Why Young Adults Are Filing for Bankruptcy in Ontario
Posted on: October 28, 2025Posted in Bankruptcy, Financial Advice | Comments Off on Why Young Adults Are Filing for Bankruptcy in Ontario
Filing for bankruptcy in Ontario is becoming a reality for more young adults as they face overwhelming financial pressure. From student loans and credit card debt to unstable employment and rising living costs, the financial landscape for millennials and Gen Z in Canada has become increasingly difficult to navigate. As a result, more young people are turning to bankruptcy in Ontario as a last resort—but many still don’t understand that bankruptcy is a legal solution designed to help them reset and rebuild.
The Debt Crisis Facing Young Adults in Ontario
Young adults in Ontario are entering adulthood with unprecedented levels of debt. According to recent data, Canadians aged 18 to 34 carry some of the highest levels of unsecured debt, including:
- Credit card debt
- Student loans
- Personal loans
- Buy-now-pay-later balances
- Overdrafts and payday loans
Many are juggling multiple payments while earning entry-level wages or working in precarious gig roles. The result? A growing number of young Ontarians are falling behind on payments, facing collection calls, and experiencing severe financial stress.
There is no single cause behind the growing number of young adults filing for bankruptcy in Ontario, but there are recurring factors that paint a clear picture of a generation under financial stress. Let’s explore the most common reasons.
Credit Card Debt and Poor Financial Literacy
Many young adults begin using credit cards in their late teens or early twenties without fully understanding how interest works or how quickly balances can grow. It’s easy to spend more than one can afford—especially with the pressure of social media and lifestyle expectations.
Missed payments lead to growing interest charges, and soon minimum payments are all a borrower can manage. Eventually, the situation becomes unmanageable.
Credit card debt is one of the most common types of unsecured debt included when filing for bankruptcy in Ontario, and young adults often carry balances well beyond their ability to repay.
Underemployment and Income Instability
Ontario’s job market has shifted dramatically in the past decade. While some sectors are booming, many young adults are stuck in part-time, contract, or gig work with no benefits and unpredictable income. This instability makes it difficult to budget, save, or manage debt responsibly.
Without a consistent income, even modest debt can spiral out of control. Missed payments lead to penalties, interest hikes, and damaged credit—creating a cycle that’s hard to escape. For many, filing for bankruptcy in Ontario becomes the only viable way to stop the bleeding and start fresh.
Rising Cost of Living and Housing
The cost of living in Ontario—especially in cities like Toronto, North York, and Mississauga—has skyrocketed. Rent, groceries, transportation, and utilities are consuming a larger share of young adults’ income than ever before. Many are forced to rely on credit just to cover basic expenses.
This reliance on credit leads to mounting credit card debt, which often carries high interest rates. When minimum payments become unaffordable, and debt collectors start calling, bankruptcy in Ontario may be the only way to regain control.
High Student Loan Debt in Ontario
Student loan debt is one of the leading causes of financial hardship among young Canadians. With the cost of higher education continuing to climb, many young adults graduate with tens of thousands of dollars in federal and provincial student loans.
Although government student loans cannot usually be discharged in bankruptcy unless they are more than 7 years old, the burden of repayment often leaves borrowers unable to manage their credit card debt, car loans, or personal loans. These unsecured debts quickly spiral out of control, leading some to consider declaring bankruptcy in Ontario as a last resort.
Buy Now, Pay Later Culture
With the rise of “buy now, pay later” platforms, it’s easier than ever for young adults to purchase items on credit without immediate consequences. These platforms often come with high fees or late penalties, and multiple purchases can create overlapping repayment schedules that are hard to track.
This culture encourages overspending and normalizes debt, which can lead to an unhealthy relationship with money and a false sense of financial security.
The Role of Consumer Proposals
Before filing for bankruptcy, many young adults explore consumer proposals in Ontario. A consumer proposal is a legally binding agreement to repay a portion of your unsecured debt over time—usually at a reduced amount and with no interest.
For those with a stable income but overwhelming debt, a consumer proposal in Ontario can be a powerful alternative to bankruptcy. It protects assets, avoids bankruptcy’s stigma, and offers a structured path to financial recovery.
However, whether you choose a consumer proposal or bankruptcy, the first step is always the same: consult a Licensed Insolvency Trustee (LIT).
Bankruptcy Is There to Help You Move Forward
It’s important to remember that bankruptcy in Ontario isn’t a punishment—it’s a legal process designed to help people deal with debt they can’t manage on their own.
As Licensed Insolvency Trustee Richard Killen explains:
“The BIA is the only Canadian legislation ‘designed to allow individuals to resolve an otherwise unsolvable debt problem.’ A visit to a trustee is the only sure way you can discover and understand ALL your options, so consult a LIT as soon as you can.”
This highlights why getting professional guidance matters. A Licensed Insolvency Trustee (LIT) will assess your unique financial situation, walk you through all available options—including consumer proposals and bankruptcy in Ontario—and help you choose the solution that aligns with your goals.
Rethinking Bankruptcy: A Legal Path to a Fresh Start
Financial stress doesn’t just affect your wallet—it impacts your mental health, relationships, and overall well-being. Many young adults report anxiety, depression, and sleepless nights due to debt. The shame and stigma surrounding bankruptcy often prevent them from seeking help early.
By reframing bankruptcy in Ontario as a legal and strategic solution, we can help young adults take control of their finances and protect their mental health. The sooner you speak with a Licensed Insolvency Trustee, the more options you’ll have.
What Bankruptcy Can and Can’t Do
When you file for bankruptcy in Ontario, several immediate protections and benefits take effect:
- Debt Collection Stops – Creditors must stop calling, sending collection letters, or taking legal action.
- Wage Garnishments End – Any current wage garnishments are lifted.
- Debt Is Discharged – Most unsecured debt, including credit card debt, personal loans, and payday loans, is eliminated.
- Fresh Start – After completing the bankruptcy process, you can begin rebuilding your credit and financial life.
While bankruptcy in Ontario can eliminate most unsecured debt, it’s not a magic wand. It doesn’t erase secured debts like mortgages or car loans unless you surrender the asset. It also doesn’t automatically discharge student loans unless specific conditions are met.
That’s why consulting a Licensed Insolvency Trustee is essential. They’ll help you understand what debts can be discharged, what assets you can keep, and whether a consumer proposal in Ontario might be a better fit.
Conclusion – Reclaiming Financial Control
The financial challenges facing young adults in Ontario are real—and growing. But so are the solutions. Whether you’re dealing with credit card debt, student loans, or unsecured debt, it’s crucial to understand that bankruptcy in Ontario is a legal, federally regulated option designed to help you reset.
Many young adults are struggling—but don’t realize that bankruptcy is a legitimate legal tool. It’s a legal option—and sometimes the smart one.
If you’re feeling overwhelmed, don’t wait. Reach out to a Licensed Insolvency Trustee today to explore your options. Whether it’s a consumer proposal or filing for bankruptcy in Ontario, the right plan can help you rebuild your credit, protect your assets, and take control of your future.
Ready to Hit Reset on Your Finances?
If debt is holding you back, don’t wait until it becomes unmanageable. Filing for bankruptcy in Ontario or exploring a consumer proposal could be the reset you need. Speak with a Licensed Insolvency Trustee today to understand your full range of options—confidentially, legally, and without judgment.
Your fresh start begins with one conversation. Book your free consultation now.
