Get a free, no obligation personal loan quote with rates as low as 9.90%
Get Started You can apply with no effect to your credit score

You might be wondering why the consumer insolvency rates of each Canadian province are important for you to both know and understand. The short answer is that these rates are indicative of how the Canadian economy is working. And whether you know it or not, the Canadian economy directly affects how you live. Let’s put it this way, if the insolvency rates of each province are currently high then that means the average Canadian is having more and more trouble with their debts, which in return tells us that there is potentially an overriding issue affecting Canada as a whole.

Insolvent Canadian families will in the future have more difficulty being approved for unsecured credit and may have issues with taking home enough income to live. No unsecured credit and less income can mean that consumption will also be low. When Canadians consume less the economy is affected. Furthermore, when insolvency rates are higher financial institutes, banks and lenders will potentially experience more charge-offs (credit accounts that cannot be paid). More charge-offs mean these lenders will reduce how many people they lend to or increase their rates which can, in turn, lead to higher insolvency rates. Thankfully, annual insolvency rates in Canada have been dropping.

As you can see everything is connected, the insolvency rates of each province might seem like useless or trivial information but in fact, these rates do affect the financial issues that you, as a Canadian, deal with on a daily basis. To help you get a better grasp on the statistics we’ve put together all the information you should know.

Insolvency

Insolvency is a term used to refer to a person who cannot pay back the money that they owe on time. Someone who is insolvent is not yet bankrupt but will probably either become bankrupt by filing for bankruptcy on their own or be petitioned into bankrupt by their creditors. Someone who has been deemed insolvent might also file a consumer proposal.

The Canadian insolvency rate for the year 2013 was 4.3%. Four of the 13 provinces and territories had higher insolvency rates than the national average, New Brunswick 6.6%, Nova Scotia 6.2%, Quebec 6.2% and Prince Edward Island 5.3%. The rest of the country’s insolvency rates were either on par with the national average or significantly lower, with Nunavut having the lowest rate of 0.3%.

Remember that these numbers represent the percentage of Canadians who were unable to pay back their debts, now let’s compare these numbers to the statistics on people who actually filed for bankruptcy or filed a consumer proposal.

Bankruptcy

Once an insolvent person has decided that there is no way they can pay off their debt on their own, they can decide to file for bankruptcy. Bankruptcy is a legal proceeding meant to resolve the debt between a borrower and a creditor. Depending on the amount of debt you have and the kind of assets you own, some of your debt will be discharged and some you’ll have to pay.

For more information about bankruptcy watch our video “Personal Bankruptcy Explained“.

Of the 4.3% of Canadians who were insolvent in 2013, 2.5% filed for bankruptcy. As bankruptcy is widely considered a choice that should only be made in extreme cases, it’s interesting to see that more than half of the insolvent Canadians in 2013 chose bankruptcy. The four provinces with the highest insolvency rates also have the highest rates of bankruptcy: New Brunswick 4.8%, Nova Scotia 4.4%, Quebec 3.9%, and Prince Edward Island 3.8%. Across the whole country, the bankruptcy rates were higher than the consumer proposal rates.

Consumer Proposal

In cases where bankruptcy might seem like an extreme and unnecessary measure, a solvent person can choose to file a consumer proposal. To file a consumer proposal you must get the help of a trustee who will create a proposal for your creditors on your behalf. The proposal is legally binding and will protect you from debt collectors. You’ll have to pay an agreed-upon portion of your debt and your creditors will forgive the remaining balance.

For more information about consumer proposals watch our video “Understanding Consumer Proposals“.

Compared to the Canadian bankruptcy rates the consumer proposal rates are significantly lower, 1.8% in 2013. It’s clear that the majority of solvent Canadians believed that their financial situation was so dire that bankruptcy was the best option for them. The situation is the same in each province with Ontario having the highest percentage of 2.3%.

Insolvency rates, bankruptcies, and consumer proposals might all seem like foreign concepts to you and that they have nothing to do with you or your finances. What we want you to understand is that all these numbers and statistics affect all of Canada, which means they affect you too. More knowledge about how the Canadian economy works and how it affects your world will allow you to make the best financial choices today and for the future.

insolvency rates canada 2013
Source: Annual Consumer Insolvency Rates by Province and Economic Region
Caitlin Wood, BA avatar on Loans Canada
Caitlin Wood, BA

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

More From This Author

Special Offers

More From Our Experts

https://loanscanada.ca/wp-content/uploads/2024/05/Fine-Option-Program.png
What Is The Fine Option Program?

By Lisa Rennie
Published on May 2, 2024

Do you have an expensive traffic ticket you need to pay? If you're short on cash, consider the Fine Option Program, which lets you work the fine off.

https://loanscanada.ca/wp-content/uploads/2024/03/Debt-to-income-ratio.png
What Is Debt-To-Income Ratio And How To Calculate It?

By Lisa Rennie

Everything you need to know about what a debt-to-income ratio is and how it affects your ability to get approved for the loan you want.

https://loanscanada.ca/wp-content/uploads/2015/10/How-to-use-debt-to-make-money.png
How To Use Debt To Make Money

By Jessica Martel

Wondering how the rich get wealthy? Debt is often used to make money and get rich. Find out how debt is used to make money.

https://loanscanada.ca/wp-content/uploads/2015/05/debt-relief-options.png
Debt Relief Programs In Canada: What Are Your Options?

By Jessica Martel

Debt consolidation loans, debt management programs, debt settlement, consumer proposal and bankruptcy: Find out which option is right for you.

https://loanscanada.ca/wp-content/uploads/2016/08/statute-of-limitations-1.png
What Is The Statute Of Limitations For Debt In Canada?

By Jessica Martel

Learn about the statute of limitations in Canada and how it can protect you from your creditors wanting to take legal action against you.

https://loanscanada.ca/wp-content/uploads/2024/01/predatory-lending.png
Debt Relief For Predatory Loans

By Lisa Rennie

Predatory lending is a problem many borrowers face when trying get a loan with bad credit. Here's how you can protect yourself.

https://loanscanada.ca/wp-content/uploads/2015/11/Does-Bankruptcy-Affect-My-Spouse-In-Canada.png
Does Bankruptcy Affect My Spouse In Canada?

By Lisa Rennie

Does bankruptcy affect your spouse in Canada? Find out the implications of declaring bankruptcy when you have a spouse.

https://loanscanada.ca/wp-content/uploads/2018/05/Foreclosure-Credit-Score.png
How Does A Foreclosure Affect Your Credit Score?

By Lisa Rennie

Everything you need to know about how a foreclosure will affect your credit score.

Recognized As One Of Canada's Top Growing Companies

Loans Canada, the country's original loan comparison platform, is proud to be recognized as one of Canada's fastest growing companies by The Globe and Mail!

Read More

Why choose Loans Canada?

Apply Once &
Get Multiple Offers
Save Time
And Money
Get Your Free
Credit Score
Free
Service
Expert Tips
And Advice
Exclusive
Offers

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.

Koho Prepaid Credit Card