INSOLVENT BUT NOT BANKRUPT?

 385 Canadians Insolvent Every Day

If we judge household financial health by bankruptcy filings alone, we are looking at the wrong number.

Bankruptcy is no longer the route chosen by most insolvent Canadians. Consumer proposals have largely replaced it—and numerous other private debt arrangements never appear in insolvency statistics at all.

Canada recorded 140,457 consumer insolvencies in 2025. That was the highest annual number since 2009 and the second-highest volume recorded since national tracking began in 1987.

Approximately 385 Canadians entered formal insolvency every day.

But only about 22% of those cases were bankruptcies. Consumer proposals accounted for 78.4%.

In 2009, proposals represented approximately 23% of consumer insolvencies. They now represent nearly four out of every five cases.

A proposal is still insolvency

A consumer proposal sounds less severe than bankruptcy. It allows someone with regular income to negotiate repayment of part of the unsecured debt while creditors forgive the remainder.

The debtor can generally retain important assets and make a fixed payment over as long as five years.

But this distinction must not obscure the underlying fact: a person filing a consumer proposal is insolvent. The person cannot meet existing financial obligations as they become due.

It is not simply clever refinancing. It is a formal legal proceeding under Canada’s Bankruptcy and Insolvency Act.

The pressure continued into 2026

Canada recorded 37,121 consumer insolvencies during the first quarter of 2026 and another 37,523 during the second quarter.

The second-quarter total was 6.9% higher than one year earlier and the highest quarterly volume since 2009.

Approximately 74,600 Canadians therefore entered formal insolvency during the first six months of 2026.

A headline saying bankruptcies remain relatively low could be technically correct while concealing most of the country’s formal consumer insolvencies.

The official totals still do not capture everyone

Consumer proposals are counted by the Office of the Superintendent of Bankruptcy. Many other signs of household financial trouble are not.

Official insolvency figures generally do not include:

• Private settlements negotiated directly with creditors
• Debt-management programs arranged through credit counsellors
• Debt-consolidation loans
• Repeated credit-card balance transfers
• Borrowing against home equity
• Loans from relatives
• Selling assets to remain current
• Making minimum payments while balances continue growing
• Falling behind without beginning a formal proceeding

Those measures may postpone or prevent a formal insolvency filing, but they do not necessarily indicate that the household is financially sound.

Debt is being used to bridge the gap

Canadian consumer credit reached approximately $835 billion in June 2026, rising about 4.8% in one year. Consumer credit was growing faster than mortgage debt.

Those aggregate numbers cannot tell us exactly how much was borrowed for groceries, gasoline, utilities or rent. But the Bank of Canada recognizes that persistently carrying high credit-card balances can indicate reliance on borrowed money to meet ordinary expenses.

Its research found that borrowers carrying balances month after month were substantially more likely to miss future debt payments. Risk increased further when borrowers used more than 80% of their available credit.

Insolvency is usually the end of the road, not the beginning. Before the formal filing come the credit-card balances, consolidation loans, minimum payments, asset sales and private arrangements used to postpone it.

Canada does not have merely a bankruptcy statistic. It has a much larger household-debt problem—one increasingly recorded under different names, and partly hidden outside the official insolvency system altogether.

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Sources:
Office of the Superintendent of Bankruptcy—2025 Insolvency Statistics
Office of the Superintendent of Bankruptcy—Second Quarter 2026
Bank of Canada—Credit-Card Reliance and Financial Stress