As Financial Literacy Month takes centre stage in Canada, a new report from the Office of the Superintendent of Bankruptcy (OSB) reveals that consumer insolvencies are climbing at a concerning rate. Data shows a 13.5% year-over-year rise in consumer insolvencies during the third quarter, underscoring the growing financial struggles Canadians face in their daily lives and financial planning. As households grapple with high debt loads, the retail sector feels the pinch as consumer spending tightens, affecting businesses across the country.
“Canadians are facing mounting debt loads alongside a persistently high cost of living,” explains André Bolduc, Licensed Insolvency Trustee and Chair of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP). “Even as inflation slows, many households are still grappling with rising costs on essentials, which is driving more Canadians to seek relief through insolvency solutions.”
The latest data shows that Canadians filed an average of 376 consumer insolvencies each day in Q3 2024. This marks the 10th consecutive quarter of double-digit increases since Q2 2022, illustrating a prolonged period of financial strain.
David Lewis, Licensed Insolvency Trustee and CAIRP member, said the stress of inflation is taking hold of the consumer with increased costs for food and housing and a number of other items – and that is impacting the retail sector.
“It’s a stretch on dollars,” he said. “So people are being more choosy with where their money is going which is causing a problem for retailers because people just aren’t buying as much as they were.
“We still see supply chain issues. We still see interest rates stress. We finally saw wage increases which should help a little bit in this last quarter. But you’re still struggling with trying to make up for all the extra costs everything is.”
Lewis said based on his experience he’s noticing that apparel companies are particularly feeling the heat in the retail sector.
Retail trade impacted as consumers feel the squeeze
With prices still elevated for necessities like food and housing, Bolduc says Canadians are resorting to extreme budgeting strategies or deferring expenses. While inflation has eased from previous highs, costs remain prohibitive for many. “At the end of the day, groceries and everyday essentials still cost more than they did in the past, leaving Canadian households to grapple with a reality where debt management becomes essential,” says Bolduc.
The rise in insolvencies is having a ripple effect on retail, with stores noticing shifts in consumer behavior. Many Canadians, weighed down by debt, are cutting back on discretionary purchases. “There’s definitely been a pullback in non-essential spending,” says Bolduc. “People are more cautious with their budgets as they focus on covering essentials, which impacts sectors like retail that rely on consumer spending.”
Homeowners Brace for Rate Hikes in 2025
Bolduc also points out that mortgage renewals in 2025 could further drive financial stress. Homeowners who secured low-interest mortgages in the past decade now face the prospect of higher rates. “Many homeowners with mortgages up for renewal may see a steep increase in payments,” explains Bolduc. “Those who have accumulated other debts could find themselves on the brink of insolvency as they juggle these heightened financial burdens.”
This looming challenge means that financial planning is more important than ever. As Bolduc highlights, “Long-term financial stability will require Canadians to focus on managing their finances carefully and seek professional advice where necessary.”
Business Insolvencies: Highest Q3 Filings Since 2009
It’s not just individual Canadians feeling the pressure—businesses, especially small and medium-sized enterprises, are struggling too. Business insolvency filings reached 1,312 in Q3 2024, marking the highest third-quarter level since the 2009 recession. While business filings fell 14.9% from the previous quarter, they remain up 16.2% year-over-year, with many companies still strained by operational costs and financing challenges.
“Small businesses have been hit hard by high operational expenses, and while recent interest rate cuts offer some relief, financial pressures are still a reality,” says Bolduc. “In sectors like retail, accommodation, and food services, the situation remains particularly challenging, with increased costs eroding profit margins.”
George Minakakis, Founder and CEO of the Inception Retail Group, said retailers have found this market challenging.
“Larger chains globally have been warning of downward or neutral revenue. Business and retail insolvencies and consumer insolvencies all tell a similar story. We should point out that other business sectors have higher insolvencies. A few issues are convergent here. The first is that we have a tapped-out consumer. We know that about one million homes are due for mortgage renewal next year; they are being frugal with spending. Many retailers borrowed during the pandemic. Failing to service debt, they took an exit versus risking their personal assets.
“Couple this with the continuous and relentless technology squeeze now coming from AI; the more capable retailers, specifically chains, if they are sophisticated enough, will be marketing and selling far more targeted.
“We are now into the last 43 days before Christmas, when you must make 25-40% of the year’s revenue to break even. “
Government Measures May Offer Limited Relief
Some measures are being introduced to ease the financial burden. This month, the federal government announced a long-awaited $2.5 billion carbon tax rebate aimed at offsetting energy costs for small businesses, along with a reduction in credit card processing fees. While helpful, these measures provide only a partial remedy.
“These rebates and fee reductions can help, but they’re unlikely to fully resolve the financial pressures facing many small businesses,” says Bolduc. “It’s a step in the right direction, yet more support may be necessary to address the broader impact of high costs on business stability.”
Exploring Debt Relief Options
For those struggling with debt, Bolduc emphasizes the importance of early intervention. Licensed Insolvency Trustees (LITs) provide government-regulated debt relief options like consumer proposals, which allow individuals to repay a portion of their debt over a set period without going through bankruptcy.
“Licensed Insolvency Trustees play a critical role in helping Canadians make informed choices about debt management,” says Bolduc. “Whether it’s restructuring personal finances or seeking debt relief, LITs can guide people through options tailored to their financial situation.”
For businesses facing insolvency, engaging with an LIT early on can provide solutions that may prevent closure. “Licensed Insolvency Trustees offer restructuring options that enable businesses to negotiate more favorable terms with creditors, extend payment periods, or explore other strategies to stabilize,” Bolduc adds.
Regional Variations in Insolvency Rates
Ontario recorded the largest year-over-year increase in consumer insolvencies this past quarter, with a 20.2% rise in filings to 13,140. Alberta followed with a 13.8% increase, and Quebec saw a 12.2% rise. Notably, insolvency rates in construction, accommodation, and transportation sectors saw the steepest increases, reflecting the acute financial challenges specific industries are experiencing.
Financial Literacy: More Crucial Than Ever
Financial Literacy Month serves as a reminder for Canadians to take proactive steps in managing finances. “Understanding finances is key to managing debt effectively,” says Bolduc. “Licensed Insolvency Trustees are a valuable resource for Canadians facing financial hardship, and Financial Literacy Month is an ideal time to raise awareness of the options available.”
As the pressures of debt continue, Bolduc emphasizes the need for practical financial planning and professional support. “The goal is to empower Canadians with the knowledge and resources to navigate through financial challenges,” he says.
The Canadian Association of Insolvency and Restructuring Professionals (CAIRP) is Canada’s professional association representing nearly 1,400 insolvency and restructuring experts. Members are Licensed Insolvency Trustees who provide crucial support to Canadians navigating financial challenges.
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