The latest data from Hoyes Michalos, based on records from the Office of the Insolvency Regulator, shows increasing cash flow pressures are forcing more Canadians into bankruptcy, with total bankruptcy filings rising by 10.6 per cent nationally and 7.6 per cent in Ontario.
The number of bankruptcies in Canada is also on the rise, rising by 19.1 per cent, outpacing growth in consumer filings and signaling a shift in how borrowers are coping with increasing financial stress.
Hoyes Michalos said the trend reflects growing cash flow pressures on borrowers whose budgets are no longer balanced.
“Many people’s living expenses are growing faster than their income, and they take on debt to survive to make up the difference, but ultimately they fall behind and can’t catch up,” said Doug Hoyes, a licensed bankruptcy trustee and co-founder of Hoyes Michalos. Canadian Mortgage Trends.
Bankruptcy growth accelerates as refinancing options shrink
Hoyes said the third-quarter growth reflected what the company saw throughout 2025, with more customers taking on credit for day-to-day expenses and then falling behind as payments increased. He added that tightening housing conditions were increasingly part of the problem.
“In the past, homeowners could tap into growing home equity to refinance, but now that real estate prices have stabilized and declined in some markets, that option no longer exists, making bankruptcy a viable option,” he said.
Tenant-led bankruptcies gain momentum
While the majority of insolvent borrowers still choose consumer advice, which allows them to keep their assets under negotiated repayment plans, bankruptcy filings are starting to take up a larger share.
In September, filings accounted for 80.4 per cent of all bankruptcies in Ontario and 78 per cent of bankruptcies nationally, but the pace of bankruptcies is now accelerating.
Hoyes said the increase is still “primarily renters,” who typically have less home equity to draw on and are more vulnerable to income pressures.
“In bankruptcy, a bankrupt is required to pay a portion of their remaining income,” he said. “As incomes stagnate and unemployment rises, residual income decreases, so bankruptcy is not as punitive as it would be if incomes were higher.”
At the same time, as home equity declines, fewer debt-ridden homeowners need to file proposals to protect property values, a factor Hoyes said has contributed to the recent increase in bankruptcies.
Homeowner stress intensifies even as mortgage delinquency rates remain low
Mortgage delinquency rates remain low, with just 0.24% of residential mortgages issued by banks three months or more past due as of the end of August. But Hoyes said that number masks broader stress among homeowners.
The Hoyes Michalos Homeowner Bankruptcy Index, which tracks the share of insolvent debtors who own homes, fell to 7.2% in September. Despite the lower reading, Hoyes said stress was rising among mortgage holders, particularly borrowers in the renewal phase, pre-construction buyers and small landlords.
“There has been a boom in pre-construction sales from 2020 to 2023, with many projects now being completed at significantly reduced prices,” he said.
“Many pre-purchase buyers are unlikely to qualify for a mortgage, so they forgo a down payment,” he added. “The story in 2026 will be the number of prepayment defaults leading to a flood of lawsuits against purchasers.”
Landlords are facing similar pressures as rising mortgage rates, weak rents and waning demand for short-term rentals leave many with negative cash flow.
Hoyes noted that many borrowers are maintaining mortgage payments by defaulting on other debts, a pattern reflected in an increase in bankruptcy filings and rising 90-day-plus delinquency rates across multiple credit types.
Going forward, he expects more homeowners to apply in 2026. He said modest interest rate cuts were unlikely to significantly improve housing affordability. He noted that the historical range for the Homeowner Bankruptcy Index remains well below its 2011 peak, suggesting that filings could climb further if income and housing stress persists.
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Bankruptcy Consumer ProposalDoug Hoyes Hoyes Michalos Homeowner Bankruptcy Index Mortgage Delinquencies
Last modified: November 24, 2025
