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TORONTO – November 3, 2023 – Consumer insolvency filings in Canada dipped slightly in the third quarter (-2.4%) after reaching a four-year high last quarter, according to the latest statistics released by the Office of the Superintendent of Bankruptcy (OSB). When compared to the same quarter last year, consumer insolvencies were up 17.8%, inching closer to pre-pandemic levels.

“Year-over-year consumer insolvencies are way up and have been for the last six consecutive quarters as they work their way back to pre-pandemic numbers. The official statistics don’t reveal the full scale of serious indebtedness because many wait years before they consider legal debt-relief options,” 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. “Many are struggling to keep up with the rising price of essentials and taking on more debt as a temporary measure to make ends meet but it ends up becoming unmanageable.”  

An average of 331 Canadians filed for insolvency each day in the third quarter, a total of 30,471. With many Canadians seeking help with mounting personal debt, the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) is urging Canadians to beware of a growing number of debt relief scams.  

“Feeling overwhelmed or at the point of crisis is what propels many to finally reach out for debt help. At that point, they are also the most vulnerable to debt relief scams that may involve high-pressure sales tactics or unrealistic promises to quickly solve their debt problems or to fix their credit score,” explains Bolduc.

Debt relief scams often target indebted consumers by falsely promising insolvency options like consumer proposals and bankruptcies. Some unlicensed debt advisory firms charge hundreds or even thousands of dollars in unnecessary fees for services they are not licensed to provide and often misrepresent the services they can offer.   

“With many Canadians struggling financially, there is more potential for them to be lured in by promises of a quick fix which will leave them worse off. That is something they can avoid by speaking with a licensed professional, such as a Licensed Insolvency Trustee.” 

As part of the ongoing efforts to help Canadians find the right solution to take control of unmanageable debt, the Office of the Superintendent of Bankruptcy (OSB) recently revamped the online  Debt Solutions Portal,  developed in collaboration with CAIRP. The portal provides key information for consumers to consider when searching for debt solutions based on their individual circumstances. It also includes a short questionnaire to help determine the debt-relief options that may be available for them and a side-by-side comparison of three possible debt solutions: a debt management plan, a consumer proposal and bankruptcy and provides them with options to find Licensed Insolvency Trustees across Canada.

“Canadians can feel confident that when they seek advice from a Licensed Insolvency Trustee, they are dealing with someone who has demonstrated they have the knowledge, experience, and skills to help them make informed choices to deal with their debt. They are the only debt-relief professionals in Canada legally required to offer a complete financial assessment, explain all the options for debt-relief and offer unbiased advice,” says Bolduc.

Business insolvencies reach highest volume in ten years

The number of Canadian business insolvencies rose in the third quarter to the highest level in ten years, inching up 3.6% compared to the previous quarter. Under pressure from higher borrowing costs and waning consumer demand, a total of 1,129 business insolvencies were filed in Q3, 41.8% higher than the same quarter of last year and flying past pre-pandemic numbers. Filings were up 36.5% compared to the same quarter of 2019.

“The number of businesses being wound up has increased again as firms are hit by the withdrawal of COVID-era support, higher interest rates and dwindling consumer spending,” says Bolduc. “But the increase in business insolvencies isn’t all bad news because it means they are taking proactive measures to put themselves on a more stable financial footing and working with federally regulated Licensed Insolvency Trustees to explore restructuring options.”

Bolduc says that ‘hidden insolvency’ is not accounted for in the insolvency figures. Many Canadian businesses – especially small businesses – choose to simply close their doors and walk away rather than filing an insolvency.

“Many companies emerged out of the pandemic already over-leveraged and now they have the added pressures of higher borrowing costs, less access to capital, and high inflation leading to increased costs. It is inevitable that some will be significantly challenged, especially those in consumer-facing sectors,” he explains.

For the 12-month period ended September 30, 2023, insolvencies filed by businesses increased 37.0% compared to the 12-month period ended September 30, 2022. Accommodation and food services, retail trade and construction registered the biggest increases in the number of business insolvencies.

“When distressed businesses seek the assistance of a Licensed Insolvency Trustee, they may have more restructuring options available to them and even alternatives to bankruptcy that can benefit the business and employees.”

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