Four out of 10 insolvent debtors owed tax when they filed their tax returns in 2021. Personal income tax, HST, source deduction, and wealth tax are all examples of outstanding taxes.
Another worrying phenomenon is the increasing number of insolvent debtors grappling with student loan obligations. The average student loan debt among those who filed for student loans was $17,005, up 11.5% since the annual survey began in 2011.
“Emergency student loan relief doesn’t help everyone in the form of deferral and interest relief available during COVID-19 and was a factor in high outstanding student loan balances upon bankruptcy filing,” Hoyes said. “The pandemic has worsened the long-term repayment situation for many millennials, as they are more likely to work in precarious employment impacted by the COVID-19 lockdown.”
According to Licensed Insolvency Trustee Ted Michaelos, “Heavily indebted Canadians simply can’t seem to catch a break. COVID-19 has decimated our average client’s income, yet their housing and other costs of living continue to rise.” There are signs, without reason.
Overall, bankrupt tax debtors owed $63,572 in total unsecured debt, which was 25.3% more than the average bankrupt debtor’s total unsecured debt. In addition, one in ten (11%) self-employed people are bankrupt, with 7% citing company failure as the reason for their bankruptcy (compared to 4% for the average debtor). Those with tax debt had a 6.3% drop in income (compared to a 2.0% drop for all debtors), and 17% were unemployed (versus 15%).