TORONTO – August 2, 2024 – The latest quarterly insolvency statistics for Canada show 35,082 Canadians filed a consumer insolvency in the second quarter of 2024, increasing 12.4% compared to the same quarter in 2023, according to the Office of the Superintendent of Bankruptcy (OSB). The Canadian Association of Insolvency and Restructuring Professionals (CAIRP) notes that consumer insolvencies have reached a four-year high, reflecting mounting financial pressures on Canadian households due to high living costs, debt servicing expenses, and the lingering impacts of rapid inflation.
“Consumer insolvencies have reached their highest level in over four years, underscoring the significant headwinds many Canadians are still facing,” 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. “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. This often results in missed debt repayments, using credit for daily expenses, receiving collection calls, and experiencing constant stress or losing sleep over financial worries—all of which are signs that an individual should seek professional debt help.”
On average, about 386 Canadians filed for insolvency each day in the second quarter of this year, totalling 35,082 consumer insolvencies in the second quarter of 2024. The last time the volume of filings surpassed 35,000 in a single quarter was in the fourth quarter of 2019 – pre-pandemic.
"While various economic factors influence the number of consumer insolvencies filed, debtors are most sensitive to interest rate changes. 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.”
Compared to the first quarter of 2024, consumer insolvencies in the second quarter rose 3.5%. In the 12-month period which ended June 30, 2024, consumer insolvencies increased 16.5%, from 112,694 in the 12-month period which ended June 30, 2023, to 131,251 in the same period this year.
“Filing a consumer proposal or bankruptcy can be viable options for deeply indebted Canadians, but these decisions should not be taken lightly. Rather than viewing them as a sign of defeat, these options should be seen as necessary financial tools. The insolvency system in Canada is designed to be a rehabilitative process,” says Bolduc. “A Licensed Insolvency Trustee will conduct a financial assessment, walk you through all the available debt relief options and advise on the best course of action. Should a consumer proposal or bankruptcy be the right option, they are the only debt professionals who are federally regulated and authorized to administer these important debt relief tools.”
Licensed Insolvency Trustees are required by law to offer a full assessment of an individual’s financial situation and explain in detail all the debt relief options. They are also the only debt professionals who can offer legal protection from creditor actions and stop collection calls and wage garnishments.
Consumers can receive advice from a Licensed Insolvency Trustee with no commitment. Generally, Licensed Insolvency Trustees offer free consultations and are available across the country, even in remote locations. To find a government-regulated Licensed Insolvency Trustee visit: www.cairp.ca/find-a-lit.html
By seeking guidance from a Licensed Insolvency Trustee as soon as debt problems arise, Bolduc says an individual can prevent further stress and deterioration of their financial situation.
The province experiencing the highest rate of increase year-over-year in the second quarter of 2024 was Ontario, increasing 18.3% to 13,309 consumer insolvency filings. This was followed by Quebec with a 17.6% increase in filings, reaching 8,594, and Alberta which saw an increase of 10%, rising to 4,900 filings.
Q2 business insolvencies up 41.1% year-over-year, down 23.1% compared to Q1
There were 1,541 business insolvencies filed in Canada in the second quarter of 2024, a significant increase of 41.4% compared to the same quarter last year. Quarterly year-over-year business insolvencies have been on the rise now for two years, making 10 consecutive double-digit increases since the first quarter of 2022.
Yet while year-over-year business insolvencies continue to make significant increases, quarter-over-quarter insolvencies have dipped. Business insolvencies dropped 23.1% in the second quarter of 2024 compared to the first quarter of this year. Still, business insolvencies in the second quarter of this year remain 58.2% higher than they were pre-pandemic, in the second quarter of 2019.
“The decline in business insolvencies from last quarter suggests a potential stabilization, perhaps in part due to businesses managing their finances more conservatively to meet pandemic support repayment obligations. This drop might also indicate cautious optimism as businesses adapt to shifting economic conditions,” explains Bolduc. “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.”
“Falling inflation levels and recent interest rate cuts are likely to provide some relief to businesses. However, these changes may not take effect quickly enough to alleviate the high debt-carrying costs and supply chain issues that continue to burden many struggling businesses,” he adds.
Bolduc says that some companies are so heavily burdened with debt that they are barely managing to stay afloat. They struggle to cover even the interest on their loans and are often just one adverse business event away from collapse. Commonly referred to as ‘zombies’, these firms often barely break even and they are often just one bad business hit away from closing their doors. Many of these businesses eventually choose to walk away from the business without formally winding it down – forgoing available debt guidance and potential restructuring options that may make the business viable again or protect employees who may be owed wages.
“Shifting from routine business management to handling the demands of a bankruptcy or restructuring process can be challenging for many business owners, especially owners of small to medium-sized businesses. The expertise and support of a Licensed Insolvency Trustee becomes immensely important during such transitions. They are uniquely qualified to help business owners explore all viable options based on the unique circumstances of the business, as well as its structure, size and assets,” advises Bolduc.
Bolduc says Licensed Insolvency Trustees are the only debt relief professionals who are legally and ethically bound to provide accurate, unbiased advice, and ensure a balance between the debtor’s and the creditor’s rights while also protecting employees.
For the 12-month period which ended June 30, 2024, business insolvency filings were 56.5% higher than the previous 12-month period which ended June 30, 2023.
Business insolvencies in the second quarter of 2024 were driven by those in the construction (+73); transportation and warehousing (+54); and administrative and support, waste management and remediation services (+53) sectors, which experienced the most significant increases in the number of insolvency filings compared to the second quarter of 2023. The construction sector alone accounted for 15.1% of all insolvencies filed in the second quarter of this year. Compared to the first quarter of 2024, the accommodation and food services sector experienced by far the largest decrease in filings (-165).
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