Canada

Canadian Consumer Insolvencies Soar 28%, Biggest Monthly Jump In Over 10 Years

The Canadian economy is picking up speed, and so is the number of consumer insolvencies. Office of the Superintendent of Bankruptcy (OSB) data shows March saw a sudden increase in filings. The unexpected monthly increase was the biggest in almost a decade. Consumer insolvencies are now at the highest level since the pandemic first began.

Canadian Consumer Insolvencies Make The Biggest Jump In Over 10 Years

Canadian consumer insolvencies, which include consumer proposals and bankruptcies, made an abrupt climb. Canadians made 9,224 filings in March, up 22.8% from a month before. This still works out to 16.4% fewer filings than the same month a year before.

Canadian Consumer Insolvency Filings

The monthly number of consumer insolvency filings across Canada.
Source: OSB; Better Dwelling.

There are a few interesting points to take away from these very choppy numbers. The number of monthly filings is still much lower than typically seen, which has been a theme throughout the pandemic. It was the highest number of filings since the pandemic began. Most interesting, the monthly growth was the largest seen in over a decade. Filings are slow, due to the number of programs allowing deferrals. However, things appear to be ramping up.

The Insolvency Backlog May Be Starting To Clear

Despite some acceleration of consumer insolvency growth, numbers are still unusually low. The first quarter of 2021 saw 28.3% fewer consumer insolvencies than 2020. Total filings over the 12-month period ending March 2021 are also 36.8% lower than the previous period.

CAIRP, an industry group representing insolvency professionals, provided some insights. “Filings fell significantly in April 2020 as Canadians faced COVID-related financial uncertainty,” explained Mark Rosen, the organization’s chair.

Creditor programs and government aid helped delay, or even drop, insolvency filings. However, just because lenders defer payments, doesn’t mean people can pay them later. It buys enough time to fix some household debt issues, but for many, it only delays the filings.

“They remained low over the last twelve months with government aid programs and creditor flexibility helping many people who were already facing insolvency delay the inevitable. Now it seems we are starting to see that backlog emerge,” he said. 

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7 Comments

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  • Jamie 5 months ago

    If you can’t pay your bills, talk to an insolvency specialist. I’m not sure exactly how consumer insolvencies work, but with business, you can end up with much better terms.

    You’re not used to the lender if you delay and default, or make payments you can’t afford and default on the remainder.

  • Mo 5 months ago

    What happened to pent-up savings, low-interest rates, and rising home values solved the insolvencies climbing before the pandemic?

    Big emphasis on it being lower than pre-pandemic. Banks have loans on their books 120+ days overdue that have been rising. They don’t want to collect. This is just a trickle of the people that have decided to take care of their stuff before it spirals out of control.

    • James Ling 5 months ago

      The people with pent up savings aren’t the ones looking at insolvency… it’s the fast food workers and retail store workers that were clobbered by covid.

  • StupidCanadians 5 months ago

    My first house in 1991 was at 12% mortgage rate, so….
    A $500,000 home with 20% down ($100k)
    Monthly mortgage payment: $4,128.00

    I really hope it never gets that high again, but back then it was normal and accepted……….

    • Mikhael 5 months ago

      I didn’t know you could get a house in Canada for $500,000!

      • Demetrios 5 months ago

        Come to Calgary, buy for $500K or less and enjoy 🙂

    • James Ling 5 months ago

      BoC couldn’t even crack +150 basis points over a 10 year period without starting to drag the economy. Global low rates are here to stay for minimum few decades.

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