Canadian insolvency experts say the official stats are just the tip of the iceberg
More Canadian consumers and businesses are struggling with their finances to the point of filing for insolvency but there will be many more heading in the wrong direction.
According to the official stats released Friday by the Office of the Superintendent of Bankruptcy, insolvencies in September 2023 were up almost 16% year-over-year with consumers filings up 15% and business filings up 40%.
The 12-month stats reveal a 22% increase to September 30, 2023, compared to the same period a year earlier. This included a 21.5% rise for consumer insolvencies with consumer proposals up 29% and bankruptcies up less than 1%. Proposals made up 74% of all consumer filings. For businesses, insolvencies were up 37% for the period.
Quarter-over-quarter figures show a 2.4% decline, but the total was still 18% higher than a year earlier. Month-over-month data shows a less than 1% increase overall.
An average of 331 Canadians filed for insolvency each day in the third quarter, a total of 30,471.
Reacting to the statistics, André Bolduc, Licensed Insolvency Trustee and Chair of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), said the underlying situation will be worse.
“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,” he said. “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.”
Businesses in trouble
With economic uncertainty, inflation, and interest rates all weighing on Canadian businesses, insolvencies rose in the third quarter to the highest level in ten years, inching up 3.6% compared to the previous quarter.
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.
“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.
Again, official stats do not include ‘hidden insolvencies’ where businesses decide to close without seeking help to restructure or otherwise deal with debts.
Debt relief scams
The CAIRP chair also warned that those who are already drowning in debt are more vulnerable to unscrupulous and fraudulent individuals operating debt relief scams.
“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, who 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.”
