A recent study from Bankruptcy Canada revealed some startling insolvency statistics and trends.
Canadian household debt reaches a record high of $2.41 trillion, with 26%, or $626.6 billion being unsecured debts such as auto loans, credit card debt, and installment loans.
Auto loan debt grew 6.2% from the same period last year.
The average debtor owes $55,328 in unsecured debts, a .94% increase from the same period last year.
“As the cost of manufacturing continues to grow, and supply chain issues still continue to impact the industry, the cost of owning a vehicle has continued to grow at the highest rate” says Sands, a Trustee at Bankruptcy Canada.
Consumers missing payments of 90 days or more also continue to rise higher year over year, according to the study from Bankruptcy Canada.
“As the cost of living continues to rise, more Canadians are turning to credit to make ends meet” Sands, Licensed Insolvency Trustee.
Debtors that were insolvent saw a significant increase in credit card balances, although those under 30 saw the largest increase in balances.
Additionally, consumers under 35 were 18% more likely to have delinquent payment history.
Credit card balances for all canadians have increased by 13.7% compared to the prior period.
Additionaly, insolvencies among homeowners and older consumers continued to increase.
“As mortgage rates rapidly rose in the years prior, and remained high throughout 2024, the higher interest rates had an impact on homeowner bankruptcies and consumer proposals” says BankruptcyCanada’s Licensed Insolvency Trustee.
Insolvent homeowners remain a low percentage of overall insolvencies, although the rate has doubled in recent months.
“Homeowners facing insolvency have little equity and are therefore unable to refinance and cover their unsecured debt obligations. That is why many homeowners turn to a consumer proposal to handle their unsecured debts,” adds Sands
A consumer proposal is popular among homeowners, because it protects your home from creditors.
As interest rates remain high, and the cost of living continues to increase, we expect to see consumer insolvencies continue to rise in 2024.
