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Canadian Consumer Insolvencies Rise to Highest Level Since 2009 as Past Economic Pressures Still Weigh, BMO Says

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Household insolvencies in Canada have resumed their upward trend, with consumers filing for almost 146,000 insolvencies in the 12 months to June, which is the highest level since 2009, according to BMO Capital Markets in a note.

The increase has been driven primarily by consumer proposals, which allow borrowers to repay their debts under revised terms, such as extending payment periods, wrote BMO Senior Economist Shelly Kaushik in Monday's note.

Bankruptcies, which can involve the forfeiture of assets, remain well below pre-pandemic levels, added the bank's economist.

The data suggested that the impact of past pressures, which included higher interest rates, weaker labor markets, elevated living costs and lower home values, continued to weigh on households, said BMO.

At the same time, buffers such as earlier mortgage stress tests and strong stock-market gains have helped many households weather the strain.

"We'll be watching to see how insolvencies fare as the housing market bottoms out and economic growth tries to build momentum," said Kaushik.

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