Consumer Bankruptcies Rise in 2008 in Canada

Feb 09, 2009
Consumer Bankruptcies:
Comparing 2008 numbers to 2007
These following numbers were released on Monday by the Office of the Superintendent of Bankruptcy Canada.



Consumer bankruptcies in 2008 jumped up by 13.5% over 2007. In all of last year 90,620 Canadians filed for bankruptcy as opposed to 79,847 that filed in the year 2007.
In 2007, the number of consumer insolvency cases per thousand residents 18 years of age and older increased by 0.1 cases over 2006. Whereas the same metrics increase now in 2008 over 2007 would be close to 0.3 cases.

Considering the job losses announced and poor housing starts for January, consumer bankruptcies are predicted to go higher in the coming months.

Consumer Bankruptcy in Canada - YTD October 2007

In the month of October 2007 the number of individuals filing for bankruptcy reported by Industry Canada was 7,304. This is about 5% higher than the 6,947 bankruptcies that were filed by individuals in the month of October in 2006.
The total number of individuls that have filed for bankruptcy so far from January 2007 up until October 2007 is 67,524. This is about a percentage point higher than what the number was a year ago.

In the past 10 years in Canada, Consumer Bankruptcies form January to October have been averaging at 67,505
The number of Consumer Bankruptcies from January 2007 to October 2007 is more or less on track alongside the decade long trend. However if you compare the Jan 2007 to Oct 2007 number of 67,524 consumer bankruptcies to Jan 1990 to October 1990 number of consumer bankruptcies of 33,938 it is whopping increase of nearly a 100%! It would be also interesting to note that the maximum number of consumer bankruptcies occured in 1997 when the Jan 1997 to October 1997 number peaked at 73,381.

The current Canadian National Consumer Bankruptcies Average stands at 2 bankruptcies for every 1,000 individuals.The hightest per capita consumer bankruptcies have been recorded in Newfoundland (3.6 bankruptcies for every 1,000 individuals)The other two Atlantic provinces of Nova Scotia and New Brunswick are second and third respectively.Quebec is fourth in the line up with 2.8 bankruptcies for every 1,000 individualsOntario is right on the national average of 2 bankruptcies for every 1,000 individuals.The rest of the provinces are below the Canadian National Consumer Bankruptcies Average.

In essence, the eastern provinces are experiencing a growth in insolvencies whereas the western provinces are recording a decline. It could be speculated that the western economy is driven by the petroleum demand and the east is buckling under the pressures of a stong canadian dollar and a weakening manufacturing sector.

Canada is a large and diverse country. With its resources dispersed regionally we witness varied levels of economic trends unfold in the east and west.Currently the west is booming. Oil prices are rising giving Alberta an economic edge. Oil and oil-by-products account for almost 70% of its exports. There is a shortage of labour in Alberta as oil companies are struggling to drive production. In 2006, Alberta had the lowest unemployment rate of all the provinces at 3.4%. At that time Newfoundland was sitting at an unemplyment rate of 16%! Insolvency thus has a directly proportionate relationship to the joblessness rate of a province. Alberta has one of the least per capita consumer bankruptcy filings (1.2 bankruptcies for every 1000 individuals)As the west is experiencing prosperity and Bentley has opened a showroom in Calgary the rest of the country is in an economic downturn. Canada’s manufacturing sectors in Ontario and Québec are experiencing layoffs and closures. The exports are affected due to the strong Canadian dollar. All of this embroiled by a the housing boom, which on hand is helping create jobs but on the other fuelling increased credit extensions and spending. This helps mitigate the crisis in manufacturing sector and the recent cut in interest rates by Bank of Canada will again boost this sector to perhaps a record level of housing sales in 2007.

It will be interesting to see how all this pans out when the final insolvency figures for 2007 are released by Industry Canada in February 2008.

Adapted from an article written by PURU GROVER \/ MD Credit Guru Inc.

Insolvency numbers sourced from OSB Industry Canada