Consumer and business insolvencies hit record highs
Canada’s rising insolvency rates reveal the growing financial stress affecting both individuals and businesses across the country.
About 34,588 Canadians filed for consumer insolvency in the third quarter of 2024, up 13.5% from the same period last year, according to the latest data from the Office of the Superintendent of Bankruptcy (OSB). Year-over-year consumer insolvencies have risen in double digits for ten consecutive quarters, starting in the second quarter of 2022.
“Canadians are facing mounting debt loads alongside a persistently high cost of living," said André Bolduc, chair of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), the national voice on insolvency matters in Canada.
Bolduc noted that while inflation has slowed, prices remain high, straining budgets further as essentials like groceries continue to cost more than in the past.
The challenge is particularly concerning for homeowners with mortgages up for renewal in 2025. With many likely facing higher interest rates, monthly payments could rise significantly, leaving those with pre-existing debt even more vulnerable to insolvency.
“We are seeing some short-term stabilization of consumer insolvencies, likely due in part to this year’s interest rate cuts and slowing inflation,” Bolduc said. “However, a longer-term financial strategy will be critical for vulnerable individuals.”
Bolduc pointed out that despite interest rate cuts and eased inflation in recent months, the outlook for some financially stretched households remains uncertain.
For the 12 months ending in September 2024, consumer insolvencies reached 135,368, up 15.4% from the previous year. On average, 376 Canadians filed for consumer insolvency each day in the third quarter of 2024.
In Ontario alone, insolvencies climbed by 20.2%, with other increases recorded in Alberta and Quebec, where rates rose by 13.8% and 12.2%, respectively.
Business insolvencies
Business insolvencies have also surged, with 1,312 filings in the third quarter of 2024, the highest for a third quarter since 2009. Year over year, business insolvencies are up 16.2%. Despite a 14.9% drop from the previous quarter, these numbers are still 58.6% above pre-pandemic levels from 2019.
“After years of navigating economic turbulence, some business owners may be experiencing ‘director fatigue’,” Bolduc explained. “The constant pressure to adapt to shifting conditions can be challenging and draining, and for some, closing their doors may feel like the only path forward amid ongoing uncertainty.”
Construction, accommodation, food services, transportation, and warehousing were among the sectors experiencing the largest year-over-year increases in insolvencies.
Read next: As mortgage renewal wave looms, how should brokers prepare?
Small businesses are facing sustained pressures from high operating costs, and while government relief measures, such as $2.5 billion in carbon tax rebates and reduced credit card processing fees, have provided some assistance, they remain under strain.
“These measures may not resolve all financial pressures, but they can help alleviate some of the cash flow challenges that have been straining small businesses,” Bolduc said in the report.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
