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MORE SENIORS FILING FOR BANKRUPTCY

IN CANADA 

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Those over the age of 60 have the highest debt of all age groups, report finds

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MADHAVI  ACHARYA·TOM YEW
BUSINESS REPORTER
TORONTO STAR
05 05 2015

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Swamped by credit card debt, a growing number of seniors and those approaching retirement are fil­ing for insolvency in Ontario, accord­ing to a new report released on Mon­day.

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Bankruptcy trustee firm Hoyes, Michalos & Associates Inc. reviewed data from nearly 6,000 personal insolvencies filed in 2013 and 2014. Three in 10 insolvencies were filed by debtors who were 50 or older, the report found. That’s up from 27 per cent in the firm’s previous study, published in 2013.

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Those over the age of 60 were the most heavily indebted of all age groups, with an average total unse­cured debt of $69,031-nearly half in credit cards, the report said.

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”It’s the seniors who have the high­est of everything – the highest aver­age debt, credit card debt, tax debt, the  highest  debt-to-income  ratio, and the highest payday loan debt. It’s kind  of  stunning,” trustee  Douglas Hoyes said in an interview.

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”People think, I get my mortgage paid off and I’ve saved money and by the time l retire l have a pot of money sitting there and a paid-off house. For some people, that’s what hap­pens. But for the people we’re help­ing, it’s been the exact opposite.” More Canadians are carrying years of accumulated debt into retirement, a time when their income drops and they may face income tax bills be­cause of pension withdrawals, the re­port said.

Nine  per  cent of  seniors  owed at least one payday loan at the time  of their insolvency, the study found. On average, seniors had 3.7 outstanding payday loans and owed $3,693.

”Payday loan companies make it easy for seniors to take out a loan as they will lend against pension in­come,” the report said.

An insolvency filing is the first step to either filing for bankruptcy or making a consumer proposal, where the debtor negotiates with creditors to pay back a portion of what is owed. Most insolvent debtors are be­tween the ages of 30 and 49, the study found.

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The typical debtor, dubbed Joe Debtor in the report, is a 44-year-old male, married with children. He owes on average $56,545 in unsecured debt, more than three times what the average Canadian owes, according to the study. That’s on top of the average $198,000 he still owes on a mortgage.

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For most debtors, the trigger for filing bankruptcy is often an unex­pected life event such as job loss, illness or relationship breakdown, the study by the Kitchener-based bankruptcy trustee found.

Single parents have less debt than average, but are more likely to strug­gle with student loans, car loans and accounts in collection.

“For many Canadians, day-to-day living expenses are growing faster than their incomes. Many consider credit to be their saving grace,” the report said “Individuals facing se­vere financial problems will do almost anything to retain their access to credit”.

The average owing on credit cards fell for the third consecutive study to $20,776, down l2 per cent from two years ago.

However, about 18 per cent of debt­ors have at least one payday loan, up from 12 per cent two years ago, the study found. The average payday loan debt increased by 12 per cent to $2,749, an amount that equalled 11.3 per cent of their monthly take-home pay, the study found.

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The typical insolvent debtor is pay­ing a blended rate of 19 per cent or more per year in interest on all his debt, the report said That means Joe Debtor is spending roughly $889 a month on interest, an amount equiv­alent to almost 37 per cent of his take-home pay.

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A PERSONAL NOTE:

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WHY DOES THIS ECONOMIC CONDITION EXIST IN CANADA IN 2015?

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WHY IS FINANCIAL LITERACY NOT TAUGHT AS A COMPULSORY SUBJECT IN PUBLIC SCHOOL?

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WHY IS PERSONAL FINANCE A TABOO SUBJECT IN OUR ELEMENTARY SCHOOLS AS IS SEX AND RELIGION?

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WHO IS RESPONSIBLE BESIDES PARENTS?

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WHO CARES?

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NOT A GREAT SOCIO ECONOMIC REPORT CARD FOR A SOPHISTICATED NATION

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