CAIRP: July 2021 Canadian Insolvency Statistics
TORONTO – September 1, 2021 – While the fourth wave of the pandemic is prolonging financial uncertainty for many Canadians, the latest insolvency data from the Office of the Superintendent of Bankruptcy (OSB) shows fewer individuals and businesses are filing for insolvency. Compared to June, business insolvencies dropped 28.3 per cent in July, the largest month-over-month decrease since the onset of the pandemic in April 2020. During the month of July, 160 insolvencies were filed by businesses, the lowest volume on record in 35 years.
“Business insolvencies reached a record low in July. Government support has bridged the revenue gap for many businesses impacted by pandemic-related restrictions and will likely continue to do so at least until those extensions come to an end in October,” says Mark Rosen, Chair of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), the national voice on insolvency matters in Canada. “If businesses aren’t able to ramp back up to near pre-pandemic levels by then, we will see the number of insolvency filings begin to climb.”
The stress of the pandemic has been a heavy burden for many business owners. Rosen points out that many businesses that are struggling do not seek professional guidance to manage their debts or restructure. Many business owners choose to simply abandon their businesses rather than formally winding them down.
“I would advise business owners who are experiencing financial difficulties to seek professional advice. Some might be waiting for the government aid to run out before seeking help, but the sooner they reach out, the more debt relief or restructuring options they will have,” explains Rosen.
Licensed Insolvency Trustees can help business owners make informed decisions to deal with debt and help rehabilitate viable businesses.
Business insolvencies were down 21.2 per cent in the 12-month period ending July 31, compared to the previous year. The two sectors that saw the largest declines were the construction and retail trade sectors, while mining and oil and gas extraction; and finance and insurance saw the largest increases in insolvencies.
Regionally, Saskatchewan (-75%), New Brunswick (-50%) and Quebec (-40%) experienced some of the largest decreases in business insolvencies in July compared to the previous month. While most provinces observed a decrease, Ontario experienced a 4.2 per cent increase in business insolvency filings.
Consumer Insolvencies Drop, Remaining Below Pre-Pandemic Levels
Consumer insolvencies dropped 11.3 per cent in July compared to June. Just over 6,600 Canadians filed for insolvency in July, or about 212 per day, remaining below pre-pandemic levels. For the 12-month period ending July 31, the number of Canadians who filed decreased by 22.6 per cent compared to the previous year.
Looking at the provinces, Atlantic Canada experienced the largest declines in consumer insolvencies in July compared to the previous month. Prince Edward Island (-30%), Newfoundland and Labrador (-28.7%) and New Brunswick (-27.9%) all dropped by approximately thirty per cent. They were followed by Manitoba (-26.2%), Nova Scotia (-13.9%), British Columbia (-11.9%), Ontario (-11.2%), Alberta (-8.3%), Quebec (-7.1%) and Saskatchewan (-6.1%), which also experienced decreases in consumer insolvencies.
“The fourth wave and the resulting extension of income support for workers out of a job have extended the low consumer insolvency rates we have seen over the course of the pandemic,” says André Bolduc, executive board member of CAIRP and Licensed Insolvency Trustee. “This is likely masking some of the financial struggles that are just below the surface for many Canadians – those whose income has been heavily impacted due to COVID-19 and have had to supplement that income with government aid or credit.”
While these short-term fixes are helping to keep consumer insolvencies low for the time being, Bolduc suggests individuals look for longer-term solutions that can help them resolve their financial difficulties and discharge them from debt. Licensed Insolvency Trustees are the only federally regulated debt professionals who can offer guidance on all of the debt-relief options available to Canadians and take a customized, unbiased approach to determine the best solution to fit an individual’s particular situation, including longer-term effects like impact to credit score and projected debt-free date.