TORONTO – November 12, 2024 – As November marks Financial Literacy Month, the latest national insolvency statistics highlight Canadians’ persistent debt struggles. A total of 34,588 consumer insolvencies were filed in the third quarter of this year – an increase of 13.5% over the same quarter last year, according to the Office of the Superintendent of Bankruptcy (OSB). The Canadian Association of Insolvency and Restructuring Professionals (CAIRP) highlights that for the 10th straight quarter, year-over-year increases remain in the double-digits, a trend that began in the second quarter of 2022 and underscores the ongoing financial strain on Canadians.
“Canadians are facing mounting debt loads alongside a persistently high cost of living," says André Bolduc, Licensed Insolvency Trustee and Chair of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), the national voice on insolvency matters in Canada. “While inflation is easing, this simply means that prices aren’t climbing as quickly as before. And at the end of the day, everyday essentials like groceries still cost more than they did in the past, leaving many Canadian households grappling to manage their budgets.”
There were on average about 376 consumer insolvencies filed by Canadians each day in the third quarter of 2024. Filings in the third quarter of this year remained relatively consistent with the second quarter of this year, dropping a modest 1.4%. In September 2024, the most recent month of data available, consumer insolvencies increased 8.8% over September 2023, and remained relatively stable over August this year, increasing 0.6%.
“We are seeing some short-term stabilization of consumer insolvencies, likely due in part to this year’s interest rate cuts and slowing inflation. However, a longer-term financial strategy will be critical for vulnerable individuals,” says Bolduc. “Many homeowners with mortgages up for renewal in 2025 may still face challenges, as a significant proportion will be renewing at higher rates. Additionally, those who accumulated significant debt during the period of high interest rates may still face a heightened risk of insolvency as they struggle to manage their growing financial burdens.”
In the 12-month period which ended September 30, 2024, consumer insolvencies increased 15.4%, from 117,305 in the 12-month period which ended September 30, 2023, to 135,368 in the same period this year.
“For those who are severely strained, long-term financial recovery will require careful budgeting and professional guidance,” says Bolduc. “Licensed Insolvency Trustees play a crucial role in guiding Canadians through the debt relief process, offering tailored solutions such as consumer proposals that allow individuals to repay a portion of their debts over a set period.”
A Licensed Insolvency Trustee will identify the most suitable debt relief options for the individual, including budget management strategies, negotiated settlements with creditors, and bankruptcy. To find a government-regulated Licensed Insolvency Trustee visit: www.cairp.ca/find-a-lit.html.
“Financial Literacy Month serves as a timely reminder for Canadians facing financial difficulties to gain a better understanding of their finances and the debt relief options available to them. Seeking help from a Licensed Insolvency Trustee can provide individuals with a clearer understanding of their financial situation and help them develop a path to long-term financial recovery,” says Bolduc.
Amongst the provinces, Ontario saw the largest year-over-year increase in consumer insolvencies in the third quarter of 2024, rising 20.2% to a total of 13,140 filings. Alberta followed with a 13.8% increase, bringing the total number of filings in the province to 4,886, while Quebec experienced a 12.2% rise, reaching 8,511 fillings.
Biggest third quarter on record for business insolvencies since 2009 Great Recession
Business insolvency filings in Canada totalled 1,312 in the third quarter of 2024, the largest third-quarter volume on record since Q3 2009, during the Great Recession. Continuing their rise year-over-year, business insolvencies increased 16.2% in the third quarter of this year compared to the same quarter of last year. However, business insolvencies dropped 14.9% in the third quarter of this year compared to the second quarter, signalling some relief as interest rates and inflation show signs of easing, though financial pressures for some Canadian businesses remain.
“Although quarterly business insolvencies have continued to increase year-over-year, the drop from the previous quarter this year suggests that some businesses are beginning to adjust to the current economic conditions. The recent declines in interest rates and resulting lower financing costs could be easing some of the margin pressures for businesses,” says Bolduc.
As small businesses continue to face high operational costs, there are measures which may provide some additional financial relief. Along with the long-awaited payment of $2.5 billion in carbon tax rebates, eligible small businesses in Canada will benefit from reductions in credit card processing fees.
“These measures may not resolve all financial pressures, but they can help alleviate some of the cash flow challenges that have been straining small businesses,” says Bolduc.
Still, business insolvencies in the third quarter of this year remain 58.6% higher than they were pre-pandemic, in the third quarter of 2019. Insolvencies filed by businesses were also 48.6% higher in the 12-month period which ended September 30, 2024, compared to the previous 12-month period which ended September 30, 2023. The most recent monthly data also shows business insolvencies in September 2024 increased 11.5% over September of last year and rose 8.3% over August this year.
“After years of navigating economic turbulence, some business owners may be experiencing ‘director fatigue’, explains Bolduc. “The constant pressure to adapt to shifting conditions can be challenging and draining, and for some, closing their doors may feel like the only path forward amid ongoing uncertainty.”
Bolduc says engaging with a Licensed Insolvency Trustee can empower business owners to make informed decisions by exploring all available options before walking away from the business.
“Licensed Insolvency Trustees can guide business owners through complex restructuring options that may offer a lifeline during challenging times,” explains Bolduc. “Through formal proposals to creditors, businesses can negotiate more favourable terms or extend repayment periods, giving a valuable opportunity to stabilize and grow.”
Licensed Insolvency Trustees are equipped to evaluate a business’s financial health, identify areas for operational improvements, and suggest cost-saving measures that enhance viability. As the only federally regulated debt professionals, they can negotiate binding agreements with creditors and offer legal protections, such as halting collection calls and wage garnishments.
Sectors experiencing the largest increases in business insolvencies in the third quarter of 2024 compared to the same quarter in 2023 were construction (+37); accommodation and food services (+32); and transportation and warehousing (+28). The construction sector accounted for the largest share of insolvencies in the third quarter of 2024, at 15.4%.
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