Bankruptcy filings for new businesses jumped 48.5% in the third quarter of this year, the largest percentage increase in 35 years of records.

The Office of the Superintendent of Bankruptcies (OSB), along with the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), argue there is no need to panic but they are issuing an alert.

They are urging Canadians to beware of unregulated, unlicensed debt advisors who claim to be authorized to assist with insolvency options.

They are nothing but scam artists.

Some charge hundreds or even thousands of dollars for services they are not licensed to provide, or for unnecessary services offered before, during or after a consumer proposal or bankruptcy filing.

“Canadians can feel confident that when they seek advice from a Licensed Insolvency Trustee (LIT), they are dealing with someone who has demonstrated they have the knowledge, experience and skills to help them make informed choices to deal with their debt,” said Jean-Daniel Breton, chair of CAIRP, the national voice on insolvency matters in Canada.

“They are the only debt-relief professionals in Canada legally required to offer a complete financial assessment, explain all the options for debt-relief and offer unbiased advice.”

“The concern is that more Canadians are reaching their breaking point financially, and as many desperately search for solutions to their debt problems, they may be lured by unrealistic promises to quickly solve their debt problems or fix their credit score,” says André Bolduc, vice-chair of CAIRP.

“Unfortunately, those promises can end up being too good to be true.”

In the third quarter of this year, 25,860 Canadians filed either a consumer proposal or a bankruptcy. Consumer insolvency filings in Q3 are 24.9% higher compared to the same quarter of 2020, yet filings are still 25.5% lower than pre-pandemic levels in 2019.

In 2022, therefore, insolvencies are up 5.9% year over year.

“The stigma of bankruptcy prevents many from seeking the advice of a Licensed Insolvency Trustee. In actuality, we can offer options for insolvent consumers to avoid bankruptcy by negotiating an agreement with creditors to reorganize their financial affairs,” said Breton. “This process, called a consumer proposal, can only be done by speaking with a LIT.

“LITs may recommend non-insolvency options such as talking to your creditors, consolidating your debts, establishing and following a budget or a Debt Management Plan (DMP). If needed, they can refer you to a reputable credit counselling agency to access DMP services, for example.”

Put simply, bankruptcy is a legal process that lets businesses or individuals clear their debts – and Canadians have a lot of debt.

In 2020, Statistics Canada reported that the average Canadian household was holding $1.77 of credit-market debt for every dollar of disposable income.

That’s why “good faith debtors” (i.e.; an insolvent person) have the right to make a fresh financial start by declaring bankruptcy. 

The Canadian Bankruptcy and Insolvency Act (BIA) is federal legislation designed to help protect individuals from inescapable debt, and it gives insolvent debtors certain tools for resolving their debt with creditors.

But all is not lost.

After bankruptcy, one is at least allowed to keep necessary clothing, one vehicle (worth up to $7,117), household furnishings and appliances, equipment used to earn a living, and certain types of life insurance. You can even keep your RRSPs and RRIFs, except for contributions made in the 12 months before your bankruptcy.

So, it’s not the end of the world, though it might seem like it.


  • Mark Bonokoski

    Mark Bonokoski is a member of the Canadian News Hall of Fame and has been published by a number of outlets – including the Toronto Sun, Maclean’s and Readers’ Digest.