Ontarians continue to carry record levels of personal debt and for many residents, a consumer proposal or a personal bankruptcy becomes the only way out of financial trouble.
We update this page for monthly data trends as they are released by the Office of the Superintendent of Ontario.
Monthly Trends 2020 Consumer Insolvency Filings
These statistics are updated monthly based on data released by The Office of the Superintendent of Bankruptcy. The OSB data is released at the end of the month and is generally two months in arrears.
Ontario consumer insolvencies declined 43.8% in May 2020 from a year earlier. Ontario bankruptcies declined by 59.3% and consumer proposals fell 35.5%.
The pace of decline accelerated in May as the impact of COVID-19 was in full force. Payment deferrals, closed courts, disabled collection centres and the buffer of CERB payments has stalled insolvency inquires and filings. While Canadians are still burdened with debt, if not working, a debtor is largely creditor proof and focused on priorities like food and rent. CERB payments cannot be garnisheed, postponing the need to deal with debt for many.
Those who are filing are more than likely working during the crisis. As a result, consumer proposals accounted for 74.7% of consumer insolvencies in Ontario and 66.5% in Canada, the highest percentage of filings attributed to consumer proposals ever. High income that results in additional surplus income payments in a bankruptcy, and home equity, are the two primary reasons why heavily indebted consumers are increasingly choosing a proposal over bankruptcy.
Total Ontario monthly insolvencies, at 2,343 in May, have not been this low in more than 20 years.
Canadian consumer insolvencies decreased by 50.6%, with proposals down 43.6% and bankruptcies down 60.4%.
What happens as the economy reopens?
The economic impact of COVID-19 will be long-lasting. We expect the decline in insolvencies to continue into late summer or early fall. CERB payments have been extended until October 3, 2020 which will certainly help some with cash flow. Most of Ontario is now in Stage 2 of re-opening meaning more people are returning to work (with income that can be garnished), and courts and collection call centres are preparing to re-open. The Ontario government has advised they hope there is no need to extend the Emergency Order beyond July 10 which will enable creditors to begin collection actions. While there will be a backlog in the courts and debtors have 21 days to respond from the time a statement of claim is mailed, debt repayment will once again be top of mind to many Canadians. Once formal mortgage and credit card deferrals end, this will add to the payment pressure. Delinquency rates, already on the rise, will increase.
Our Homeowners Bankruptcy Index was also at record lows, at 3.5% in June 2020. Again, mortgage deferrals and a stalled housing market are providing a buffer at present.
This temporary reprieve in insolvencies will be followed by a significant upswing. Yes, average consumer debt may decline as people are spending less. But that includes those who tend to repay their credit card balances in full each month (estimated at 70% of cardholders according to the Canadian Bankers Association). Those with problem debt will likely see their debt balances increase as many individuals will take advantage of credit deferrals. Others will rely on credit cards and high-cost loans to stay afloat. The potential for a drop in the real estate market will also drive homeowner insolvencies, which have been at historical lows, up. We expect to see accelerated growth in consumer insolvencies into 2021 that will likely outpace that of the 2008-2009 recession.
Despite this rather dramatic decline, Ontarians are burdened by too much personal debt, and COVID-19 highlighted just how many were living paycheque to paycheque.
Higher overall debt levels remain a concern in the long term.
Consumer Insolvency Statistics Ontario 2019
Total insolvencies filed by Ontario consumers rose 15.4% in 2019 according to data released by the Office of the Superintendent of Bankruptcy.
In total, 44,852 hardworking individuals filed insolvency in Ontario in 2019.
Personal bankruptcies fell 0.6% while consumer proposals increased by 25.1%.
In 2019, 67% of consumer insolvencies filed in Ontario were consumer proposals. Heavily indebted consumers with high income and high asset values turn to a consumer proposal as a way to avoid high surplus income payments in a bankruptcy and keep their home. In 2019, homeowners were not a significant driver of consumer proposals. Instead, indebted homeowners have relied on their home equity to refinance their credit card and other debt through a second mortgage, HELOC or debt consolidation loan.
The increase in proposals in 2019 is more a reflection of strong employment conditions in Ontario. Insolvent debtors with a household income above the government-mandated thresholds limits are more likely to choose a consumer proposal as an alternative to bankruptcy in order to spread potential surplus income payments over a period of up to five years.
Below is a summary of insolvencies by geographic region as summarized by Hoyes Michalos based on insolvency statistics by FSA provided by the Office of the Superintendent of Bankruptcy (OSB). Regional FSA allocations may differ slightly from annual economic region data provided by the OSB as the regional data summarized by Hoyes Michalos provides additional location details than is available by economic region.
You can learn more about how much debt it takes to file bankruptcy on our interactive graphic: Regional Consumer Debt & Bankruptcy which shows total insolvencies, average consumer debt levels, and debt-to-income by region.
|Consumer Insolvencies||Total Growth||Growth Bankruptcy||Growth Proposal||% Proposals|
|City of Toronto||2,604||17%||-3%||28%||71%|
|Newmarket & Area||861||27%||13%||35%||68%|
|North Bay Region||596||11%||-6%||21%||66%|
|Orangeville & Area||353||15%||-3%||25%||72%|
|Parry Sound-Huntsville Region||420||6%||0%||8%||69%|
|Sault Ste. Marie Region||459||11%||1%||30%||39%|
|Thunder Bay Region||572||5%||-1%||15%||44%|
|*Region includes surrounding rural areas|
Who files insolvency in Ontario?
The average insolvent debtor looks much like the average person in Ontario. They are working and struggling to make ends meet. To read more about what the average bankrupt looks like, see our bankruptcy research study: Joe Debtor.
For commentary and information about consumer insolvencies and debt issues in Ontario, contact:
J. Douglas Hoyes
CA, CPA, Licensed Insolvency Trustee
CA, CPA, Licensed Insolvency Trustee