CAIRP data shows a rise for both consumer and business insolvencies in the first three months of this year
The number of Canadians individuals and businesses filing for insolvency has risen by the largest percentage since the fall-out from the financial crisis.
There was a 28% jump in consumer insolvencies and a 33% hike for business insolvencies in the first quarter of 2023 compared to a year earlier.
The last time these levels of annual increase were seen was in 2009 as Canada was still reeling from the impact of the global financial crisis.
Analysis by the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) reveals that a total 29,725 consumers filed for insolvency in the first three months of this year, an average of 330 every day.
There was a 15% rise quarter-over-quarter – the largest quarterly increase since 1990 - and March alone saw a 28% increase compared to the previous month, the largest monthly increase since 2009.
On a positive note, this figure was down 11% from the start of the pandemic in Q1, 2020.
“Consumer insolvencies in Canada are continuing a sharp upward trajectory towards levels seen pre-pandemic. With rising debt carrying costs and inflation, consumer insolvencies could rise beyond pre-pandemic averages later this year,” says André Bolduc, Licensed Insolvency Trustee and CAIRP vice-chair. “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.”
Business insolvencies
More than 1,000 Canadian businesses filed for insolvency in the first quarter of 2023.
This was a 33% year-over-year increase and marks the fifth quarter in a row that business insolvencies have increased by over 30% year-over-year.
Business insolvencies in Q1 were 21% higher than the same quarter in 2020 and 10% higher than the same quarter in 2019, as filings continue to trend up.
“Higher borrowing costs are starting to weaken consumer demand, which is likely to negatively impact businesses, particularly those who are already struggling to manage their own costs of borrowing and increasing supply costs,” said Jean-Daniel Breton, Chair of CAIRP.
He noted that inflation and interest rates are overwhelming for those businesses that may already be struggling with pandemic debt.
