Insolvency filings in Canada in January up 33.7 per cent compared with a year earlier

Insolvencies in Canada surged by a 3rd in January in contrast with a 12 months in the past as customers struggled with rising costs and better rates of interest, the Office of the Superintendent of Bankruptcy mentioned Wednesday.

The federal regulators mentioned there have been 9,066 complete insolvencies filed within the first month of the 12 months, up 33.7 per cent from 6,779 in January 2022.

The enhance got here as rising rates of interest drove up borrowing prices whereas inflation pushed up the price of dwelling and stretched family budgets.

“The impacts of high inflation and numerous interest rate hikes are taking their toll on Canadians,” mentioned Andre Bolduc, a licensed insolvency trustee and vice-chairman of the Canadian Association of Insolvency and Restructuring Professionals.

“These individuals and families may turn to credit cards or lines of credit to bridge the gaps in their household budgets — to pay for groceries and essentials, for example,” he mentioned in a press release. “In the higher interest rate environment, it is harder to pay off these debts.”

The variety of client insolvencies for the month rose 33.0 per cent in contrast with a 12 months earlier.

There had been 8,735 insolvency filings by customers for January, together with 1,859 bankruptcies and 6,876 proposals. The end result in contrast with 6,566 insolvency filings by customers in January 2022 when there have been 1,768 bankruptcies and 4,798 proposals.

Meanwhile, business insolvency filings for January had been up 55.4 per cent in contrast with a 12 months in the past as they totalled 331, up from 213 in January 2022.

“It has been a tough start to 2023 for Canadian businesses,” Bolduc mentioned. “Many are struggling to manage the impact of higher interest rates, inflation and the continuing effects of the pandemic.”

Yet the insolvency numbers might not inform the entire story, he mentioned.

Struggling small business homeowners might select to stroll away altogether, relatively than take formal steps to wind down the business, Bolduc mentioned.

Walking away from a business guidelines out the potential of preserving ongoing business operations by way of restructuring or “corporate workouts,” he mentioned.

This report by The Canadian Press was first printed March 1, 2023.