For the first time in four years, insolvencies have shifted back to an older demographic, according to a 2020 bankruptcy study by Hoyes, Michalos & Associates Inc.The share of insolvencies among those 50 and older increased from 28.3 per cent in 2019 to 29.8 per cent in 2020, while the share among younger generations declined.

Ted Michalos, co-founder and senior insolvency trustee for Hoyes, Michalos & Associates Inc., said one of the principal reasons the senior numbers were increasing is that the emergency response benefits that the government put in place were designed to help compensate folks that were on a minimum wage, or on unemployment insurance.

“A minimum wage person makes about $2,000 a month, the CERB benefit was set up to be $2,000 a month,” Michalos said. “Now unfortunately most of the seniors that were working have higher income than that, so when they lost their jobs in the service industries and the other forms of employment that they had, the CERB benefit wasn’t making much of a difference.”

Michalos said the average person who filed for insolvency had their income drop by 2 per cent, the average seniors’ income dropped closer to 11 per cent.

“And that makes a huge difference because that extra percentage is the money they have available to service their debts,” Michalos said.

Michalos said another one of the concerns when it comes to seniors is that they have the highest level of debt.

“The average person becomes insolvent, can’t pay their bills, owes about $58,000, the average senior, somebody over 60-years-old, owes about $66,000,” Michalos said. “You might be thinking that $6,000 doesn’t make a big difference, but when you’re calculating interest payments of between 15-29 per cent, it can make a big difference to your monthly budget.”

Michalos said that one of the telling statistics for people is the average household income for the seniors, and in fact for most people that become insolvent is about $3,000 a month, and the debt servicing costs for them run about $1,300 a month.

“So, what we’re saying is that if someone is making $3,000 a month and the first $1,300 has to go to pay bills, it doesn’t leave them with a lot to live on,” Michalos said.

He added that combining the loss of income with the fact that debt load rises with age, and that explains why they saw a rise in insolvencies involving older Canadians in 2020.

To see the full study, click here.

Ted Michalos, co-founder and senior insolvency trustee for Hoyes, Michalos & Associates Inc.: