Insolvencies Rise as Canadians Face Growing Financial Pressures

Geoff Currier

Canadians continue to face significant financial pressure, and renewed Canada-US tariff uncertainty adds another consideration for consumers and businesses already dealing with high costs, debt and economic uncertainty.

Insolvencies are already on the rise. In fact, the overall rate of insolvencies is highest since the recession of 2009. For tax and financial professionals, related pressures may increasingly show up in conversations with clients.  Are you prepared to provide sage guidance in these cases?

The Background. The Superintendent of Bankruptcies reported in August that more than 13,000 insolvencies were filed in June of 2026, up 5.7% from May and a rise of 11.5% from the previous year. Most were individual consumers. Some may be your clients.

Albert and Saskatchewan witnessed fewer bankruptcies by individuals but the trend elsewhere has been generally up. P.E.I. (13.2%), B.C. (14.9%), Ontario (8.8%) and Manitoba (8.4%) were particularly hard hit over the past year. 

Business insolvencies were down nationally more than 10% year over year although Newfoundland and Labrador, Manitoba, Alberta and New Brunswick experienced businesses going under.

The overall rate of insolvencies is highest since the recession of 2009. 

The Impact of Taxes: A recent report by the Fraser Institute may provide some insight as to why so many Canadians are struggling. The average Canadian family now pays 41.9% of its income on taxes. In 1961 that figure was under 34%. When taxes eat up more of a household budget than shelter, food and clothing combined, there’s a serious imbalance. 

Some Options for Relief: Start with the tax return! Are they taking advantage of all of the tax benefits and programs for which they are eligible? There’s the tax refund itself, which delinquent tax filers may be owed.  Then there is the Canada Groceries and Essentials benefit, the Canada Workers Benefit, the Canada Child Benefit, the Disability Tax Credit and the Canadian Dental Care Plan, aside from provincial tax credits and assistance. Your client may not be aware of some of these programs which could help remove some financial stress.

These benefits and others are not available unless the individual files a tax return.

Filing in case of Bankruptcy.  In the case of bankruptcy, several returns must be filed:  one for the year prior to the year of bankruptcy, which the trustee in bankruptcy must immediately file,  a return for the period from January 1 up to the day before the date of bankruptcy; called the pre-bankruptcy return.  There is also an in-bankruptcy return used to report income from liquidated assets (for example, RRSPs) or from businesses the trustee winds up for the benefit of creditors.

Finally, the taxpayer must file a post-bankruptcy return, from the date of bankruptcy to December 31, which tax advisors may be called upon to file for the client.  Be sure to indicate “post-bankruptcy return” above the "Identification" section on page 1 of the return in that case.

It is so important to ensure clients are receiving the benefits and credits available to them at this critical time in their financial lives.

The Bottom Line: A tax return can reveal more than a client’s tax position, it can provide important clues about their financial well-being. With insolvencies rising and economic uncertainty continuing, watch for changes in income, debt and tax obligations. Asking the right questions early may uncover opportunities to improve cash flow, access overlooked benefits or connect a client with specialized help before financial difficulties become a crisis.

Be sure to tune into Real Tax News with Evelyn Jacks and Friends wherever you listen to your favourite podcasts.