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High, Low, or About Right? 
An Update On Canadian Consumer and Business Insolvencies

Ksenia Bushmeneva, Economist | 416-308-7392

Date Published: February 16, 2023




  • After declining during the pandemic, the number of Canadians experiencing financial troubles and filing for insolvency is on the rise. 
  • The negative dynamics may seem at odds with the red-hot labour market, but this trend in personal insolvencies reflects a normalization from the ultra-low levels of the pandemic. In both absolute and per capita terms personal insolvencies remain well-below their 2019 levels. 
  • Personal insolvencies increased coast-to-coast last year, in part driven by changes in household debt. Provinces with more favourable recent trends in  household debt-to-income ratios experienced smaller increases in insolvencies. 
  • Business insolvencies rose at an even faster clip last year. Bankruptcies increased across nearly all industries, but rose especially briskly in some of the sectors that were hit hardest by pandemic restrictions.
  • Looking ahead, financial headwinds, such as inflation and rising debt servicing costs, will likely persist or intensify this year.  The labour market is also expected to be less supportive. Together they are likely to push consumer insolvencies above their pre-pandemic average.
Chart 1 shows total consumer insolvencies filings, as well as consumer proposals and bankruptcies between 2007 and 2022. Consumer insolvencies and proposals hit the trough in 2021 and began to trend higher in 2022, increasing by 11 % and 21%, respectively. Bankruptcy filings remain low at below year ago level. Despite the increase last year, total consumer insolvency filings remained 27% below their level in 2019

After declining during the pandemic, the number of Canadians experiencing financial troubles and filing for insolvency is on the rise once again (see Chart 1). Last year, there were 100k filings – up 11% from 2021 level.  Despite the onset of the negative dynamics, it’s important to note that consumer insolvencies are rising from an unusually low level that prevailed during the pandemic and are still considerably below where they were prior to the health crisis. Out of every thousand adult Canadians, 2.9 filed for insolvency in 2021, the lowest rate since 1994. Last year, the insolvency rate edged up to 3.2 filings per thousand adults, but remained considerably below 4.6% seen in 2019. In absolute terms last year’s filings were 27% lower than the 137k claims filed in 2019.

Consumer Proposals Rise, While Bankruptcies Keep Falling 

There are some diverging trends underneath the deteriorating headline number. Insolvency filings can be divided into two main categories: consumer proposals and bankruptcies. It is the former which is driving the rise in insolvencies: proposals for debt restructuring are 21% higher relative to the year-ago level (Charts 1). Meanwhile, the number of people declaring personal bankruptcy continued to fall last year. Total bankruptcy filings submitted in 2022 were down 10% compared to the same period in 2021 and were less than half of their pre-pandemic level in 2019. This is consistent with the longer-term trend of rising preference among debtors to opt in for consumer proposals rather than bankruptcy. Last year, bankruptcies accounted for just under a quarter of all insolvencies, down from 40% in 2019.   

Reasons behind the rising popularity of consumer proposals over the bankruptcy filings likely stem from some key differences between these two types of insolvencies. One major difference is that when filing for a consumer proposal the debtor gets to keep all assets, whereas in the case of a bankruptcy most assets are surrendered. Additionally, the debt repayment period is longer in a case of insolvency – up to 5 years versus 9-21 months for bankruptcies – potentially leading to smaller and more manageable monthly payments. The duration of the negative impact on the debtor’s credit history may also be lower following a consumer proposal filing relative to bankruptcy.1 Last but not least, a regulatory change in 2009 which increased the maximum consumer debt limit in a consumer proposal from $75,000 to $250,000 also made it easier for borrowers with larger debts to file for a proposal thus avoiding bankruptcy.  

Why Are Consumer Insolvencies Rising?  

The rise in consumer insolvencies may seem at odds with the resilience seen in the labour market. The economy continued to add jobs last year, pushing the unemployment rate below pre-pandemic level, and wage growth accelerated amid labour shortages. However, as mentioned above, insolvencies are rising from unusually low levels reached during the pandemic period of generous government supports and near zero borrowing rates. As these supports were removed and consumer spending rebounded last year, bankruptcy trends have been in the process of normalizing.  

