2008 and 2010 the average debt carried by those who file for bankruptcy increased 17 per cent. The largest increase was in credit card debt – which grew by about one-third.
“The recent downturn in the economy, combined with job loss or income reduction, has forced more families to rely on credit to pay their every day bills,” the report said.
There has also been an increase in the number of people over age 55 who are snowed under by debt. In the same two years the portion in that age group rose to 16 per cent from 12.5 per cent.
“An increasing number of Canadians are entering retirement with debt,” the report said. “Another alarming trend is the increasing propensity of retired Canadians to assume more debt during retirement.”
On average, debtors in the 55-plus group owed about $74,000 in unsecured debt, including credit card debt of $37,000. Half of these debtors are living on their own but one-third still has a dependant at home. Their average take home pay was $2,133, well below the Canadian average.
Only one-third of older bankruptcy filers had RRSP savings and the average total value was about $30,000.
“Approaching retirement without a safety net savings, combined with higher debt levels, significantly increases the risks of bankruptcy,” the report said.
The profile of the average student debtor is a single female, 35, owing about $50,000 of which about $14,400 is student loans. She is also more likely to be divorced or separated and a single parent.
The firm’s research also shows that more than half of bankrupts admitted that they were overextended and mismanaged their finances, but that mismanagement was typically caused or dramatically increased by separation or divorce, job loss or personal illness.
“The difference between a bankrupt and a non-bankrupt may be as simple as this: the bankrupt lost his job, and the non-bankrupt didn’t. Or perhaps the bankrupt got divorced, or was off work for a medical issue, and the non-bankrupt wasn’t,” trustee Doug Hoyes said in an interview.
“If you want to predict whether you will have financial trouble in the future, ask yourself this question: If I lost my job tomorrow, how long would it take before I could no longer pay my bills?”
The report is sure to add to fodder to the ongoing national debate over Canadian household debt levels.
Two weeks ago, the Vanier Institute of the Family reported that average family debt has now hit $100,000, and that for every $1,000 in after-tax income, Canadian families now owe $1,500.
Some economists say the odds of a national crisis spawned by consumer debt are remote as the
economy continues to recover and add jobs.