Canadian Debt Crisis Reaches New Heights as Financial Distress Mounts
Canadians facing severe financial difficulties are now carrying unprecedented levels of debt, according to a comprehensive annual insolvency study. The research reveals a troubling trend of individuals accumulating credit from multiple sources as they struggle to manage their finances.
Record-Breaking Debt Loads Emerge
The latest "Joe Debtor" report from Hoyes, Michalos & Associates Inc. shows that the average insolvent debtor owed $67,496 in unsecured debt during 2025. This represents the highest level recorded since the firm began tracking this data in 2011, indicating a significant escalation in financial vulnerability across the country.
Doug Hoyes, an insolvency trustee and co-founder of the firm, emphasized the systemic nature of this crisis. "This isn't about one bad financial decision or a sudden crisis," he stated. "Canadians are layering borrowing on top of borrowing, leading to insolvencies with unprecedented debt levels."
Multiple Credit Sources Compound Financial Strain
The study uncovered alarming patterns in how financially distressed Canadians are managing their obligations:
- Insolvent individuals averaged 10.5 different creditors in 2025, the highest number since 2013
- They carried an average of 3.5 credit cards simultaneously
- A record 4.9 payday loans per insolvent individual, highlighting the desperation many face
Ted Michalos, the firm's other co-founder, explained this behavior as a coping mechanism. "Canadians are using credit as a coping strategy," he noted. "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 10."
Credit Card Debt Surges to Decade High
Credit card balances experienced a dramatic 20.2 percent increase in 2025, now accounting for 36 percent of total unsecured debt. This represents the highest share in ten years, signaling a significant shift in how Canadians are financing their daily lives amid economic pressures.
Consumer insolvencies, which include both bankruptcies and credit proposals, rose 2.3 percent in 2025 compared to the previous year. According to the Canadian Association of Insolvency and Restructuring Professionals, this marks the highest annual volume since the 2009 financial crisis.
Homeowners Face Growing Financial Vulnerability
While homeowners represent a smaller portion of insolvency filings, their numbers are increasing at an alarming rate. Homeowner insolvencies climbed three percentage points in 2025, with their financial positions deteriorating significantly.
- Nearly one in four homeowners filing for insolvency reported negative home equity
- Insolvent homeowners carried an average of $111,995 in unsecured debt, representing a 12.6 percent increase
- The traditional safety net of home equity is eroding for many households
"For years, home equity has acted as a pressure valve," explained 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."
Broader Economic Pressures Intensify Financial Strain
The report identifies several interconnected factors driving this debt crisis:
- Higher interest rates creating increased borrowing costs
- Rising cost of living affecting household budgets
- Mortgage rate spikes for homeowners renewing from pandemic-era lows
- Accumulating debt across all major categories
Overall debt loads increased more than 11 percent in 2025 alone, climbing almost 37 percent over the past three years. This rapid acceleration suggests that many Canadians are reaching a breaking point in their financial resilience.
The study concludes that debtors are now filing for insolvency later in the financial distress cycle and with higher balances from more accounts, indicating they are increasingly using credit to buy time rather than address underlying financial problems.
