Consumer insolvencies rise by 3.8% in January year over year

Consumer insolvency filings rose by 3.8 per cent in January year over year according to new data from the Office of the Superintendent of Bankruptcy – the lowest increase for that month since 2022.

 

The OSB reported Friday that while consumer insolvency filings continued an upward trend, rising by 1,904 from December to 11,196 in January, the increase was much smaller than in the same month the two previous years.

 

In January, 2024, the total number of consumer insolvencies was up more than 23 per cent year over year. The increase was 33 per cent from January, 2022, to January, 2023.

 

“The increase of insolvency levels is slowing down,” said André Bolduc, the chair of the Canadian Association of Insolvency and Restructuring Professionals. “It’s still increasing and we’re still at high numbers, but it’s slowed down.”

Mr. Bolduc said part of the explanation could be that some households have accumulated savings and lower interest rates, which reduce borrowing costs, are starting to take effect.

 

Still, it’s not all good news. The number of consumers in Canada who sought formal relief from their financial obligations was still more than 12 per cent higher in January than the prepandemic level in January, 2019.

 

While economic headwinds are on the horizon, insolvencies may be rising slower than expected because unemployment rates are not increasing significantly and interest rates are lower than they were, said Doug Hoyes, an insolvency trustee at Hoyes, Michalos & Associates. “Consumers are still just hanging on.”

 

Statistics Canada reported Friday that the country’s real gross domestic product increased 0.6 per cent in the fourth quarter of 2024, after rising 0.5 per cent in the third quarter, with growth fuelled in part by higher household consumption.

 

But even though the inflation rate has declined, consumers are still grappling with high prices, said Mr. Hoyes.

 

In the 12 months ended Jan. 31, consumer insolvencies grew nearly 10 per cent from the same period a year earlier, with New Brunswick and Quebec seeing the largest spikes in January at 9.8 per cent and 9.2 per cent, respectively, according to the OSB.

 

The slower growth in consumer insolvencies could also suggest that individuals who are most financially vulnerable may have already sought debt relief in 2023 and 2024, leading to a stabilization in new filings.

 

“Over the past two years, we saw a sharp increase in insolvencies as many Canadians struggled with the combined impact of high inflation, rising interest rates and postpandemic financial pressures. Now, we could be seeing a moderation,” said Francisco Remolino, a licensed insolvency trustee at Remolino and Associates.

Total consumer debt in Canada jumped 4.6 per cent in 2024 from 2023 and reached $2.56-trillion at the end of the year, driven largely by non-bank auto loans, according to a February report from Equifax.

 

The same report showed that 11,000 mortgages in Ontario missed a payment in the fourth quarter of last year, almost three times more than in the same quarter in 2022.

 

Economic pressures arising from trade tensions with the United States and the threat of sweeping 25-per-cent tariffs on Canadian imports are also hitting Canadians, who are still reeling from inflationary pressures and rising costs, said Mr. Bolduc.

 

Mortgage renewals at higher interest rates will deal an additional blow to families who are struggling to make ends meet.

 

 

 

 

 

This article was first reported by The Globe and Mail