(KITCHENER, Ontario) In personal bankruptcy statistics for 2004, released by the Office of the Superintendent of Bankruptcy, consumer bankruptcies and proposals increased by a modest 1.9% in Ontario in 2004, and by only 0.3% in Canada in 2004. Despite these encouraging results, a local bankruptcy trustee warns that the number of bankruptcies may increase significantly in Canada in 2005.
"We are expecting consumer filings in Canada to increase at a rate of 5% to 8% per year over the next two years" says Douglas Hoyes, a trustee with Hoyes, Michalos & Associates Inc., one of Ontario's largest consumer bankruptcy firms. "We consider 2004 to be the calm before the storm, particularly if interest rates increase significantly".
Mr. Hoyes believes consumers benefited from improved employment performance in Canada and Ontario in 2004. "While Ontario bankruptcies increased more than the national average income due to the delayed impact of events in 2003 such as SARS and a high Canadian dollar, the rate of growth slowed in the second half of the year."
Ted Michalos, a trustee with Hoyes, Michalos & Associates Inc., is concerned that although growth has slowed in 2004, increasing debt levels will eventually result in the bankruptcy rate increasing again. "Household debt grew a staggering 9.6% in the first 10 months of 2004 and the debt-to-income ratio in Canada reached a record 109% in the third quarter of 2004. Given the continued dramatic increase in consumer debt levels and anticipated rise in interest rates, consumers will find it increasingly difficult to meet their financial obligations".
Mr. Hoyes adds that "while almost one-third of our clients mention
marital, family or health related problems as a primary cause of their
financial troubles, a further one-third mention job loss or income reduction
as a major contributor. However, the largest percentage of clients list high
debt levels relative to their income as a key reason for filing a bankruptcy
or proposal."
More information on consumer bankruptcy and proposal filings trends
can be found in The Calm Before
the Storm?, a report prepared by Hoyes Michalos & Associates
Inc.
For more information on personal bankruptcy statistics for 2004 read bankruptcy statistics for 2004 and 2003.