Is Canada seeing a calm before the insolvency storm?

Consumer insolvencies dropped in July as business insolvencies register worst monthly volume

Is Canada seeing a calm before the insolvency storm?

The protracted pandemic crisis has cast a cloud of financial uncertainty over both Canadian households and small businesses. And while extreme levels of debt could push many over the brink, the latest figures suggest that hasn’t happened yet.

Citing the latest data from the Office of the Superintendent of Bankruptcy (OSC), the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) said that fewer individuals and businesses filed for insolvency in July.

Business insolvencies dropped 28.3% compared to June, reflecting the largest month-on-month decrease since the pandemic’s onset; they were down 21.2% for the 12-month period ending July 31. July also saw 160 insolvencies filed by businesses – the lowest volume registered in 35 years.

“Government support has bridged the revenue gap for many businesses impacted by pandemic-related restrictions and will likely continue to do so at least until those extensions come to an end in October,” said CAIRP Chair Mark Rosen.

Rosen warned that the number of insolvency filings by businesses is bound to climb if they are unable to get back to near pre-pandemic levels before government supports expire in October. That’s practically a certainty, as polling from the Canadian Federation of Independent Business (CFIB) indicates the worst-hit businesses expect a two-year path to recovery ahead.

A similar trend is playing out for consumers, for whom insolvencies saw an 11.3% decline in July compared to June. A little more than 6,600 Canadians filed for insolvency during the month, which CAIRP said was below pre-pandemic levels. The volume of consumer insolvencies also reflected a 22.6% decrease for the 12-month period ending July 31.

“The fourth wave and the resulting extension of income support for workers out of a job have extended the low consumer insolvency rates we have seen over the course of the pandemic,” said CAIRP executive board member André Bolduc.

“This is likely masking some of the financial struggles that are just below the surface for many Canadians – those whose income has been heavily impacted due to COVID-19 and have had to supplement that income with government aid or credit.”


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