The Big Story
Why are Canadian insolvencies close to record highs?
Oct 12, 2024
Doug Hoyes, a licensed insolvency trustee and co-founder of Hoyes Michael Associates, delves into Canada's rising consumer insolvency rates, nearing levels last seen during the 2008 crisis. He discusses the stark difference between insolvency and bankruptcy, and the critical role of consumer proposals. Hoyes emphasizes how high living costs, stagnant wages, and debt contribute to financial instability. He offers insights on recognizing warning signs and the importance of seeking help early to navigate financial challenges.
14:22
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Quick takeaways
- The significant rise in Canadian consumer insolvencies is primarily driven by soaring living costs, particularly in food and housing, outpacing stagnant income growth.
- Proactive financial management, such as seeking additional work and consulting professionals early, can help individuals mitigate the risk of insolvency.
Deep dives
Understanding Consumer Insolvency
Consumer insolvency occurs when individuals are unable to pay their debts, manifesting in two primary ways: a cash flow issue or a situation where liabilities exceed assets. In Canada, consumers can either file for bankruptcy or propose a consumer proposal, wherein a debtor negotiates a repayment plan with creditors. This highlights the critical distinction that bankruptcy involves a formal legal process, unlike broader claims of insolvency. The current trend shows a significant rise in consumer insolvencies, which can largely be attributed to economic pressures such as rising costs and stagnant incomes.
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