Consumer insolvencies in March spike to highest level in a year

The month of March saw the largest monthly increase in insolvencies since the pandemic began, the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) said in a release on Wednesday.

The total number of consumer insolvencies filed in Canada in March increased by nearly 23% compared to February, CAIRP said.

It was the largest monthly increase in more than 10 years and the largest single month of new filing activity since the onset of the pandemic in March 2020, it said.

However, the spike reflected a return to near pre-pandemic levels after a year of record lows.

“Filings fell significantly in April 2020 as Canadians faced Covid-related financial uncertainty,” said Mark Rosen, CAIRP chair, in the release.

“They remained low over the last twelve months with government aid programs and creditor flexibility helping many people who were already facing insolvency delay the inevitable,” he said. “Now it seems we are starting to see that backlog emerge.”

Despite the volume increase in March, consumer filings were down 28.3% in the first quarter of 2021 compared to the same period in 2020. For the 12-month period ending March 31, 2021, they were down 36.8%, according to the data.

Those lows are expected to increase in the months ahead.

“As we approach the second quarter of 2021 with the vaccine rollout moving slowly, re-openings stalled and government support programs winding down, more Canadians will look at debt-relief options,” said André Bolduc, executive board member of CAIRP, in the release.

Across Canada, Alberta (10.5%), British Columbia (7.2%) and Saskatchewan (6.5%) saw the largest rises in consumer insolvency filings in the first quarter of 2021 compared to the previous quarter.

In contrast, New Brunswick (-6.1%), Newfoundland and Labrador (-3.6%) and Ontario (-2.5%) all experienced a decrease in filings compared to the fourth quarter of 2020.

For businesses, the first quarter of 2021 saw the lowest number of business insolvencies in 35 years of records, with 603 companies filing. That represented a 9.7% drop compared to the previous quarter and a 31.7% drop compared to the first quarter in 2020. For the 12-month period ending March 31, 2021, business insolvencies were down 30.2% compared with the same period in 2020.

However, as with consumers, some businesses may be forced to consider insolvency as the year continues.

“Many companies have amassed a crippling amount of debt during the pandemic,” said David Lewis, a CAIRP member, in the release. “On top of that, the business climate will be challenging for the foreseeable future.”

Businesses are worried about their survival this year, according to Statistics Canada data from a survey earlier this year. Half (51.3%) of surveyed businesses didn’t know how long they could continue to operate at their current levels of revenue and expenditures before considering closure or bankruptcy.

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