Toronto Households Are Going Broke – Fast. Insolvencies Rise 18%

Canadian insolvency filings are on the rise, and the country’s largest city is far from immune. Office of the Superintendent of Bankruptcy (OSB) filings show Greater Toronto insolvencies climbed fast in Q4 2019. The whole province of Ontario has seen an acceleration in the number of filings, with the second largest growth in the country last year. It appears Toronto, which is seeing faster growth, is driving this trend.

Insolvencies Vs Bankruptcies

First, let’s quickly cover some of the lingo that may be unfamiliar to people outside of finance. There’s two types of insolvency in Canada – consumer proposals and bankruptcy. Consumer proposals are a formal agreement with creditors to repay debt, at a fraction of the amount and/or over a longer period. Bankruptcy is when borrowers hand over their assets, subject to some exceptions, in exchange for a discharge from certain types of unsecured debt. Both are administered by a licensed insolvency trustee (LIT). Both are signs of a person or entity swimming in too much debt.

Neither is ideal, but one is a little less bad than the other. Consumer proposals are generally for smaller amounts, and earlier intervention. Bankruptcies are often for larger amounts, and/or when more immediate relief is needed. Consumer proposals allow users to keep more of their assets, and have a smaller impact on credit. Once again, both aren’t great situations – but one is a little better than the other. In certain situations, bankruptcies are a better option for the borrower. There’s more to it, so if you’re actually looking to file for insolvency, discuss it with a LIT. For today, that’s pretty much all you need to know to understand these stats.

Toronto Insolvencies Made A Big Jump At Year End

Greater Toronto insolvencies were climbing quickly at the end of last year. There were 4,385 insolvency filings in Q4 2019, up 19% from a year before. Breaking it down, bankruptcies represent 1,114 of the filings, up 3.1% from last year. Consumer proposals represent the other 3,271 filings, up 25.6% from a year before. Both segments are seeing substantial growth, but consumer proposals are soaring.

Greater Toronto Insolvency Filings

The number of insolvency filings made in 2019, for both Greater Toronto and Ontario.

Source: OSB, Better Dwelling.

Toronto Insolvency Filings Increased Over 18% Last Year

Greater Toronto generally saw similar growth throughout all of last year. The region’s insolvency filings hit 17,162 in 2019, up 18.8% from a year before. Bankruptcies represent 4,641 of those filings, up 2.6% over the same period. Consumer proposals represent the other 12,521 filings in the year, up 26.1% from a year before. There was some slight acceleration in the most recent quarter, but annual growth wasn’t too far off.

Greater Toronto Insolvency Growth

The percent change for insolvency filings made in 2019, compared to a year before.

Source: OSB, Better Dwelling.

Greater Toronto isn’t alone with rising insolvencies, with every province seeing a bump. In fact, last year Canada hit the highest number of filings since the Great Recession. Ontario in particular, showed 15% growth from a year before. That lands the province in number two, for annual growth – which gives Ontario the top spot for filings. Greater Toronto insolvencies are rising even quicker though, indicating problems are materializing faster.

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  • Reply
    Marc 4 years ago

    *popcorn gif*

  • Reply
    Trader Jim 4 years ago

    Keep in mind the GOVERNMENT has said people have been using their HELOCs to make everyday payments. Those people aren’t even on this stat, until prices stop rising, since they’ll just sell or quit claim before going into insolvency.

    • Reply
      Terry 4 years ago

      That brings up the bigger point that a default/quit claim/cure still isn’t an insolvency. Neither are defaults at private lenders, that end up being resolved in court. I’d like to see how those numbers are evolving. My understanding is it’s not pretty around BC, especially for aspiring developers.

      Canada has fragmented credit stats, and there’s no way to keep track of a comprehensive household failure number. Even the banks don’t entirely understand their own risk, due to the way information is obfuscated.

  • Reply
    Dan Cuff 4 years ago

    I see near Dixie Rd just north of the QEW is ok, Its because of all the old houses built after the war(2). Its the new houses in Mississauga ,Brampton have the high rate of insolvency. Who wants an old house ?

  • Reply
    Asterix1 4 years ago

    Median prices: Toronto: Detached
    JAN 2020 = 1,100,000$
    FEB 2017 = 1,100,000$

    Prices are stagnant, and falling since they did not climb with inflation. Markham median detached prices are the same as FEB 2016!

    Don’t trust RE salespeople, bank economists, CMHC and the rest of the lot. Its a falling house of cards, once recession hits, its going to get worse.

  • Reply
    michael 4 years ago

    “Once recession hits” is likely already on us. One leading indicator of recession that I’ve noticed since starting to work in Toronto 25 years ago is IT & banker employment. In the past six months I’ve seen a lot of techies and bankers either going unemployed for months or taking new jobs at steep pay discounts. It’s anecdotal but it has me (IT) looking for work in other markets.

    • Reply
      Gregory 4 years ago

      Yup the Detached bubble bursted in 2017.

      But Downtown condos are up 20% since April 2017

      Mostly because they were lagging so much between 2005-2015

      • Reply
        alvi 4 years ago

        Yeah the stress test really hit the detached homes to benefit of condos, It is amazing that
        present average price is at or above all time hights of 2017

      • Reply
        Canaduh 4 years ago

        Oh no, Gregory.
        The bubble is still strong.
        Both house and condo.

  • Reply
    Mossy 4 years ago

    It’s hard to reconcile this data with what’s happening in the Toronto SFD market right now. People bidding $1 million above ask etc.–all the froth and foolishness of 2017. I’m not a bear or a bull, just someone who looks at fundamentals and thinks this is unsustainable. But Toronto seems to be impervious to the laws of economics.

    • Reply
      Canaduh 4 years ago

      When they all go mad,
      Sit back and enjoy the show.
      Tick tock, tick tock. Boom.

      • Reply
        Bob123 4 years ago

        This is due to government policy of immigration. 1. People back home bring tons of money. 2. Families with double income think their combined incomes are new normal to buy 1M$ home and they dont shy away from any amount. 3. We know the chinese pattern.

  • Reply
    Proud and Bankrupt 4 years ago

    Rent has been rising in the M1R area. The Victoria Park Apartments are going for no less than $1,805 a month plus electricity for a one-bedroom. This is unaffordable.

  • Reply
    alvi 4 years ago

    Mossy I noticed a dramatic rise in asking price for single detached homes in my area in last few months, but some,not al,l of the asking prices(even above 2017 levels) are ridculous and will never sell

  • Reply
    Cash 4 years ago

    Just wait till you see the unadjusted employment numbers. ouch a lot of seasonal adjustments afoot. Go have a look at statscan.

  • Reply
    Brad 4 years ago

    With a consumer proposal people wipe out unsecured debt and it doesn’t touch their mortgage at all. So basically they get a pass to pay down consumer debt while having more disposable income… so until bankruptcies start piling up the insolvency level is either meaningless or even fuels housing further as a higher level of disposable post-proposal will keep consumer spending chugging along.

  • Reply
    Venkat 4 years ago

    I have never trusted the RE guys, they are hand in glove with the builders, always talking +ve. Hot Property on cp24 is a great example. Bunch of con guys.
    One need not be a great economist to understand basics. When one goes for bidding war and pays over the asking, this amount they will have to pay over their lifetime. No brainier. In the end the builders, RE guys, banks and the city become rich. Poor citizen is left to defend for himself/herself.

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