When Debt Becomes a Social Policy Problem

An upcoming academic conference is asking a pointed question: what does a decade of American bankruptcy data tell us about the state of Canadian household debt?

Debt's Grip: Risk and Consumer Bankruptcy, organized by Professor Stephanie Ben-Ishai, takes place April 17 at Osgoode Professional Development. The half-day program draws on research from the Consumer Bankruptcy Project, which has tracked thousands of Americans who have filed for bankruptcy, combining large-scale quantitative data with personal narratives to build one of the most detailed pictures of financial failure ever assembled.

The themes are hard to ignore from a Canadian perspective. Canadians now carry some of the highest household debt levels in the OECD. Rising interest rates, precarious employment, and an increasingly unaffordable housing market have pushed financial vulnerability to new extremes, particularly among younger households and seniors. The program examines whether the forces driving Americans into bankruptcy, including medical debt, student loans, and what researchers call the "privatization of risk," are playing out differently or not so differently on this side of the border.

We spoke with Professor Ben-Ishai, Distinguished Research Professor and York Research Chair in Law, Finance and Debt, ahead of the event.

1. The Consumer Bankruptcy Project data is rooted in American experience. Where do you see the strongest parallels with Canada, and where does the picture diverge most sharply?

The American data shows us what happens when financial risk is shifted onto households without adequate safety nets. Canada isn't immune to those forces. We see the same precarity, the same erosion of pension coverage, the same reliance on credit to bridge income gaps. The question isn't whether those pressures exist here, they do. It's whether our systems are absorbing them differently or just absorbing them more slowly.

One of the program's central provocations is the idea that insolvency systems quietly function as welfare mechanisms, absorbing the consequences of gaps in social policy rather than addressing their root causes.

2. What does it mean in practice to say that insolvency law functions as a de facto welfare system, and does that change how you think the BIA or consumer proposal regime should be designed?

The insolvency system has become a kind of last-resort social safety net, catching people who fall through other gaps. That's not what it was designed for. A consumer proposal (approximately 80% plus of BIA insolvency filings) doesn't restore someone's health or retrain them for a new career, it just restructures their debt. If we accept that the system is functioning this way, we need to think seriously about whether the current bankruptcy discharge rules, exemptions, intermediaries, cost of bankruptcy, options, and timelines actually serve those populations well.

The program also takes a forward-looking view. With Canadian consumer insolvency filings on the rise and household balance sheets under sustained pressure, the question of whether the current system is fit for purpose feels urgent.

3. Are we heading toward a consumer insolvency wave, and is the current system equipped to handle it?

The conditions are there. Household debt-to-income ratios are at historic highs, interest rates have risen faster than at any point in decades, and many Canadians are carrying mortgage debt that was underwritten in a very different rate environment. Whether that translates into a wave depends on employment and to a certain extent the impact of AI. If the labour market holds, we'll see elevated filings but not a crisis. If it doesn't, the system will be tested in ways it hasn't been since 2009.

Debt's Grip: Risk and Consumer Bankruptcy takes place April 17, 2026, 1:00 PM to 4:00 PM at Osgoode Professional Development. For inquiries, contact Professor Ben-Ishai at [email protected].

Register for the conference here.