Report: Consumer insolvencies saw substantial growth during Q1

Annual increase was the largest since 2009, new study says

Report: Consumer insolvencies saw substantial growth during Q1

Consumer insolvency levels in Canada increased by 28.4% annually during the first quarter, marking the largest year –over-year increase since 2009, according to the Canadian Association of Insolvency and Restructuring Professionals.

In the first three months of 2023, an average of 330 individuals filed for consumer insolvency every day, amounting to 29,725 filings during that quarter alone, CAIRP said.

The quarterly increase of 14.8% also represented the greatest such growth since 1990. Still, Q1 filings were 10.5% lower than the same quarter in 2020, prior to the pandemic taking hold.

“Consumer insolvencies in Canada are continuing a sharp upward trajectory towards levels seen pre-pandemic,” said André Bolduc, licensed insolvency trustee and vice chair of CAIRP. “With rising debt carrying costs and inflation, consumer insolvencies could rise beyond pre-pandemic averages later this year.”

The majority of the insolvency filings in Q1 came from Ontario (10,299), Quebec (7,685), and Alberta (4,499), while the largest proportional increases were registered in Nova Scotia (45%), Manitoba (44.6%), and Ontario (31.8%).

Most consumer insolvency filings during the first quarter were proposals (78.9%, up from 74.2% in Q1 2022), CAIRP said.

Bolduc warned that any increases in the unemployment rate, taking the potential of a 2023 recession into account, could trigger a further surge in consumer insolvencies.

“With debt levels on the rise alongside interest rates, more individuals may turn to insolvency options as it becomes increasingly difficult to manage their debt obligations in the higher rate environment,” Bolduc said.