Consumer Insolvencies Rise, Consumer Proposals Take Majority Share

By the Editorial Team · Wednesday, September 30, 2026

Consumer insolvencies in Canada reached 145,681 filings in the year ending July 2026, marking a 46 percent increase in the insolvency rate since 2021 and approaching the two-decade average after pandemic lows. The majority of individuals are now opting for consumer proposals to manage debt, a method supported by legislative changes and accounting for 78 percent of filings, while ongoing economic pressures like rising interest rates and trade tensions may affect future insolvency trends.

Consumer insolvencies in Canada have risen sharply since 2021, with a marked shift in the way individuals resolve their debts. Over the 12 months ending in July 2026, a total of 145,681 Canadians filed for insolvency, representing the second-highest annual total on record since 1987, surpassed only by 2009. When adjusted for population growth, the insolvency rate stands at 4.26 filings per 1,000 adults, a 46 percent increase from 2.91 in 2021. This level is nearly identical to the two-decade average of 4.25 filings per 1,000 adults, suggesting a return to pre-pandemic norms following an unusually low rate during the height of COVID-19 support measures.

The rebound in insolvencies coincided with a series of interest rate hikes by the Bank of Canada, which began in March 2022 after holding policy rates near 0.25 percent throughout the pandemic. Rising borrowing costs are believed to have contributed to financial strain among consumers, prompting an increase in insolvency filings.

A significant transformation has occurred in the methods Canadians use to address insolvency. Consumer proposals now account for 78 percent of filings, a substantial increase from just 23 percent in 2009. Under a consumer proposal, licensed insolvency trustees assist debtors in negotiating payment plans with creditors, typically allowing individuals to repay a portion of debt over up to five years while retaining key assets such as homes, vehicles, and savings that exceed provincial exemption limits.

Changes in legislation have also expanded access to consumer proposals, increasing the debt threshold from $75,000 prior to 2009 to $250,000 today, excluding mortgage debt from the calculation. These adjustments, along with broad promotional efforts by insolvency trustees, have made consumer proposals a more attractive alternative to bankruptcy, which involves liquidating non-exempt assets to repay creditors.

The shift toward consumer proposals appears to be stabilizing, with their share peaking at 78.9 percent in 2024 and slightly declining to 78.1 percent in the most recent period.

Regional variations persist across Canada. Newfoundland and Labrador reports the highest insolvency rate at 5.11 filings per 1,000 adults, approximately 1.5 times higher than British Columbia’s rate of 3.41. Ontario’s rate is just below the national average at 4.20 filings per 1,000 adults. Despite British Columbia’s reputation for high household debt and expensive housing, its relatively low insolvency rate is attributed to substantial home equity held by many homeowners, allowing options such as refinancing or home sales before insolvency becomes necessary.

Looking ahead, several factors may influence future insolvency trends. Increasing borrowing costs, driven in part by recent U.S. Federal Reserve rate hikes and rising Canadian bond yields, are putting upward pressure on fixed mortgage rates. Additionally, ongoing trade tensions between Canada and the United States create economic challenges, particularly for Ontario’s auto and manufacturing sectors, which account for nearly 40 percent of the country’s insolvency filings. How these economic pressures evolve will be critical in determining whether insolvency rates stabilize or continue to climb in the near term.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.