Rising inflation and high interest rates push more Canadians into insolvency as debt loads reach new highs
Credit card debt among insolvent Canadians surged 25.9 percent to $20,398 in 2024, marking the sharpest annual rise since 2011, according to research from Licensed Insolvency Trustees Hoyes, Michalos & Associates Inc.
The study highlights the increasing financial strain on households, with more consumers relying on credit cards for necessities rather than discretionary spending.
Doug Hoyes, Licensed Insolvency Trustee, emphasized the severity of this trend. “The dramatic rise in credit card debt tells a troubling story about the financial health of Canadian households,” he said.
He noted that higher interest rates and persistent inflation are forcing more people to depend on credit cards for everyday expenses.
The study found that credit card debt now makes up 34 percent of total unsecured debt among insolvent debtors, an increase from 30 percent in 2023.
Millennials experienced the most significant rise, with their credit card debt climbing 35 percent.
Ted Michalos, Licensed Insolvency Trustee, pointed out that insolvency statistics only reveal part of the problem.
“What's particularly concerning is that these insolvency statistics are just the tip of the iceberg,” he said. “For every person who files insolvency, many more Canadians carry unsustainable credit card balances, struggling silently with minimum payments that barely cover the interest charges.”
The average insolvent debtor’s total unsecured debt rose to $60,678 in 2024, an increase of 12.2 percent from the previous year.
This rise, combined with an overall increase in consumer insolvencies, reflects broader financial distress among Canadian households.
Hoyes described the current financial climate as a “perfect storm of financial stress.”
He explained that rising interest rates have made borrowing more expensive, while inflation continues to weaken purchasing power.
“Many households are forced to choose between making rent or mortgage payments and keeping up with credit card bills,” he said.
Higher-income earners are also feeling the effects of mounting debt. The study found that 54 percent of all insolvency filers in 2024 had a net monthly income above $3,000, compared to 48 percent in 2023.
Michalos highlighted the significance of this trend.
“These numbers signal a deterioration in household finances across income levels,” he said. “When we see this magnitude of increase in credit card debt, combined with rising insolvency filings among higher-income earners, it’s clear that financial stress is moving up the income ladder.”
Homeowners are not exempt from this financial pressure.
The study found that homeowner equity among insolvent debtors dropped from 21 percent in 2023 to just 10 percent in 2024. One in seven insolvent homeowners now has negative equity.
Hoyes warned that upcoming mortgage renewals at higher interest rates could push more homeowners to rely on credit cards to keep up with their mortgage payments.
Economic uncertainty continues to grow for Canadian households, as rising inflation, higher interest rates, and trade pressures create additional financial risks.
Hoyes cautioned that these conditions could lead to even more households struggling with unsustainable debt.
“The combination of persistent inflation, higher interest rates, and new trade pressures creates significant risks for the Canadian economy,” he said.
“These conditions suggest we're likely to see even more households struggling with unsustainable debt loads in the months ahead, particularly if economic growth stalls.”
