Canadian Insolvencies Rise in Q2, Threatening to Surpass 2009 Peak
Canadians continued to file for insolvency in the second quarter at levels not seen in more than a decade as the housing market slump and rising costs caught up with consumers, according to the Office of the Superintendent of Bankruptcy.
OSB data released on Monday shows 37,523 Canadian consumers filed for insolvency in the second quarter – a 6.9-per-cent increase compared to the same period last year, and the highest quarterly volume since 2009. There were 402 more insolvencies during Q2 as compared to the first quarter of the year. The increase marked two consecutive quarters above 2009 levels; that was the all-time highest full year for consumer insolvency filings.
The uptick can be attributed to historically high consumer credit-card and tax debt, said Scott Terrio, a manager of consumer insolvency at Hoyes, Michalos & Associates, a personal insolvency service firm. He added that the increase in insolvencies could also be because of Canadian homeowners reckoning with the heavy borrowing that took place during the housing boom of the 2010s.
During the boom, “everybody was going crazy and using their equity to pay their unsecured debts off …” Mr. Terrio said. “So we didn’t really have a reckoning.” He said that started to change in 2019, and “then this thing called COVID happened.”
At the beginning of the pandemic, Mr. Terrio’s firm advised consumers who found themselves unemployed to not file for insolvency, because they were protected from direct garnishment. This delayed the inevitable spike in insolvency filing.
Consumer insolvency filing numbers from the OSB include both bankruptcies and consumer proposals.
A consumer proposal is an agreement that allows people to extend payments over a longer period of time, while a bankruptcy means individuals may be required to forfeit assets to pay their debt.
There were 8,600 consumer bankruptcies in the second quarter of 2026, up 13.5 per cent compared to the first quarter, and 10.3 per cent year-over-year.
During the same period, there were 28,923 consumer proposals, which fell by about two per cent from the first quarter but climbed by 5.9 per cent year-over-year.
A consumer proposal allows creditors to come out with more cash, but they have to wait longer to get it, Mr. Terrio said.
As a result, the risk of losing assets in the case of bankruptcy has historically left homeowners more inclined to opt for consumer proposal, he said. But insolvencies have ticked up among homeowners, who are generally less vulnerable than renters, with a greater portion of homeowners claiming bankruptcy, he added.
A February report from his firm found that homeowner insolvencies are now 8 per cent of filings, compared with 5 per cent in 2024. The proportion of two-income households filing for insolvency also spiked to 23 per cent, the highest level since 2017.
Falling home values have left owners unable to take equity out of their properties by refinancing their mortgages, or in some cases, owing more money than their home is worth.
“The things that consumer homeowners were doing for a decade to avoid calling a guy like me, they can no longer do as much,” Mr. Terrio said.
With reports from Zarif Sinha and Mariya Postelnyak
This article was first reported by The Globe and Mail
