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Record-Breaking 101,192 Bankruptcies Filed in 2005 in Canada Last Year |
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Written by Wire Services
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Friday, 03 February 2006 |
In statistics just released by the Office of the Superintendent of Bankruptcy, 101,192 Canadians filed a bankruptcy or proposal in 2005, the first time in Canadian history that more than 100,000 people have filed. Statistically, 4 out of every 1,000 adults declared themselves to be insolvent last year.
"Canadians are carrying too much personal debt," says Douglas Hoyes, a trustee with Hoyes, Michalos & Associates Inc., one of Ontario's largest consumer bankruptcy firms. "The average Canadian now owes 118% of what they earned last year, the highest level ever. As long as interest rates stay low and there are no unpleasant surprises, most people can afford to make their monthly payments. For families at their limit, however, a high debt-to-income ratio means they are less able to deal with life's unexpected financial traumas".
Ted Michalos, a trustee with Hoyes, Michalos & Associates Inc., is concerned that debtors with low income or poor credit are relying on high cost alternative credit. "Our recent study showed that our average consumer bankrupt had four credit cards with a total balance owing on the cards of $35,960. That's an average balance of $9,625 per card compared to $2,329 for the average Canadian. In addition, the number of our bankrupts using payday loans has doubled from 2003 to 2005." Michalos described the problem of debt burdened consumers as "teetering on the edge of financial distress, one negative life event away from bankruptcy."
Mr. Hoyes added, "With 65% of couples now relying on two incomes and personal savings declining, Canadians are becoming more financially vulnerable. This will eventually translate into more bankruptcies. We are predicting a growth in consumer insolvencies of 3 to 5% over the next two years. Every 1% increase means another 1,000 people and families dealing with financial hardship."
In Canada, consumer bankruptcies and proposals increased by 1.2% in 2005. |
