At-risk Canadians drawn into cycle of debt

KITCHENER, ON, May 4, 2015 /CNW/ – A new “Joe Debtor” study conducted by Hoyes, Michalos & Associates Inc. reveals that, for a core group of Canadians, debt has become a survival tool.

“While the rate of personal insolvencies has fallen in recent years, certain at-risk groups continue to struggle to stay out of debt,” said Douglas Hoyes, a trustee with Hoyes, Michalos & Associates Inc. “Our study of the average insolvent debtor shows that single parents, students and seniors make up an increasing share of insolvent debtors.”

“Struggling Canadians are susceptible to poor credit choices and these choices are increasing their risk of filing bankruptcy” cautioned Ted Michalos, a trustee with Hoyes, Michalos & Associates Inc.  “While credit card debt declined sharply, payday loans and “fast cash” loans are an increasing problem, particularly for seniors; and student loan repayment remains an issue, especially for women.” 

  • Seniors at risk & using payday loans: Debtors aged 60 and older carry the most debt of all age groups, with a total unsecured debt of over $69,000, and almost half of that debt is credit card debt. Moreover, seniors had the highest payday loan debt ($3,693) of all age groups.
  • Parenting alone: Almost 1 in 5 insolvent debtors are lone parents and 3 out of 4 lone parents who become insolvent are female. While they carry less credit card debt than the average debtor, they struggle with fixed repayment debt (like car loans and student loans), and they are more likely to have debt in collections as compared to other debtors.
  • Massive student debt: 13% of debtors have a student loan, up 4.3%; and 60% are female. Female student debtors face an elevated risk of filing insolvency. Jane Student owed $14,748 on student loans at the time of filing, 19% more than males. Although female student debtors earn slightly more than male debtors, they are more likely to have unstable income making it difficult to remain on top of student loan repayment.
  • Credit card debt down: In good news, total unsecured debt levels decreased by 2% over the last two years. Credit card debt has declined steadily since 2010, and was down 12% from two years ago, leading to fewer largely credit card driven insolvencies.
  • Dangerous payday loan usage growing: Overuse of payday loan debt is on the rise. 18% of insolvent debtors have at least one payday loan, compared to 12% two years ago.  The average total payday loan debt increased 12% to $2,749, or 113% of their monthly income. With an average income 6% above that of the typical Joe Debtor, middle income earners, not low income earners, are most likely to use payday loans to excess.
  • Fast cash loans adding up: 5% of debtors have “fast cash” instalment loans, compared to just 1% two years ago, and average loans increased from $2,199 to $3,608. 78% of these borrowers also had a payday loan, so instead of an alternative to payday loans, these easy instalment loans are one more source of cash for financially struggling individuals. 9% of seniors are using payday loans and 62% of seniors with a payday loan were retired, with 35% of all senior payday loan borrowers over the age of 70.
  • Vehicle cost driving debt: Insolvent debtors were more significantly in debt due to vehicle financing than in our previous study. 46% of all vehicles listed were encumbered (up from 43%), with the average secured vehicle loan increasing by 12% from two years ago to $11,358.
  • Debt costs drowning debtors: Joe Debtor pays a blended interest rate of 19%, or approximately $889 per month in interest, an amount equal to 37% of his take-home pay.  High debt service costs cause people to borrow to make minimum payments, starting a downward cycle of higher debt and higher debt service costs. The average payday loan debtor is paying a blended debt servicing cost of more than 56% on his total unsecured debt of $35,799, or almost $1,700 a month.  That is the primary reason why the average payday lender owes a total of 3.5 payday loans and can easily accumulate double digit loans.


“For many Canadians facing financial problems, much of their debt is incurred not to fund spending, but to service other debt and cover ongoing interest payments,” says Doug Hoyes. “This is a cycle of debt that ultimately leads to insolvency.”

A complete copy of our Joe Debtor: Marginalized by Debt research study, can be found at

About Hoyes, Michalos & Associates, Inc.

Hoyes, Michalos & Associates Inc., a consumer proposal and trustee in bankruptcy firm with offices throughout Ontario, helps people in financial difficulty.  Further information is available at


Average Unsecured Debt $56,545

Senior Debtor (60+)

Unsecured Debt






Payday Loan


Easy Instalment Loan


Lone Parent Debtor

Unsecured Debt






Payday Loan


Easy Instalment Loan


Student Debtor

Unsecured Debt


Student Debt


Male (Student Debt)

40% ($12,431)

Female (Student Debt)

60% ($14,748)

Payday Loan


Easy Instalment Loan


Payday Loans

Average Payday Debt


Number Loans


Average Loan Size


Easy Instalment Loans

Average Total Debt


Average Loan Size



More data available at:

Additional graphs and images available here:

SOURCE Hoyes, Michalos & Associates Inc.