Canada’s high cost of living and snowballing household expenses continue to push people further into debt, as the rate of insolvencies in the country has reached a scary new high.
That’s according to the latest Canadian Association of Insolvency and Restructuring Professionals (CAIRP) report.
It found that 35,082 Canadians filed for consumer insolvency in the second quarter of 2024.
The Office of the Superintendent of Bankruptcy (OSB) noted a 12.4% increase from the same time last year.
Even more troubling is that the CAIRP found consumer insolvencies in Canada have reached a four-year high.
The last time the volume of filings surpassed 35,000 in a quarter was towards the end of 2019, before the pandemic.
CAIRP crunched the numbers and determined that, on average, about 386 Canadians filed for insolvency each day during the second quarter of 2024.
In a statement, André Bolduc, CAIRP chairperson, said that the four-year high in insolvencies underscores “the significant headwinds many Canadians are still facing.”
“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.”
He added that this results in Canadians often digging themselves further into the financial hole as they miss debt repayments, use their credit cards for daily expenses, and receive collection calls.
In the 12-month period ending June 30, 2024, consumer insolvencies increased by 16.5% compared to the same period last year.
Ontario had the highest rate of consumer year-over-year insolvencies in the second quarter of 2024, with 13,309 filings—an 18.3% increase.
Quebec had the second-highest insolvency increase (17.6%), with 8,594 filings, followed by a 10% jump for Alberta, which saw 4,900 filings.
Some positive news for business insolvencies
CAIRP notes that 1,541 Canadian business insolvencies were filed in the second quarter of this year, a 41.4% increase from the same time last year.
However, there is some positive news as quarter-over-quarter business insolvencies have dipped.
Business insolvencies dropped 23.1% in this year’s second quarter compared to its first.
Bolduc notes that this drop could signify “potential stabilization, perhaps in part due to businesses managing their finances more conservatively to meet pandemic support repayment obligations.”
“Falling inflation levels and recent interest rate cuts are likely to provide some relief to businesses,” he added.
Bolduc highlighted that consumer insolvencies are expected to remain high.
“While various economic factors influence the number of consumer insolvencies filed, debtors are most sensitive to interest rate changes,” he noted.
“Although interest rates are on the decline, there is a lag before these changes impact 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.”