Higher-income households filing for bankruptcy: Insolvency study
Canadian consumers filed the largest number of insolvencies in almost a decade at the end of last year, stoking concern about the impact of record indebtedness on households and the economy.
Insolvencies totalled 35,155 in the final three months of 2019, the most in any one quarter since 2010, according to data released Monday by the Office of the Superintendent of Bankruptcy Canada. That’s up 10.2 per cent compared with 31,900 in the same period a year earlier and is about 5,000 shy of the record 40,589 reached in the third quarter of 2009.
After declining steadily after the financial crisis, insolvencies began accelerating again last year, prompting questions about whether the country’s record household debt — $2.3 trillion at the end of December — is sustainable. Adding to concern is the fact insolvencies are rising at a time when Canada’s economy is doing relatively well, with an unemployment rate that averaged 5.7 per cent in the fourth quarter. When insolvencies peaked a decade earlier, the jobless rate was almost three percentage points higher at 8.6 per cent.
On the less alarming side, adjusting the number of insolvencies to account for population growth shows the increase isn’t as dramatic. As a share of total debt, the rate of filings also appears to be more stable.
In addition, the lion’s share of the increase in the past decade has been so-called consumer proposals, where the debtor agrees with creditors to pay back a proportion of what’s owed. Proposals are considered less severe than bankruptcies, the other form of insolvency reported by the Ottawa-based OSB.
• Consumer proposals climbed 22 per cent in December from a year earlier, while bankruptcies were up 1.7 per cent
• Total consumer filings for all of 2019 were 137,178, the highest year-end total since 2009
• Consumer insolvencies fell 14 per cent in December from a month earlier, in accordance with typical seasonality
• Ontario recorded the biggest increase last year among provinces, with filings jumping 15.4 per cent from 2018 levels. Alberta saw a 14.6-per-cent increase, while in British Columbia they advanced 10.3 per cent
• Business insolvencies rose 2.4 per cent in December from a year earlier, and for all of 2019 up 2.8 per cent compared with 2018
--With assistance from Kristy Scheuble.