Personal Bankruptcy Rate Falls in Toronto, But Debt Levels Continue to Increase
As a personal bankruptcy trustee who meets with hundreds of people in financial trouble every year, I know from experience that these positive statistics only tell part of the story. The other part of the story is that residents of Toronto, and throughout Canada, are carrying record levels of debt. Household debt continues to rise, up 9.8% in the first 10 months of 2006, and in September 2006 the ratio of debt to personal disposable income reached a record 122%. This means that for every $4 the average Canadian earns in a year, they now have $5 in debt.
Some experts believe that high levels of debt are not a problem. They say that because interest rates and the unemployment rate are low, everyone can afford to service this debt. That's partially true, but my research indicates that a small segment of the population is very vulnerable to even the slightest financial shock.
As a personal bankruptcy trustee with offices in Toronto, I meet with people every day for whom rising debt levels mean they are one or two missed paycheques away from financial disaster. A recent Bank of Canada survey found that the proportion of highly vulnerable debtors (those whose debt payments exceed 40% of gross household income) has risen by 23% in the first six months of 2006 (from 2.6% to 3.2% of the population). If any of those people lose their job, get sick, or get divorced, they may have no choice but to file bankruptcy to deal with their debts.
What's the solution? I believe that we should all examine the level of debt we are carrying, and take steps to reduce it before it becomes unmanageable. For many personal bankruptcy in Toronto may be the only option, but with careful planning bankruptcy can be avoided.
Related Tags: personal bankruptcy, bankruptcy toronto, bankruptcy statistics
J. Douglas Hoyes is a chartered accountant, licensed trustee in bankruptcy, and co-founder of Hoyes, Michalos & Associates Inc., one of Ontario, Canada's largest personal insolvency firms providing credit counselling, consumer proposal, and personal bankruptcy services. Douglas has served as the trustee in over 3,000 personal bankruptcies and consumer proposals. For more information visit http://www.bankruptcy-toronto.ca to learn about the advantages and disadvantages of filing personal bankruptcy in Toronto, Ontario.
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