Homeowner insolvencies on the rise

The average insolvent debtor owed $54,084 in unsecured debt in 2023, a 9.7 percent increase from 2022, primarily driven by a resurgence in credit card debt and homeowner insolvencies. The pace of growth was the highest seen since 2011, says a study by licensed insolvency trustees Hoyes, Michalos & Associates Inc.

"Credit card debt balances are increasing as households use credit to make ends meet in a rising cost environment and as indebted homeowners use credit cards to keep up with mortgage payments," says Doug Hoyes, licensed insolvency trustee.

Higher-income insolvencies became more prevalent in 2023, coinciding with changing demographics. While insolvent debtors aged 30 to 39 continue to represent the largest percentage (31.7 percent) of all insolvencies, the trend in 2023 was towards an older debtor. Insolvencies involving debtors aged 40 and older increased, rising to 53.4 percent of all insolvencies from 51.0 percent in 2022.

Although the percentage of insolvent debtors who own a home remains low by historical standards, the rate doubled in 2023 to four percent. Insolvent homeowners have nearly double the unsecured debt ($77,780) of the typical insolvent debtor.

"As long as the cost of living and interest rates remain high, we expect consumer insolvencies will continue to rise in 2024 at the current pace of 20-30 percent," says Hoyes.