The cost of living is catching up to a large chunk of Canadians, with almost one in four taking on new debt in the last year, a new report has found.
The survey by the Office of the Superintendent of Bankruptcy (OSB) and the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) also found more than half of Canadians (54 per cent) are struggling to pay bills, and 4.2 out of every 1,000 adult Canadians filed for insolvency in 2024, the highest rate since 2019.
“Why are we seeing debt accumulate to a point that insolvencies are rising? It’s because spending has consistently been outstripping income for some time now,” said Moshe Lander, an economist at Concordia University.
“That’s maybe the more worrying sign. It’s not the credit itself, it’s that a lot of people don’t find a path to be on the other side of the ledger, even when they get into the working years of their life.”
This comes as credit agency TransUnion said Tuesday that total consumer debt in Canada rose to $673 billion in the third quarter of 2025, up 18 per cent compared to the same period last year.
Car loans were the biggest driver of that rising debt. In the third quarter of last year, the average Canadian with a car loan owed $29,138. That number jumped 4.32 per cent to $30,396 in 2025, TransUnion said.
And the average credit card balance across Canada rose 1.9 per cent to $4,652.
That number might increase further as Canadians head into the holiday season, when credit card debt typically peaks, a report by Equifax Canada said Wednesday.
It’s not just credit card debt, the Equifax report shows. More Canadians are now defaulting on all kinds of non-mortgage loans this year, it added. This is true “especially in younger households and homeowners in urban centres,” said Equifax Canada vice-president Rebecca Oakes.
So why is this happening now? Lander believes low interest rates masked “the true depths to which people were in trouble” in the years following the COVID-19 pandemic.
In 2022, interest rates started rising again and the effects of Canada’s debt troubles are becoming apparent now, he said.
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“It’s not that they’re (interest rates) at generationally high numbers by any means, but they’re just high enough that people have now reached that point of no return,” he said.
The inability to get a handle on debt is preventing Canadians from saving enough for a rainy-day fund.
Nearly half (48 per cent) of respondents to the OSB and CAIRP survey said they don’t have enough in their emergency funds to last them three months.
“Experts say we want to have three to six months of living expenses saved up. That seems really overwhelming for most Canadians,” said Stacy Yanchuk Oleksy, CEO of Alberta-based non-profit credit counselling agency Money Mentors.
A method she recommends to clients struggling with saving for an emergency fund is a “52-week challenge,” named for the number of weeks in a year.
“For every week of the year you pick (an increasing amount of money) you’ve got to deposit into your savings account. Week one, you do $1, week two, you go $2. Now you’ve got $3 and you keep adding it up. You’re going to have over a thousand dollars in a year,” she said, as a means of starting a saving habit.
The first step is taking an honest look at the numbers, Oleksy said.
“The story in our heads is often way bigger than the reality is. The reality of it is the numbers. Who do you owe and how much do you owe? What are your interest rates? Just looking at the facts,” she said.
A budget will also show you how much you could potentially set aside to apply to your savings account or to pay down your debt.
What happens when you have multiple debts, including credit cards, lines of credit and payday loans, all at the same time? Some experts suggest debt consolidation.
Simply put, debt consolidation bundles all your different loans into one so that you only have a single payment you need to make.
“This option could reduce the amount you pay if the interest rates and terms of a consolidation loan from your bank are better than those of the individual creditors,” CAIRP says.
“What you’re going to want to do is consolidate all your unsecured debt, close out all those products, and then just pay this one loan off. The risk is that you get the consolidation loan, but you don’t close all those products,” Oleksy said.
CAIRP says debtors can also enrol in a debt management plan (DMP), which is essentially an agreement between you and your creditors that could include interest rate relief and a new debt repayment timeline.
If your total debts (not including your mortgage) do not exceed $250,000, you can also apply for something called a “consumer proposal.”
“A consumer proposal is a proposal made between you and your creditors that usually has you repaying only a portion of the unsecured debt you owe, instead of the full amount, making it different from a DMP,” CAIRP says.
If none of the conventional methods of paying your debt work, a professional may recommend declaring bankruptcy. This could release you from most, if not all, of your debt.
“Despite the common belief that you ‘lose everything’ if you declare bankruptcy, for some people’s situation it is actually the most efficient debt solution for regaining financial stability. Bankruptcy is only considered, however, after exploring all your other options first,” the CAIRP website says.
