Youth Debt in Quebec: A Concerning Situation

Mathieu Roy, Licensed Insolvency Trustee and Financial Recovery Advisor, was invited to appear on the J.E show to comment on the financial situation of young people in Quebec. Link: https://www.tvaplus.ca/tva/j-e/saison-31/episode-909-jeunes-et-dans-le-rouge-1098375219

With rising inflation and interest rates, more people are filing for insolvency. This trend is especially worrying for Quebecers aged 18 to 25, who are finding it harder to make ends meet.

Since the pandemic ended in 2022, the debt of young Quebecers has gotten worse. They are now the most indebted age group in the country. Some have no choice but to declare bankruptcy. In this uncertain economy, many are worried about their financial future.

The Financial Situation in Quebec

Financial stability is currently fragile across the globe. The pandemic has had devastating effects on many people and businesses, causing a rise in insolvency and bankruptcy cases. Many people now live with ongoing financial stress.

Young Quebecers face an uncertain financial future. The cost of living has become so high that many of them are accumulating debt they cannot repay. Some become insolvent as early as age 20, which can have serious long-term consequences.

What Causes Debt Among Young People?

Debt among 18- to 25-year-olds is mainly caused by easy access to credit, leading to credit card debt, job insecurity, and school-related costs, like student loans. A survey conducted by J.E. on the financial vulnerability of young people also revealed that a lack of financial literacy further contributes to their indebtedness.

Lack of Knowledge of Financial Management

Respondents highlighted the lack of personal finance education in the school system, especially in high school. In their view, better financial education would help young people manage their budgets more effectively and avoid debt in early adulthood.

Accumulation of Expenses

The current economic context has changed our relationship with money. The rise of digital wallets has created a disconnect between purchases and their financial impact. The increasing number of monthly subscription services is another factor influencing current consumer habits and driving up spending.

Without a clear budget, small expenses can go unnoticed and add up to unmanageable costs. This may lead to a credit card balance that is hard to repay. In many cases, debt repayment becomes impossible without professional help.

Faced with this accumulation, some people who can no longer pay their bills turn to microloans. Often offered by private companies, these loans come with extremely high interest rates.

Before resorting to this option, it is strongly recommended to consult a financial advisor, who can assess your situation and guide you toward the solution that best suits your needs. Borrowing, even small amounts of money, can worsen your situation instead of helping you out of it.

What Are the Solutions to Indebtedness?

Depending on the severity of your financial situation, a licensed insolvency trustee can present the options available to you.

In some cases, a consumer proposal may be considered. This option allows you to free yourself from your debts without having to declare bankruptcy. If this solution does not apply to your situation, personal bankruptcy may then be considered.

Consumer Proposal

A consumer proposal involves debt consolidation, meaning consolidating all your debts into a single monthly payment. These debt payments are based on your repayment capacity (your budget) and allow you to settle your debts without your assets being seized.

This structure can be similar to taking out a consolidated loan, where multiple debts are merged into one manageable payment. However, unlike a traditional loan, a consumer proposal is a legal process that may offer greater protection from creditors.

For young adults, who rarely own significant assets, selling possessions is generally not effective. Handing over personal items to creditors usually does not reduce their debt enough. On the other hand, homeowners can use their property as financial leverage, either by selling or refinancing.

Personal Bankruptcy

When a consumer proposal is not an option, personal bankruptcy may be considered. Monthly payments are also required, however, these amounts do not take your budget into account. As a result, you may be required to hand over certain assets to your creditors to reduce or eliminate your debt.

Despite these consequences, this solution allows individuals to put an end to an unsustainable financial situation and find some relief from the stress of debt.

What Are the Consequences on Your Credit Score?

Filing a consumer proposal or personal bankruptcy is not without consequence, especially for a young adult with their whole life ahead of them.
In both cases, your credit score will be affected, and you will no longer have access to credit.

Buying a home or a car will therefore become much more difficult. A poor credit score can also affect your ability to rent an apartment or obtain car insurance, as these institutions usually conduct a credit check.
Therefore, it is essential to be well informed about the long-term impacts before making such an important decision.

Consulting a professional should always be the first step in evaluating the best option for your situation.

Debt among young Quebecers is not simply the result of poor personal decisions; it stems from a more complex and unstable economic context. In this new reality, it is crucial to learn how to better manage personal finances to ensure a more secure future.
If you are facing financial difficulties, act now and don’t hesitate to consult a licensed insolvency trustee. They can support you through this challenging time and help you find a path to financial freedom.