For most of the past fifteen years, a homeowner in financial trouble had a way out. They could refinance, borrow against the house, or sell into a rising market. Equity solved the problem before it reached a bankruptcy trustee.
That way out is closing.
This week I sat down with Doug Hoyes, a Licensed Insolvency Trustee and co-founder of Hoyes Michalos, who has tracked whether his insolvent clients own a home since 1999. In 2022, about one in sixty of them did. Today it’s about one in nine.
The equity behind those homes has collapsed. In 2021, the typical homeowner filing with his firm held about $151,000 in equity, roughly a third of the home’s value. This year it’s about $20,000, or 6%. Nearly one in four now owe more than the house is worth.
Doug’s own homeowner count also understates the damage. When his firm read the reasons behind every file since January 2025, about one in seven had a real estate link, not one in nine. That group includes people who sold at a loss, people who lost the home to power of sale, buyers who couldn’t close on a pre-construction condo, and real estate agents whose income dried up.
We spent a good part of the conversation on pre-construction buyers. To file a consumer proposal instead of going bankrupt, your debts outside your home’s mortgage have to be $250,000 or less. For a buyer who can’t close, the builder’s claim can push them over that line. Doug explains how a $50,000 difference in what one condo is worth can decide which side of that line someone lands on, and what buyers should do about it now instead of waiting a year or two.
We also get into why low mortgage arrears don’t mean households are fine. People stop paying the mortgage last. They fall behind on installment loans, credit cards and car loans first, and those are already showing strain.
Rates have now turned too. The Bank of Canada raised its rate on October 28 for the first time since 2023, and Doug’s model now forecasts Ontario consumer insolvencies up 11.3% over the next year.
If you own a home, are thinking about buying one, or have a pre-construction closing coming up, this one is worth your time.
WATCH FULL INTERVIEW HERE - When the Equity Runs Out: Why More Homeowners Are Going Broke.
Doug also hosts Debt Free in 30, a podcast and YouTube show on personal debt and how to get out of it.
The homeowner and equity figures come from Hoyes, Michalos & Associates client files, not provincewide data. Nothing here is legal or financial advice.
