A fresh wave of coronavirus infections pushed total insolvencies up 7.9% during the third quarter, wiping off the record declines seen in Q2, according to the Canadian Association of Insolvency and Restructuring Professionals.
On a monthly basis, total insolvencies nationwide surged 18.8% in September.
“Heading into a second wave of COVID-19-related restrictions that will continue to have a negative impact on the economy, a continued uptick in insolvencies looks inevitable,” CAIRP Chair Mark Rosen said in the organization’s latest data release. “As it stands, insolvencies are down compared to last year but we can attribute the decline to pandemic-related government support, unprecedented creditor flexibility and a lockdown lag whereby insolvency proceedings have been delayed – whether by personal choice or due to court closures.”
Consumer insolvencies accounted for much of the upswing, posting a Q3 increase of 8.1%. Business insolvencies saw 3.5% growth during the same time frame.
“There are many individuals who are currently scraping by. These individuals are most at risk because it is often sudden income shocks – like a job loss, or a major car or home repair – that can trigger insolvency,” said Andre Bolduc, license insolvency trustee and executive board member at CAIRP. “In many cases, the coronavirus crisis will expose deeper financial issues, like staggering household debt.”
Bolduc said that the situation is likely to get worse for financially burdened Canadians in the very near future.
“As pandemic assistance measures end and creditors begin collecting current payments and deferred payments, those who are dangerously over-leveraged are going feel the squeeze most,” Bolduc said.