Why Are Canada Insolvency Filings Back at 2009 Levels?

Canada insolvency filings reached 13,254 in June, according to figures the Office of the Superintendent of Bankruptcy released on Monday. That is 5.7 per cent more than May and 11.5 per cent more than the same month a year earlier. The majority came from consumers rather than companies — ordinary households that ran out of room and handed the problem to a licensed trustee.

Set against the historical record, that number is uncomfortable. Only one June has ever been larger in this country: June 2009, in the middle of the global financial crisis. Nothing in between has come close. June also marked the sixth straight year of growth for the month, and filings have now roughly doubled compared with the same point in 2020.

Stretch the lens to a full year and the shape holds. There were 150,505 filings in the 12 months ending in June, up 5.3 per cent, or about 7,600 more than the previous 12 months. Do the arithmetic and that works out to roughly one Canadian household or business every three and a half minutes, around the clock, deciding it can no longer pay what it owes.

What 13,254 filings in one month looks like

June averaged about 440 filings a day. The monitor counts two different things under one label: straight bankruptcies, where assets are surrendered and most debts wiped, and proposals, where a trustee negotiates a repayment plan for a portion of what's owed. Proposals have become the more common route for consumers over the past decade, which means the headline figure captures a lot of people trying to avoid bankruptcy, not just those already there.

Why Canada insolvency filings keep climbing

Charles St-Arnaud, chief economist at Servus Credit Union, told BNN Bloomberg the rate has bounced around over the past year but now looks like it is settling near levels last seen in 2009. He points to two pressures working together on household budgets.

Debt built for cheaper money

Canadian households carry some of the heaviest debt loads in the developed world, most of it mortgage debt taken on when borrowing was historically cheap. Loans signed in that era have been resetting at higher payments, and a renewal that adds a few hundred dollars a month is enough to tip a stretched budget into arrears. Insolvency usually arrives months after that first missed payment, not immediately.

Paycheques that stopped stretching

The second pressure is slower and less visible. St-Arnaud describes purchasing power as having stagnated in recent years — wages technically rose, but not far enough to cover what groceries, rent, insurance and utilities now cost. When income flatlines and fixed costs don't, credit cards and lines of credit quietly fill the gap until they can't.

Insolvency rates "have been volatile over the past year but appear to be stabilizing near levels last seen in 2009," St-Arnaud said.

How this compares with the 2009 spike

The comparison is real, but the mechanism is different. In 2009 the surge came fast, driven by a sudden recession and mass layoffs; filings spiked, then receded as employment recovered. What's happening now has built for six consecutive years without a single dramatic trigger. That makes it less alarming week to week and harder to reverse, because there is no single shock to bounce back from.

Bankruptcy or a consumer proposal?

If any of this describes your own finances, the practical distinction matters more than the national statistic. Both options are handled only by a Licensed Insolvency Trustee, a federally regulated professional — not by a debt consultant charging fees to make an introduction. A few things worth knowing before you call anyone:

• A consumer proposal freezes interest and consolidates unsecured debt into one fixed monthly payment, usually over up to five years, and lets you keep your home and car if you keep paying those loans.
• Bankruptcy clears more debt faster but involves surrendering non-exempt assets, and exemptions differ by province.
• Both appear on your credit file for years — a proposal typically for three years after completion, a first bankruptcy for six or seven.
• The first consultation with a trustee is normally free, and filing legally stops wage garnishment and collection calls.

The trap most people fall into is waiting. Cashing out RRSPs or refinancing a home to service credit card debt often destroys protected assets that insolvency law would have shielded.

What to watch before the next report

July's figures land in September, and the number to watch isn't the headline total — it's whether the month-over-month increase keeps repeating. One 5.7 per cent jump is noise; three in a row is a trend. Also watch the business share, which has been the smaller slice but tends to move first when consumer spending softens.

For your own budget, the useful signal isn't the national count. It's whether you're covering minimum payments with new borrowing, and whether a mortgage renewal is coming in the next 12 months. If both are true, run the renewal numbers now, at today's rates, and talk to a trustee before the gap becomes a filing.