In addition, other financial headwinds have intensified. Inflation took flight squeezing household budgets and depleting savings (Chart 2). Adding to the pain, rents have also increased significantly. The vast majority of people filing for insolvency are renters, with only 16% owning a home.2 Furthermore, after plunging during the pandemic, unsecured debt levels rose rapidly last year, as consumers rushed to resume travelling, dining out and other sought-after activities (Chart 3). Credit card balances were 13% higher in November than a year ago, catching up to their pre-pandemic peak. Higher debt balances alongside rising interest rates have to led to an increase in debt servicing costs, accompanied by a deterioration in delinquency rates on credit card and auto loans (Chart 4).    

Chart 2 shows net annual savings per household by income quintile for four years: 2019, 2020, 2021 and 2022. It shows that, after increasing during the pandemic, net savings have been trending lower for all income quintiles. However, the two lowest income quintiles show the largest deterioration, with net savings declining to their pre-pandemic level.
Chart 3 shows outstanding balances for consumer credit (excludes home equity lines of credit) between 2019 and 2022. After declining during the pandemic, demand for consumer credit rebounded in 2021 and 2022, with balances surpassing their pre-pandemic level.
Chart 4 shows 90 days plus delinquency rate on credit cards and auto loans between 2017Q1 and 2022Q3. Both rates have declined during the pandemic, but have been trending higher in 2022, coming in close to their pre-pandemic level.

Regional Trends  

Insolvencies began trending higher coast-to-coast. In percentage terms, the largest increases were in British Columbia, Saskatchewan, Prince Edward Island, Ontario and Nova Scotia, while the remaining Atlantic and Prairie Provinces as well as Quebec saw below-national increases. Variation in year-over-year changes appears to be at least partially due to the changes in the level of household leverage across provinces (Chart 5). Provinces which saw large declines or comparatively small increases in household debt-to-income ratios over the last two years, such as Alberta, New Brunswick, Newfoundland & Labrador, Quebec and Manitoba, experienced smaller increases in insolvencies (note: debt-to-income ratio declines when income outpaces debt growth, or when debt declines).


On the other hand, provinces such as Ontario, British Columbia and Saskatchewan experienced relatively large increases in debt relative to income over this period of time. They also saw some of the largest gains in insolvency claims in 2022. This is also true for PEI and Nova Scotia.  However, the insolvency rate in those provinces is still considerably below the 5-year average ahead of the pandemic (Chart 6). On the other hand, Ontario, British Columbia, and Saskatchewan currently maintain only a narrow advantage relative to their respective pre-pandemic averages. 

Chart 5 shows a dot-plot chart with change in debt-to-disposable income ratio between 2020Q3 and 2022Q3 on the y-axis and year-over-year growth in insolvencies across all Canadian provinces. The chart shows a positive correlation between the change in debt-to-income ratio (leverage) and the increase in insolvencies. Provinces with smaller increase in leverage saw smaller increases in consumer insolvencies in 2022. Chart 6 shows the number of insolvencies per thousand people over the age of 15, also known as insolvency rate, across all Canadian provinces in November 2021 and November 2022 as well as the 5-year average insolvency rate between 2014 and 2019. The chart shows an increase in insolvency rate across all provinces other than Manitoba and Prince Edward Island in 2022. However, relative to the pre-pandemic, insolvency rate is still considerably below of where it was prior to the pandemic in Nova Scotia, New Brunswick, Quebec, Prince Edward Island, Newfoundland and Labrador. On the other hand, in Alberta Saskatchewan, Ontario, Manitoba and British Columbia, it is much closer to the pre-pandemic average.

What’s Ahead For Consumer Insolvencies

Chart 7 is showing the average effective rate on mortgage and consumer debt and mortgage debt between 2004 and 2024 (including a forecast for 2023 and 2024). It is showing that both interest rates will continue to rise rapidly in 2023 before edging slightly lower in 2024. For consumer debt, interest rate will surpass it prior peak reached in 2006-2008 period. For mortgage debt, the interest rate will not surpass its prior peak but will still be at the highest level since the Global Financial Crisis.

Consumer insolvencies are rising from low levels, but the trend is not our friend as it still captures deteriorating financial health of Canadian households. Last year was a tough one for consumer finances, marked by surging inflation and interest rates, falling equity values and home prices, and higher consumer debt balances. Looking ahead, these financial headwinds will likely persist or even intensify in 2023 and into 2024, likely pushing consumer insolvencies above their pre-pandemic average. 

Take inflation, for example: while we expect that inflationary pressures to subside this year, the cost-of-living pressures will remain acute with inflation still outpacing disposable income. Additionally, the labour market, which was a bright spot last year, will be less supportive this year. With jobs being less plentiful amid slowing economic growth, the unemployment rate is expected to increase by about 1.3 percentage point  over the next year and a half, rising above of where it was just prior to the pandemic (forecast). 

