More businesses were also continuing to reach breaking point
More Canadian individuals and businesses saw their finances reach breaking point in the third quarter, with further increases in the number of insolvency filings.
Stats from the Office of the Superintendent of Bankruptcy (OSB) reveal that 34,588 consumer insolvency filings were made during the three months, the equivalent of an average 376 every day, representing a 13.5% increase year-over-year, although down 1.4% from the second quarter of this year.
The Canadian Association of Insolvency and Restructuring Professionals (CAIRP) says that the rising debt burdens faced by many Canadians are stretching finances to the limit. This has been the case for some time now with double-digit increases in consumer insolvency filings for 10 consecutive quarters now.
“While inflation is easing, this simply means that prices aren’t climbing as quickly as before,” said André Bolduc, Licensed Insolvency Trustee and chair of CAIRP. “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.”
September’s OSB figures show that consumer filings were up almost 9% year-over-year and for the 12 month period ended September 30, 2024, filings were up more than 15%. However, month-over-month filings were up less than 1%.
“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,” added 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.”
Ontario led the year-over-year increases in consumer insolvencies in the third quarter of 2024 with a total of 13,140 filings, up 20%. Alberta followed with a 14% increase, bringing the total number of filings in the province to 4,886, while Quebec experienced a 12% rise, reaching 8,511 fillings.
Business insolvencies
Canadian businesses also continue to find their finances challenging and 1,312 of them filed for insolvency in the third quarter of this year, the third highest number since the Great Recession of 2009.
The number of insolvencies were up 16% year-over-year, but the quarter-over-quarter story was a happier one with a 15% drop, no doubt aided by the reduction in inflation and interest rates seen in the quarter.
“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,” said Bolduc, noting that carbon tax rebates and reduced credit card costs should further ease pressure on business finances. “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.”
However, CAIRP’s commentary highlights that business insolvencies are almost 60% higher than they were pre-pandemic and were also almost 50% higher in the 12 month period ended September 30, 2024, than they were in the previous 12 month period.
September stats also show a 11.5% rise year-over-year and were up 8% month-over-month.
“After years of navigating economic turbulence, some business owners may be experiencing ‘director fatigue’, suggested 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.”
