Insolvencies up last year as business filings rise for first time since 2001 [UPDATED]

OTTAWA — The total of number of insolvency filings grew by 9.3% to 140,858 last year with consumers leading the way and business filings rising for the first time since 2001, says statistics released Feb. 10 by the Office of the Superintendent of Bankruptcy.

More than 97% of insolvency filings were by consumers. Despite solid jobs numbers, consumer filings rose 9.5% to reach the second highest level on record after 2009 at the end of the Great Recession.

“The sheer number of Canadians struggling with their finances is alarming but the growth in consumer insolvencies and the accelerating insolvency rate is a symptom of a bigger problem: many who have amassed unmanageable debts have no path out,” stated Andre Bolduc, board member of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).

Ontario had the most insolvency filings at 45,754, which grew by 15% from the prior year. Newfoundland and Labrador’s total filings grew 15.4%, Alberta by 14.5% and British Columbia 10.4%.

The overall increase in insolvencies came as the total number of personal and business cases in the fourth quarter of 2019 climbed 9.8% from the same period a year earlier.

The number of business insolvency filings in the fourth quarter were down 4.1% compared with the fourth quarter of 2018, but up 9.7% compared with the third quarter of 2019. Filings grew 2.8% for the year.

The mining, oil and gas sector lead the way with a 75% increase in the number of insolvency filings in 2019 over 2018. Among business filings, Manitoba was the hardest hit with filings rising by more than 39%, followed by the Atlantic provinces at 38%.

Consumer insolvencies grew partly because interest rates increased between 2016 to 2018, witha two to three-year lag, said Bolduc.

The household debt-to-income ratio increased to 175.86 in the third quarter, but remains below the 2018 record high of 177.82.

“If consumers continue to moderate their spending habits, this should help dampen the rate of increase in consumer insolvency filings,” he said.

But consumer insolvency filings will continue to grow this year as many Canadians have amassed unmanageable debt loads, said CAIRP.

“The indebtedness across Canadian households is likely to way on credit trends as we move forward,” added Craig Fehr, Canadian markets strategist, Edward Jones.