March 3, 2010
Canadians have been relatively smug about our ability to weather the economic storm thrust upon the world since the sub-prime mortgage crisis in the US. But we’re not as untouchable as we think.
Bankruptcies reached a record high in 2009 with 151,712 Canadians making a declaration. This represents a 31% increase for the period ending December 31. The Northwest Territories saw increases of 80.8% and Alberta experienced increases of 58.8% in personal bankruptcies. These two were the hardest hit areas. On the bright side, business bankruptcies actually declined by 9.6%.
The other record set in 2009, unfortunately, was we reached the highest consumer debt-to-income ratio (Canadians have accumulated $141 worth of debt for every $100 they make).
Some of you might be thinking: “We’re out of the woods now, though, right? Aren’t these historical figures that reflect a period of economic recession?”
While it’s true that growth exceeded expectations in the final quarter of 2009, Douglas Hoyes, a bankruptcy trustee, thinks that trends in bankruptcy will continue to be an issue:
“Household debt in Canada is a ticking time bomb…Canadians with jobs have managed to service their debt levels thanks to low interest rates, but that period of relative peace will end the moment interest rates start to rise later this year.” Calgary Sun
Hoyes is worried that after interest rates increase, Canadians will not be able to keep up with interest payments. We’ll see if Canadians budgeted correctly and let’s hope, for the sake of the whole economy, that we did!