375 Canadians a day went insolvent last year, the most since the financial crisis
Personal insolvencies in Canada increased last year to the highest level and at the fastest rate since the financial crisis while business insolvencies rose for the first time in nearly two decades, government figures show.
The Office of the Superintendent of Bankruptcy reported Monday 137,178 Canadians filed for bankruptcy or modified repayment terms with creditors last year, a 9.5 per cent increase over 2018. It marked the most filings since 151,712 in 2009 and the quickest annual increase since then, the office said.
The pace amounted to 375 people a day seeking financial protection or debt restructuring, the statistics show.
The growth in consumer insolvencies and the accelerating insolvency rate is a symptom of a bigger problem
Andre Bolduc of the Canadian Association of Insolvency and Restructuring Professionals
“The growth in consumer insolvencies and the accelerating insolvency rate is a symptom of a bigger problem,” Andre Bolduc, a board member of the Canadian Association of Insolvency and Restructuring Professionals, said in a statement. “Many who have amassed unmanageable debt have no path out.”
Business insolvencies and debt restructuring proposals rose 2.8 per cent last year, the first annual increase since 2001, driven by a 75 per cent increase in mining, oil and gas industry failures, the office said. The sector had 42 companies under duress last year compared with 24 in 2018, the data show.
The impact could be reduced capital spending and more firings, which will then be felt by more consumers seeking financial protection. In turn, consumers under heavy debt may cut spending, threatening some businesses.
Bolduc pinned the jump in bankruptcies to interest rate hikes from 2016 to 2018, noting there’s a two- to three-year gap for the impact to be felt in the number of insolvencies as consumers struggle to contend with higher payments on items such as mortgages and credit cards before they’re overwhelmed.
Ontario had the most personal bankruptcy and debt restructuring applications last year with 44,852. The 15.4 per cent increase over 2018 was the steepest in the country. Newfoundland and Labrador followed with a 15 per cent rise to 3,221. Quebec had the second-highest number at 42,865 but a shallow increase of 2.7 per cent, the statistics show.
Alberta had the third-highest amount and increase with a 14.6 per cent climb to 16,675 personal applications, the office said.
In business, other sectors besides mining, oil and gas showing hits include information/cultural industries with a 27 per cent jump to 80 business insolvencies, a 21.7 per cent increase in wholesale trade to 191 failures and a 14.7 per cent rise in arts, entertainment and recreation business flops to 78, the statistics show.
“We are seeing an upward trend that will likely extend into at least next year,” David Lewis, an Alberta-based board member of CAIRP who specializes in corporate insolvencies,” said in the statement. “The increases are reflective of the headwinds faced by a variety of industries in Canada.”
Manitoba’s 39.3 per cent gain over 2018 showed the largest increase in business insolvencies at 39, while British Columbia’s tally rose by 23.3 per cent to 127, according to the government figures. Alberta’s amount rose 8.3 per cent to 223, while Ontario bucked the national trend with a 3.7 per cent decline to 902 cases, the data show.
“Businesses may begin addressing financial pressure by cutting discretionary expenses and reducing capital investment,” Lewis said. “For some, this will include reducing payroll costs and that will ultimately drive consumer insolvency rates up as well.”