Canadian Consumer Insolvencies, April 2016

Canadian Consumer Insolvencies, April 2016

The Office of the Superintendent of Bankruptcy Canada has released statistics concerning consumer insolvency across Canada for the month of April. With issues in the oil-producing provinces, high consumer debt levels throughout the entire country and the volatile housing market, these insolvency statistics paint a picture of the current financial struggles facing all Canadians.

Currently, the consumer insolvency national average is 3.3%. While the percentage of insolvencies in some provinces remains similar to the national average, there are a few provinces that are clearly struggling with debt. Here’s how the percentage of consumer insolvencies either increased or decreased per province in the month of April:

  • British Columbia increased by 0.1%
  • Alberta increased by 32.5%
  • Saskatchewan increased by 5%
  • Manitoba increased by 15%
  • Ontario decreased by 1.9%
  • Quebec increased by 1.4%
  • New Brunswick increased by 2.4%
  • Nova Scotia increased by 0.6%
  • Prince Edward Island increased by 8.2 %
  • Newfoundland and Labrador increased by 26.2%

Unfortunately, only the province of Ontario was able to decrease its percentage of insolvencies during the month of April. British Columbia remained relatively stable but the percentage of consumer insolvencies in the rest of the country grew and in some provinces, grew a lot.

What is consumer insolvency?

Let’s take a quick look at what consumer insolvency is. Generally speaking, consumer insolvency is a term used to describe a consumer who has some type of debt that they cannot afford to continue to pay back. Bankruptcy and insolvency are not synonyms; they have different meanings, although it is likely that most people who are insolvent will need to file a consumer proposal or bankruptcy in the future.

Canadians who become insolvent typically have the following types of debt:

  • Credit card debt
  • Personal loan debt
  • Tax debt
  • Student loan debt
  • Vehicle financing debt

While mismanagement of funds is a common reason that many Canadians become insolvent. Emergencies, personal issues and loss of employment can also cause serve financial issues that may lead to insolvency.

The Difference Between a Consumer Proposal and Bankruptcy

Both a consumer proposal and bankruptcy are legally binding actions that must be filed by a Licensed Insolvency Trustee (more about LITs here). Bankruptcy is slightly more drastic than a consumer proposal and therefore almost all financial experts, credit counselors and  insolvency trustees will suggest that you file a consumer proposal instead of filing for bankruptcy (unless bankruptcy is the best option for your situation).

Check out this video for a more in-depth look at consumer proposals.

Amount of Debt

To file for bankrupt you must have at least $1,000 worth of debt but there is no maximum. To be able to file a consumer proposal you cannot have more than $250,000 worth of debt.


If your consumer proposal is accepted by your credits you will not have to surrender any of your assets, this is probably the most advantageous aspect of a consumer proposal. The opposite is true when filing for bankruptcy, your assets will more than likely be seized in order to pay back your creditors.


Generally speaking, anyone who needs to file for bankruptcy will be able to do so with relatively no objects. On the other hand, there is no guarantee that your consumer proposal will be accepted.

Credit Rating

When you complete a consumer proposal you will receive an R7 credit rating. This rating will negatively impact your credit score but is not the worst rating you can receive. You’ll receive the worst rating, an R9, when you file for bankruptcy.

Watch this video for a more in-depth look at personal bankruptcy.

How to Prevent Insolvency

There are of course some circumstances where insolvency is not avoidable, in these cases it is best to seek the professional help of a Licensed Insolvency Trustee who will be able to guide you through the debt relief option that is best suited for your situation.

But for those looking to prevent insolvency or to simply make sure they manage their debt levels properly, here are a few tips and tricks:

  • Live within or below your means. A nice car, a big house, and nice belongings are all great to have but at what cost? If you’re charging too much to keep up with the lifestyle you’ve created or are starting to fall behind on your car or mortgage payments you need to reevaluate what’s important to you.
  • Your intentions to save or cut back on unnecessary spending aren’t going to work unless you make a plan to follow through. Create a realistic budget (learn how to budget here) and then have a weekly or bi-weekly budget “meeting” with yourself to make you’re staying on track.
  • Pay down your existing debts as quickly as possible. Are you only making the minimum payments on your credit cards? If so start making larger payments right now and as often as possible.
  • Prepare for financial emergencies. Having an emergency fund on hand will prevent you from having to use your credit cards to cover the unexpected costs.
  • Get help. If you can see yourself starting to lose control of your finances it’s always a good idea to seek the help of a professional, either a credit counsellor or even a Licensed Insolvency Trustee.

If you’re currently struggling with debt or credit issues and are looking for financial guidance, Loans Canada can assist you in finding the help you need, no matter what province you live in.


To see the full report on consumer insolvency from the Office of the Superintendent of Bankruptcy Canada, click here.

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