Record spikes for Canadian insolvency filings

CAIRP comments on sharp increases for individual and business filings

Record spikes for Canadian insolvency filings
Steve Randall

The continued pressure faced by Canadian individuals and businesses amid elevated inflation and interest rates is reflected in insolvency filings.

A Canadian Association of Insolvency and Restructuring Professionals (CAIRP) analysis of recent data from the Office of the Superintendent of Bankruptcy (OSB) shows the largest increase in business insolvency filings in 36 years, and the highest for individuals since 2009.

There were 4,810 business filings in 2023, a 41.4% increase year-over-year and the highest volume in 13 years. Comparing quarters, the fourth quarter saw a 34.7% rise from the third quarter and was up more than 51% year-over-year.

“Businesses have been struggling to cope with a myriad of financial challenges over the past year, including higher input costs, wage costs, and debt servicing costs, exacerbating the rocky footing many have been on ever since the pandemic,” says André Bolduc, Licensed Insolvency Trustee and CAIRP chair.

Things may well get worse when stats are released for the current quarter as the deadline for CEBA loan repayment arrived on January 19, which many business owners will not have met meaning extra costs from losing the forgivable portion of the emergency pandemic support loans. And pessimism about the economy is an added concern.

“Many businesses are already on a razor’s edge. The additional costs to service their debts due to higher interest rates will mean even less room to cover increasing costs of business going into 2024,” added Bolduc. “Some businesses may not be able to manage the increases to their monthly bills, especially if they are already finding it difficult to drum up sales. That strain, combined with any additional financial challenges or setbacks this year could force businesses to shutter.”

Consumers struggling

Meanwhile, the number of consumer insolvency filings in 2023 increased by the largest level since 2009 (23% year-over-year) with around 337 Canadians filing for insolvency each day for a total of more than 123,000 for the year.

There was a 4.4% increase quarter-over-quarter while fourth quarter filings were up 23% from the same period of 2022.

“Compounding the financial impacts of inflation and higher interest rates, many Canadians have not seen their income grow at the same pace as the cost of their daily expenses, making it increasingly difficult to manage bills and service debts,” commented Bolduc. “Without additional sources of income or a pay raise, households may feel they need to cut back further on spending habits or take on more debt to keep pace.”

With mortgage renewals at a higher rate exacerbating the issues for pressured households, Bolduc says people should seek help as soon as possible.