The number of insolvent Canadians skyrocketed by 33 percent on a year-over-year basis in January 2023, according to a new report, which blames rising inflation and high interest rates for the jump.
Consumer insolvency filings in January increased 14.2 percent from the month before, said CAIRP, citing the latest statistics from the Office of the Superintendent of Bankruptcy.
“The impact of high inflation and numerous interest rate hikes are taking their toll on Canadians, particularly those who are deeply indebted and therefore more financially vulnerable,” according to CAIRP vice-chair André Bolduc and a licensed insolvency trustee.
“These individuals and families may turn to credit cards or lines of credit to bridge the gaps in their household budgets—to pay for groceries and essentials, for example. In the higher interest rate environment, it is harder to pay off these debts,” he said.
More Canadians are using consumer proposals, a legally binding process that allows them to pay creditors a percentage of outstanding debt, administered by a licensed insolvency trustee, said Bolduc.
The process offers legal protection from creditors and stops collection calls and wage garnishees.
In January, 78.7 percent of consumer insolvencies were filed as proposals, a 5.6 percent increase from 73.1 percent in January 2022.
Across the country, Ontario (3,063), Quebec (2,167) and Alberta (1,370) recorded the largest volumes of consumer insolvencies in January.
The provinces with the largest percentage increases in consumer insolvencies were Manitoba (66.9 percent), Nova Scotia (55. percent), and Alberta (41.7 percent), but all provinces experienced an increase, CAIRP indicated.
Business Debts
Businesses are also facing hurdles, according to CAIRP.
“Business insolvency filings in January surged, increasing 55.4 percent year-over-year. Compared to 2021, filings in January of this year were up 103.1 percent. Having surpassed pre-pandemic levels, January 2023 levels were 7.5 percent higher than in January 2020 before the onset of the pandemic,” said CAIRP.
Bolduc said many Canadian businesses are also struggling with the impact of higher interest rates, inflation, and less pandemic-related government support payments.
According to CAIRP, 331 businesses filed for insolvency in January, down only slightly from the previous month (-2.4 percent). For the 12-month period ending Jan. 31, 2023, the number of businesses that filed for insolvency was 39.1 percent higher than the 12-month period ending Jan. 31, 2022.
Those numbers do not include small business owners who simply close their doors without a formal process, added Bolduc.
Most businesses that suffered insolvencies filed as bankruptcies, at 79.5 percent.
