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Navigating the Debt Crisis: The Challenges and Solutions for Canadian Millennials

Ryan Luttrell
June 5, 2023

Introduction

Canadian millennials are grappling with a financial crisis unlike any other generation before them. Insolvency trustee Doug Hoyes has conducted an annual “Joe Debtor” analysis for over a decade, revealing that millennials face a unique combination of student loans, credit card debts, high-interest loans, and post-pandemic tax debt from collecting CERB. This blog post will delve into the findings of the “Joe Debtor” study, discuss the factors contributing to millennials’ financial struggles, and explore coping strategies for those facing insurmountable debt.

The “Joe Debtor” Study

Hoyes’ Ontario-based firm, Hoyes Michalos, conducted the “Joe Debtor” study by examining 2,700 personal insolvencies filed in Ontario. The study found that 49% of insolvencies were filed by millennials aged 26 to 41, despite making up only 27% of adult Canadians. On average, insolvent millennials were 33 years old and owed $47,283 in unsecured debt. The study also revealed that millennials are 1.4 times more likely to file for insolvency than Generation X and 1.7 times more likely than baby boomers.

Factors Contributing to Millennials’ Financial Struggles

Several factors have contributed to the financial hardships faced by Canadian millennials. These include:

  • Student loans: Rising tuition costs have forced many millennials to take on substantial student loans, delaying their ability to save and invest.
  • Credit card debts: Millennials often struggle with credit card debts, which can have high interest rates and compound quickly.
  • High-interest loans: Millennials may resort to high-interest loans to cover unexpected expenses or consolidate debts, exacerbating their financial troubles.
  • Post-pandemic tax debt from collecting CERB: Many people collected CERB and other pandemic-relief funds without fully understanding the tax liabilities they generated, leading to further debt.
  • Lack of a financial “safety valve”: Unlike older generations who had more affordable housing prices and lower tuition fees, millennials lack a financial buffer to help them weather financial crises.

Coping Strategies for Millennials in Debt

There are several options available to millennials struggling with debt, including:

  • Filing for bankruptcy: While it can hurt credit temporarily, bankruptcy can provide a fresh financial start for those drowning in debt.
  • Consumer proposals: Working with an insolvency trustee, individuals can file a consumer proposal to pay down their debts over time in manageable portions. This option has become increasingly popular among millennials seeking debt relief.
  • Seeking help from credit counseling services: Non-profit organizations like the Credit Counselling Society can help individuals negotiate with creditors to eliminate interest on loans, manage budgets, and refer clients to bankruptcy and insolvency trustees when necessary.

The Impact of Rising Interest Rates

Rising interest rates have further strained millennials’ budgets, making it more challenging to manage existing debts. Credit counseling services can play a crucial role in helping individuals navigate these changes and develop strategies to adjust their financial plans accordingly.

The Mental Health Toll of Financial Struggles

The burden of debt can have severe mental health consequences, including anxiety and other mental health issues. It’s essential for those in financial distress to seek help and not blame themselves, as external factors have contributed to their situation. Remember that there are legal options available to help alleviate debt burdens and start anew financially.

Understanding and addressing the financial challenges faced by Canadian millennials is crucial in finding solutions to this generational crisis. By exploring legal options and seeking help from professionals, millennials can work towards alleviating their debt burdens and building a more stable financial future.