Insolvent borrowers carried more accounts, higher balances and growing housing‑related risk
Average Canadians who reached insolvency in 2025 arrived with more debt, more accounts and less room to manoeuvre.
The latest “Joe Debtor” study by Hoyes, Michalos & Associates found that insolvent Canadians owed an average of $67,496 in unsecured debt in 2025, up 11.2% in one year and nearly 37% over three years. Credit card balances alone accounted for 36% of that total, the highest share in more than a decade.
“This isn't about one bad financial decision or a sudden crisis,” said Doug Hoyes, Licensed Insolvency Trustee and co‑founder of Hoyes, Michalos & Associates.
“Canadians are layering borrowing on top of borrowing, leading to insolvencies with unprecedented debt levels.”
Insolvent borrowers also dealt with more lenders and products. The average person who filed had 10.5 creditors – the highest level since 2013 – 3.5 credit cards and, among payday loan users, an average of 4.9 loans.
“Canadians are using credit as a coping strategy,” said firm co‑founder Ted Michalos. “That strategy works for a while, but it's a delaying tactic, not a solution. By the time people file, they're not dealing with one problem – they're dealing with ten.”
Homeowners’ buffer from equity narrowed
Homeowners still made up a minority of insolvency cases, but their share rose to 8% in 2025 from 5% a year earlier, and their position weakened.
Nearly one in four insolvent homeowners filed with negative equity, while their average unsecured debt climbed to $111,995.
“For years, home equity has acted as a pressure valve,” said Hoyes.
“That buffer is eroding. When homeowners lose the ability to refinance or consolidate, unsecured debt starts to pile up quickly, and insolvency risk rises.”
Federal regulators already warned that heavily leveraged borrowers would feel renewal pain. The Office of the Superintendent of Financial Institutions reported that most fixed‑payment variable‑rate borrowers who renewed at higher rates faced rising delinquency risk, even as rate cuts in 2024 and 2025 eased the worst‑case “mortgage cliff” scenario.
Renewals, credit and the next phase of stress
Despite worsening balance sheets, insolvency filings rose only modestly in 2025 – about 1.2% in Ontario and 1.4% nationally – as households borrowed more and stretched payments to stay current.
“Layering credit can buy time, but it doesn't fix the problem. Once borrowing capacity runs out, insolvency filings tend to rise quickly,” said Michalos.
Insolvencies hit a 15‑year high in 2024, and nearly $1 trillion of mortgages is slated to renew by 2026, concentrating risk among borrowers who locked in at pandemic‑era lows.
Industry sources later suggested the renewal “crisis” softened as rates fell, but with more than $2.6 trillion in consumer debt outstanding and late‑stage delinquencies edging higher, that relief remains uneven.
The Hoyes Michalos study warns that personal insolvencies could rise by “as much as 20%” in 2026 as deferred stress surfaces.
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