Insolvencies in Canada Rise Again: What It Means for Households and Businesses

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Insolvencies in Canada Rise Again: What It Means for Households and Businesses

Jul 15, 2025

Canada is facing a surge in consumer insolvencies, as more households struggle to manage debt under ongoing economic pressure. New data from the Office of the Superintendent of Bankruptcy (OSB) shows that both bankruptcy filings and consumer proposals are climbing in 2025—despite recent interest rate relief from the Bank of Canada

What's Driving the Increase in Filings?

While interest rates have eased in recent months, many households are still financially overextended. The Canadian Association of Insolvency and Restructuring Professionals (CAIRP) explains the trend as a result of:

High cost of living
Stagnant wage growth
Debt carried over from high-rate years
Financial stress in middle-income households

“Rate cuts have helped, but not enough to undo the damage of two years of expensive borrowing,” says André Bolduc, CAIRP chair.

Debt Pressure Remains High in 2025

Despite a more stable interest rate environment, many Canadians are locked into costly debt payments. Major stress factors include:

Variable-rate mortgage increases
Rising utility bills and rent
Credit card debt with high rates
Delayed income recovery post-pandemic

These pressures are pushing more individuals to pursue debt restructuring through consumer proposals, which allow repayment plans without full bankruptcy.

Business Insolvencies Down, But Still Elevated

While personal filings are rising, business insolvencies dropped by 13.3% year-over-year. However, CAIRP notes that levels remain above pre-pandemic averages.

“Small business sectors are still under pressure from inflation and uncertainty,” Bolduc notes. “These aren’t normal market conditions.”

Key impacted industries:

Retail
Construction
Hospitality
Manufacturing

What Are Consumer Proposals?

A consumer proposal is a formal agreement to settle unsecured debts over time—without filing bankruptcy. It’s increasingly the go-to option for those seeking:

Lower monthly payments
Protection from creditors
Avoidance of bankruptcy
Debt consolidation

In 2025, proposals now account for a growing share of all insolvency filings.

Financial Outlook for Households

The trend signals continued financial stress among Canadians, especially those in debt-heavy households. Even with a pause in rate hikes, the long-term impact of high borrowing costs, combined with stagnant wage growth, leaves many families in a fragile position.

Key indicators to watch:

Insolvency rate
Household debt
Disposable income
Credit utilization

Financial planners and lenders alike should stay alert to evolving debt risk as economic conditions shift.

Final Word: Rising Insolvencies Demand Smart Debt Management

As of mid-2025, Canada’s insolvency rate is trending upward, particularly among consumers. This rise is a reflection of broader systemic issues—debt burdens, inflation, and slow income growth—not just individual financial missteps.

Understanding the difference between bankruptcy and consumer proposals, and seeking early advice, could help many Canadians avoid long-term damage to their financial health.