Lastly, the drag from higher interest rates on household finances via rising debt servicing costs will continue to intensify this year. While the Bank of Canada’s rate hikes have likely come to an end, interest rates (both the overnight rate and 5-year mortgage rates) are expected to remain elevated relative to the recent history (forecast). This means that the effective interest rates – average rates which households pay to service existing debt – will be higher than they have been historically (see Chart 7). As are result, the amount of income that households will need to allocate to service debt will surpass its pre-pandemic peak, reaching a new high (see report). Higher debt balances, and reduced savings and wealth cushions will further add to this pressure.

A Closer Look at Business Insolvencies

It’s not just consumer insolvencies that are on the rise, insolvency filings by businesses rose at an even faster clip last year. After increasing by nearly 40%, they are now only 10% shy of their pre-pandemic level. Unlike personal insolvencies, the rise in business insolvencies is being fueled by bankruptcies, rather than debt restructuring proposals, which represent a relatively small share of total filings (See Chart 8). 

The rise in business bankruptcies isn’t surprising. Similar to personal insolvencies, it partly reflects post-pandemic normalization. In addition, businesses continued to face a myriad of challenges last year: a surge in energy costs, labour shortages, higher input prices amid rising wages and inflation, and rapidly rising borrowing costs (Chart 9). 

Zooming in on industrial composition reveals that bankruptcies increased across nearly all industries (Chart 10). Mining, and oil and gas extraction and finance & insurance services were the only ones to buck the trend, faring better not only relative to the year earlier, but also relative to the pre-pandemic. In the case of mining, oil and gas industry, elevated commodity prices have likely helped to keep bankruptcies at bay, where as finance and insurance services likely benefited from the relatively low level of consumer delinquencies and the still-robust demand for credit last year. 

Chart 8 shows total business insolvencies filings (made up of proposals and bankruptcies), as well bankruptcies between 2013 and 2022. Business hit the trough in 2021 and began to rise briskly in 2022, increasing by 40% from their 2021 level and are now just 10% below their pre-pandemic level. The increase was led by higher bankruptcy filings.
Chart 9 shows a list of a various input costs tat were causing difficulties for small businesses in 2022 and 2019 based on the CFIB survey of small businesses Business Barometer. In particular it is showing the share of respondents reporting various costs as being an issue has increased in 2022, with particularly big increase in fuel and energy costs (over 70% of survey respondents cited this as an issue in 2022 versus over 40% in 2019), insurance, wages, borrowing costs and product input costs.
Chart 10 shows business bankruptcies across major industries in 2021 and 2022 as well as pre-pandemic average (2015-2019). It shows that in 2022 the number of bankruptcies increased in all industries other than mining, oil and gas and finance & insurance relative to the 2021 level. The largest increase in percentage terms were in industries that were hard-hit by the pandemic closures, such as accommodation and food, entertainment & recreation, retail trade, transportation, and other services. In these industries the number of bankruptcies is either close to or even above its pre-pandemic average.

On the other hand, bankruptcies rose briskly in some of the areas that were hit hardest by the pandemic lockdowns, such as accommodation & food, retail trade, transportation, entertainment & recreation and other services (i.e., hair and esthetic services, dry-cleaning and laundry, religious services etc). Accommodation & food and retail trade alone accounted for a third of the overall increase. These industries stand out not only because bankruptcy filings there were 40-70% higher than in 2021, but also because they have either surpassed or nearing their pre-pandemic levels. 

Looking ahead, some pressures, such as the elevated input prices and supply chain disruptions, will lessen this year. Filling in vacant positions may also become easier as the labour market becomes less tight. However, slowing consumer demand could weigh on profitability. Government loans, such as CEBA, issued during the pandemic are also due at the end of this year to qualify for partial loan forgiveness. About 62% of businesses participated in these programs, of these about 30% indicated that repaying pandemic loans may be a challenge,  with this share rising to 54% for businesses in accommodation & food services.3 All in all, given some lingering headwinds, it appears that business insolvencies will continue trending higher this year, but likely at a slower pace relative to 2022.  


  2. “Office of the Superintendent of Bankruptcy. Canadian Consumer Debtor Profile – 2021.”
  3. Statistics Canada. “The state of business financing and debt in Canada, fourth quarter of 2022.”