The cost of living in Canada continues to rise, bankruptcy rates are at their highest in years and Canadians are falling deeper into debt.
This is according to a new report from the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).
According to the latest data from the Office of the Superintendent of Bankruptcy (OSB), consumer bankruptcies increased 11.3% in May compared to the same month last year.
Individual applications reached 12,195, the highest monthly total since pre-pandemic October 2019. Canadians are filing an average of 393 applications per day.
Despite the June interest rate decline, “the rising cost of living and rising debt service costs continue to put pressure on budgets,” CAIRP President Andre Balduc said in a statement.
In the 12 months ending in May 2024, consumer bankruptcy filings increased 17.9% compared to the 12 months ending in May 2023.
The province with the highest year-over-year consumer bankruptcy rate in May 2024 was Saskatchewan, where the number of bankruptcy filings per day increased by 18.8 per cent to 347.
Ontario and Quebec had the second-highest increase in bankruptcy rates at 16 per cent.
It's not just personal bankruptcies that have seen a big increase.
According to CAIRP, there were 530 business insolvencies in Canada in May, up 41.7 per cent from the same period last year.
Compared to pre-pandemic levels in May 2019, the number of business insolvencies has increased by a staggering 67.6% this year.
Bolduc said these figures are “just the tip of the iceberg.”
“The latest bankruptcy numbers show that companies are filing for bankruptcy at levels higher than pre-pandemic, and it's also likely that more businesses are running into financial difficulties and choosing to simply close up shop and walk away rather than formally filing for bankruptcy,” he said.
This year's Canada Emergency Business Account (CEBA) loan deadline also placed a heavy burden on Canadian businesses.
CEBA is a government-funded, interest-free business loan introduced in April 2020, created to help businesses pay for expenses during the pandemic.
A recent study by the Canadian Federation of Independent Business (CFIB) found that more than 200,000 Canadian small businesses have had to take on new debt to repay CEBA loans.
“Bankruptcies continue to rise as more businesses delay paying taxes and increase their debt burdens in order to juggle them with other financial obligations,” Bolduc said.
The report noted that despite interest rates falling in June, it may still be some time before individuals receive “meaningful” financial relief, offering little hope about the future for indebted Canadians.
From the files of May Silvestre, Ireland
