Canada Housing Market

Canada’s debt crisis is intensifying as consumer insolvencies reached their highest June total in 15 years, according to new data from the Office of the Superintendent of Bankruptcy (OSB). The 11,464 filings in June 2025 mark a 3.3% increase from last year and highlight a growing shift toward more severe forms of debt relief.

What’s Driving the Rise in Insolvencies?

Insolvencies in Canada include two main types: consumer proposals and bankruptcies. Both require a licensed insolvency trustee (LIT) to negotiate with creditors, but the severity differs:

• Consumer proposals allow borrowers to keep assets while repaying a reduced amount over up to 5 years. They’re typically used for debts under $250,000 (excluding a mortgage) and stay on credit reports for at least 3 years.
• Bankruptcies are a last resort, requiring borrowers to surrender non-exempt assets in exchange for debt discharge. They remain on credit reports for 6 years after discharge and have a more severe long-term impact.

While both indicate financial distress, consumer proposals suggest the borrower’s situation is still manageable. A rise in bankruptcies, however, signals deeper financial trouble and larger losses for lenders.

June 2025: A Record Month for Debt Filings

June’s 11,464 insolvency filings were the highest for the month since 2010 and the fifth consecutive year of annual growth for June. On a 12-month basis, filings climbed 14.7% year-over-year to 137,667, the highest since March 2020.

Consumer proposals made up 9,027 of June’s filings, up 1.9% from last year. Bankruptcies, while fewer in number, jumped 5.9% to 2,856, a growth rate three times higher than proposals.

Why the Increase Matters

The surge in bankruptcies is particularly concerning. While proposals indicate borrowers are still able to repay part of their debt with restructuring, bankruptcies often mean the situation has deteriorated beyond repair. Rising bankruptcy rates can tighten credit availability, create larger losses for lenders, and signal growing economic strain among households.

Experts warn that the trend is not simply a post-pandemic adjustment. Credit accommodations in 2020 may have delayed the problem, but they didn’t solve the underlying debt pressures. As high interest rates, elevated living costs, and slowing wage growth weigh on households, more Canadians may be forced into severe forms of debt relief.

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Source: Canadian Insolvencies Rise To 2010-Levels As Bankruptcies Soar – Better Dwelling

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