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 FilingsThe 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.
Like this post? Like us on Facebook for the next one in your feed.