Canada shows a record low level of insolvency rate

The recent report by the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) says the national consumer insolvency rate was down by almost 40% from pre-pandemic levels. However, household debt is still “excessively high.”

In the third quarter, insolvencies fell by 7.8% on a quarterly basis, marking the largest quarterly decline since the pandemic started. Such results mean that almost 21,100 Canadians (or about 230 each day) filed for insolvency.

According to CAIRP, all regions reported quarterly drops during the period, with the largest decreases seen across Atlantic Canada in Newfoundland and Labrador (-28.3%), Prince Edward Island (-17.9%), New Brunswick (-17.6%), and Nova Scotia (-12%).

The annual decline in consumer insolvencies reached 15.8%.

Nevertheless, André Bolduc of CAIRP says we shouldn’t underestimate the consequences of tapering government supports.

“We’ve managed to avoid an increase in personal insolvencies, but Canadians show excessively high household debt, and the financial strain of the pandemic will be a serious issue for many families,”- Bolduc noted.

Although the record-low rate environment has been quite attractive for consumers, almost 35% of Canadians worry that higher interest rates may lead them to bankruptcy, according to MNP Debt.

Most Canadians (52%) also worry about the influence of growing interest rates on their financial situations.

These fears come from a massive appetite for increasing debt, with 49% of Canadians saying they feel more relaxed about their debts than usually, as the rates remain low. Moreover, 58% of respondents say low rates helped them make purchases they wouldn’t be able to afford otherwise.

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