Consumers tied to variable rate debt to get hurt the most from rising rates: Insolvency expert
Canadian consumer insolvencies surged by nearly 23 per cent month-over-month in March, according to data released by the Office of Superintendent of Bankruptcy (OSB) Wednesday.
That increase marked the largest one-month jump in new filing activity in more than a decade as some consumers simply hit a wall when it came to staving off a bankruptcy.
Several factors led to the month-over-month increase, including consumers running out of income supports, the return-to-work trend, resumption of wage garnishments, and the courts gradually returning to more normal activities.
On a monthly basis, insolvencies rose the most in Prince Edward Island, New Brunswick and Saskatchewan.
However, insolvencies were still down 15.7 per cent from a year earlier, when the federal government instituted a slate of wage and income supports in the early days of the pandemic, courts shuttered for in-person hearings and in-person meetings with creditors largely ground to a halt.
Overall, the number of consumer insolvencies filed across the country fell a full 37 per cent over the last 12 months due to wage supports and limited court dates.
In a release, Mark Rosen, chair of the Canadian Association of Insolvency and Restructuring Professionals, said the eye-popping jump in insolvencies in March reflected a backlog working its way through the system.
“After a year of record lows, consumer insolvencies spiked in March compared to February with the volume of filings returning to near pre-pandemic levels,” he said.
“Filings fell significantly in April 2020 as Canadians faced COVID-related financial uncertainty. They remained low over the last twelve months with government aid programs and creditor flexibility helping many people who were already facing insolvency delay the inevitable. Now it seems we are starting to see that backlog emerge.”
Doug Hoyes, licensed insolvency trustee at Hoyes, Michalos & Associates Inc. said Canadians should be wary of reading too much into a single data point.
In an email to BNN Bloomberg, Hoyes said the March data was not necessarily indicative of a broader trend, especially given how much of the country renewed clampdown measures to combat the third wave of the pandemic in the subsequent weeks.
“Some people went back to work in March, so needed creditor protection, but of course they then went into lockdown again in April and May, so I expect that increase is transitory, and will reverse when more recent stats are released,” he said.