Already noticed among companies, insolvency is showing its first signs of awakening among consumers. Across Canada, 23,153 insolvency proceedings were initiated by individuals in the first quarter, up 4% from the previous quarter, but down 2.8% from the same quarter last year .
The Canadian Association of Insolvency and Restructuring Professionals (CAIRP) points out, however, that the insolvency rate remains 30.3% lower than that recorded for the same quarter in 2020, and 28.2% lower than that of 2019, reflecting the aid and income support programs implemented by governments at the heart of the health crisis. Having said that, we observe an increase of more than 24% in the number of cases between February and March — this is the highest monthly growth rate in 13 years, notes CAIRP — and of 2.8 % for the 12-month period ended March 31.
Among Quebec consumers
The picture is similar among Quebec consumers. The number of insolvency files compiled by the Office of the Superintendent of Bankruptcy jumped 25% between February and March, and now stands only 1.2% below the March 2021 data. On a quarterly basis, the The increase exceeds 8% compared to the fourth quarter of 2021 to remain only 2.5% below the number of files recorded in the first quarter of 2021.
Simple monthly aberration or seasonal effect? Over 12 months, the increase reached 3.3% compared to the 12 months ended March 31, 2021. And if most of the increases measured according to the different time references were attributable to an increase in files ending in proposals to creditors , the number of Quebec consumers who opted for bankruptcy jumped 24% between February and March.
Among Quebec companies, the red light has been on for longer, with the increase in insolvency files oscillating between 24% and 11% depending on whether the comparison is made from February to March, from March to March, from a first quarter to another, or from one 12-month period to the next.
Canada-wide, the number of business insolvency files increased by 33.8% in the first quarter of 2022 compared to the same quarter last year, the largest year-over-year increase in 31 years, retains CAIRP.
“The support measures, combined with the high degree of patience shown by creditors, prevented an initial spike in corporate insolvency cases. However, the reversal of the recent trend marked by a decline in the number of insolvency files, observed over the past two years, highlights the economic damage caused by the pandemic,” explains the Association.
Financial stress
We can recall the results of recent polls evoking an inflationary stress particularly felt by individuals and households, amplified by a rise in interest rates expected to be stronger than expected. All of this should be put in the context of a historic deterioration in the level of affordability on the residential market. The results of a poll released April 20 by TD Wealth Management placed soaring inflation as the top personal finance concern for 87% of Canadian respondents.
Of course, “young people (under 35) are much more likely than their elders to be worried about housing prices (80% vs. 54%), rising interest rates (71% vs. 49%), fluctuations in the market (71%, versus 66%), their salary or ability to earn an income (67%, versus 43%), and job security (47%, versus 24% ),” the poll read.
According to MNP’s Consumer Debt Index, in the first quarter, 53% of respondents said they were more concerned about their ability to repay their debts, a jump of six percentage points since December. They are 35% to fear that higher interest rates could lead them to bankruptcy.