CAIRP: Q1 2023 Canadian Insolvency Statistics

Continuing Upward Trend, Consumer Insolvencies up 28% and Business Insolvencies up 33% Year-Over-Year
More than 29,700 people became insolvent in the first three months of 2023 – an average of 330 people each day
September 22, 2023

TORONTO – May 10, 2023 – Canadian consumer insolvencies increased 28.4% in the first quarter of 2023 compared to the same quarter last year, continuing an upward trend toward pre-pandemic levels and marking the largest year-over-year percentage increase since 2009, according to an analysis by the Canadian Association of Insolvency and Restructuring Professionals (CAIRP). In the first quarter of 2023, an average of 330 individuals filed consumer insolvency each day, resulting in a cumulative count of 29,725 and a 24.8% increase compared to the same quarter in 2021. However, filings remain 10.5% lower than the same quarter in 2020 at the onset of the pandemic.

Compared to the fourth quarter of 2022, consumer insolvencies were up 14.8%, the largest quarter-over-quarter increase since 1990. In the month of March alone, consumer insolvencies saw the largest month-over-month percentage increase since 2009, jumping 27.6%. For the 12-month period ended March 31, 2023, insolvencies filed by consumers were 19.4% higher than the 12-month period ended March 31, 2022.

“Consumer insolvencies in Canada are continuing a sharp upward trajectory towards levels seen pre-pandemic. With rising debt carrying costs and inflation, consumer insolvencies could rise beyond pre-pandemic averages later this year,” says André Bolduc, Licensed Insolvency Trustee and Vice-Chair of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), the national voice on insolvency matters in Canada. “With debt levels on the rise alongside interest rates, more individuals may turn to insolvency options as it becomes increasingly difficult to manage their debt obligations in the higher rate environment.”  

With some estimating a recession could hit as soon as the second quarter, Bolduc says any resulting increases to the unemployment rate could also cause an increase in consumer insolvencies.

“Consumer insolvency is typically triggered by a combination of various financial setbacks, with job loss being one of the primary catalysts,” explains Bolduc. “Many do not have the emergency savings necessary to cushion themselves in the case of a loss of income. Regardless of the circumstances, individuals who find themselves struggling to manage their debts should speak with a trusted debt professional such as a Licensed Insolvency Trustee for advice on the debt-relief options available.”

He says that the fear of societal judgment associated with bankruptcy often deters individuals from seeking expert guidance to address their debt issues. However, it is important to note that alternative avenues for debt relief exist, such as consumer proposals. This process enables a variety of relief measures, including the possibility for debtors to settle their debts with their creditors, by offering a percentage of the total amount owed.

Licensed Insolvency Trustees are the only debt relief professionals who can facilitate all the debt relief options available, including consumer proposals and bankruptcies. As the only federally regulated debt professionals, they are legally and ethically required to offer a full assessment of an individual’s financial situation and explain in detail all the debt-relief options, while providing accurate and unbiased advice. They are also the only debt professionals who can offer legal protection from creditor actions and stop collection calls and wage garnishments.

Those facing debt challenges can receive advice from a Licensed Insolvency Trustee with no commitment; most Licensed Insolvency Trustees offer the first consultation at no cost.

In the first quarter of this year, the majority of consumer insolvencies filed were proposals (78.9%). The share of proposals among consumer insolvency filings grew 4.7% from 74.2% in the first quarter of 2022 to 78.9% in the first quarter of 2023.

Across the country, Ontario (10,299), Quebec (7,685) and Alberta (4,499) saw the largest volumes of consumer insolvencies in the first quarter of 2023. All of the provinces experienced a year-over-year increase in consumer insolvency filings, with the largest percentage increases amongst the provinces seen in Nova Scotia (45.0%), Manitoba (44.6%), and Ontario (31.8%).

Business insolvencies make another steep year-over-year climb in the first quarter of 2023, increasing 33%

Business insolvency filings also continued their upward trajectory in the first quarter of 2023, increasing 32.6% year-over-year. This marks the fifth quarter in a row that business insolvencies have increased by over 30% year-over-year. Business insolvencies in Q1 were 21.2% higher than the same quarter in 2020 and 10.1% higher than the same quarter in 2019, as filings continue to trend up.

There were 1,070 business insolvency filings in the first quarter of this year, the highest volume in eight years. The latest insolvency data for March also shows a record number of business insolvencies, reaching the largest volume in 12 years with 435 filings.

Jean-Daniel Breton, Chair of CAIRP, says the data suggests businesses are under growing pressure, as some are still struggling with pandemic debt exacerbated by the impacts of inflation and higher interest rates. Compared to the previous quarter, filings were 6.7% higher in the first quarter of 2023. For the 12-month period ended March 31, 2023, 36.5% more businesses filed than in the 12-month period ended March 31, 2022. As a recession looms, harder financial times could be ahead for more Canadian businesses.

“Higher borrowing costs are starting to weaken consumer demand, which is likely to negatively impact businesses, particularly those who are already struggling to manage their own costs of borrowing and increasing supply costs,” explains Breton.

The exact consequences of insolvency depend on a number of factors, including the business structure but in some cases, it is possible to preserve the business through restructuring or corporate workouts. Regardless of the size or type of business, Breton advises insolvent business owners to seek professional advice about all of the debt relief or restructuring options available. Through a comprehensive review of the operations and finances of the business, Licensed Insolvency Trustees use their extensive specialized training and knowledge of governing legislation to guide businesses through financial hardship.

“Rather than opting to abruptly shut down their businesses and abandon them, certain business owners who face insolvency should consider seeking impartial guidance regarding potential debt relief solutions to restructure or wind down their operations,” advises Breton. “Licensed Insolvency Trustees are the sole professionals authorized to administer government-regulated insolvency options. Seeking their expertise can provide valuable insights and assistance in navigating the available avenues for debt resolution.”

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