Canadian insolvencies have steadily been on the rise, hitting a four-year high in the second quarter of this year, according to new data from the Office of the Superintendent of Bankruptcy.
Higher interest rates and inflation continue to be a heavy burden for Canadians as the latest OSB data reported a rise in both business and consumer bankruptcies and proposals.
The two jumped up 13.3% this past quarter, compared to the same time last year.
“Consumer insolvencies have reached their highest level in over four years, underscoring the significant headwinds many Canadians are still facing,” said André Bolduc, a licensed insolvency trustee and chair of the Canadian Association of Insolvency and Restructuring Professionals in a statement.
“When individuals are forced to allocate more of their paycheque to groceries and other basic necessities, less remains for other obligations such as credit card bills or debt servicing.”
Consumer insolvencies increased 12.3%, with 35,082 Canadians filing for insolvency compared to the first quarter of 2024.
A daily average of 386 Canadians filed for insolvency in the second quarter.
According to CAIRP, insolvencies haven’t surpassed the 35,000 threshold since the fourth quarter of 2019.
Business insolvencies saw an even greater spike of 41.1% annually, with 1,541 Canadian businesses filing for insolvency.
The business insolvency rate saw an increase of 58.2%, compared to the second quarter of 2019.
“The increase in consumer insolvencies is yet another unfortunate reminder that Canadian families bear the brunt of the cost of excess government spending,” Renaud Brossard, vice president of Communications at the Montreal Economic Institute told True North.
“If it wasn’t for the excess spending from all levels of government in recent years, inflation wouldn’t have been as high, and the interest rates needed to tame it wouldn’t have had to climb as much.”
On a quarterly basis however, business insolvencies dropped 23.1%, which Bolduc suggested may be an indication of potential stabilization.
“This drop might also indicate cautious optimism as businesses adapt to shifting economic conditions,” said Bolduc said.
“Yet, despite the recent drop, insolvency levels remain high and could rise again due to ongoing volatility. Small and medium-sized businesses tend to be particularly vulnerable to changes in consumer spending, so if price-sensitive consumers pull back on spending, these businesses would feel the pain right away.”
Bolduc noted that there are a variety of economic factors that affect insolvencies, like interest rate changes which hurt debtors the most.
While the Bank of Canada announced its second consecutive interest rate cut last month, Bolduc said it will still take some time before those changes can be seen in insolvency filings.
“Therefore, we expect insolvency activity to remain elevated as the recent rate cuts take time to positively affect Canadians’ wallets and provide relief for household budgets,” said Bolduc.