Millennials dominate insolvencies as credit card, student loan, CERB tax debts add up | Canada News Media
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Millennials dominate insolvencies as credit card, student loan, CERB tax debts add up

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Insolvency trustee Doug Hoyes encounters a lot of Canadians with money troubles, but he’s become particularly sympathetic to the plight of young people who find themselves financially underwater.

For more than a decade, his Ontario-based firm Hoyes Michalos has been crunching bankruptcy and insolvency numbers for its annual “Joe Debtor” analysis, with its latest results released last month ahead of tax season.

He’s concluded that millennial Canadians have been dealt a generational losing hand as they face student loans layered with bad debts from credit cards, high-interest loans, and post-pandemic tax debt from collecting CERB.

“I think there’s a whole bunch of whammies that have hit millennials.” Hoyes said. “The CERB was the final straw that broke the camel’s back.”

The 2022 Joe Debtor study examined 2,700 personal insolvencies filed in Ontario. Hoyes Michalos says 49 per cent were filed by millennials aged 26 to 41, even though they make up 27 per cent of adult Canadians.

The study found that on a per-population basis, millennials were 1.4 times more likely to file for insolvency than people in generation X aged 42 to 56, and 1.7 times more likely than baby boomers aged 57 to 76.

Insolvent millennials were on average 33 years old and owed an average of $47,283 in unsecured debt.

Hoyes said many people collected CERB and other pandemic-relief funds without fully appreciating the tax liabilities those programs generated, finding themselves insolvent and unable to pay down their credit cards, student loans, high-interest loans, and lastly their tax debts.

More than 100,000 Canadians of all ages filed for bankruptcy or insolvency in 2022.

But older generations, Hoyes said, have enjoyed many advantages.

Housing prices were more in step with wages. Tuition fees didn’t necessitate student loans, allowing graduates to enter the workforce and start saving and investing out of the gate, rather than having to service large debts for years after completing their education.

Hoyes said those circumstances represented a “safety valve” that young people now can’t rely on.

“Anything goes wrong like a pandemic, or you lose your job or you get sick or you get divorced and boom, there is no safety valve there,” he said.

Filing for bankruptcy, he said, is an option to eliminate debts, but most people end up filing consumer proposals with the help of insolvency trustees like him to pay them down over time in manageable portions.

“It becomes an affordable way to eliminate the debt, and that’s why we’re seeing more and more millennials resorting to consumer proposals,” he said. “They really have no other choice.”

Sandra Fry, a Winnipeg-based credit counsellor with the non-profit Credit Counselling Society, said many young people who seek alternatives to insolvency and bankruptcy are dealing with the shock of rising interest rates.

“Unfortunately, a lot of people out there are living on the edge of their affordability,” Fry said.

Fry said the Credit Counselling Society sees all types of people struggling financially with rising costs that are “really squeezing Canadians in general from all sides.”

The society helps people struggling with debt, negotiating with creditors to eliminate interest on loans, but also refers people in some situations to bankruptcy and insolvency trustees.

Millennial clients she’s dealt with lately have often had variable interest rate mortgages, and rate hikes “caused huge strain on their budget because their payments just went up like crazy.”

Dave Locke, 31, lives with his wife in Coquitlam, B.C., east of Vancouver, and the couple sought Fry’s help when their mortgage payments jumped dramatically in the middle of a costly renovation.

Locke, who works for a real estate brokerage, got into the housing market at a young age having worked in the oil and gas industry after high school.

He ended up buying a home in Coquitlam with his wife Tara, who works in labour relations, and the Bank of Canada’s rate hikes eventually saw their monthly mortgage payments jump 40 per cent.

The couple had a construction loan with their bank to fund the renovations, and as interest rates climbed and the price of construction materials ballooned, Locke realized something had to give, even with their relatively high combined incomes.

Insolvency or bankruptcy weren’t options for the couple because they wanted to keep their assets, but the Credit Counselling Society was able to work out a deal with their bank to eliminate interest on the renovation loan.

“I’m still paying the full balance,” Locke said. “I’m just not paying any additional interest.”

Locke said the stress and stigma of debt is embarrassing, “but it’s just the way it goes.”

“You have to kind of swallow your pride,” he said.

Grant Bazian, a licensed insolvency trustee and president of MNP Ltd. in Vancouver, said he’s seen many clients “keeping up with the Joneses,” but living beyond their means and getting stuck in a cycle of high interest debt from payday loans and credit cards, layered on top of “ridiculous” housing costs.

Bazian said there’s likely no “one magic bullet” to alleviate the debt woes of young people, many of whom are coming to see him racked with anxiety and other mental health issues.

For accountant Hoyes back in Ontario, putting out the firm’s Joe Debtor study every year is a way of letting people know they’re not alone and to remind them of legal options to start anew financially.

Hoyes said it would be a mistake to automatically blame millennials for their money trouble because “you cannot be blaming an entire generation for how the deck is stacked against them.”

“You don’t have to keep working two jobs for the next 20 years,” he said. “There are legal ways to eliminate a chunk of your debt, and yeah, it hurts your credit temporarily and it’s not something you want to do, but sometimes surgery is the answer.”

This report by The Canadian Press was first published March 26, 2023.

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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