The number of consumer insolvencies in Ontario in August 2012 rose 4% compared to July according to statistics released by the Office of the Superintendent of Bankruptcy Canada. Bankruptcies were up 1% and consumer proposals were up 7%. While insolvencies rose slightly in August, they are down overall for the year so far. Total consumer bankruptcies and proposals declined 5% for the eight month period ending August 2012 compared to the same period last year.
Unfortunately consumers are still filing bankruptcy in disproportionate numbers. A deeper look at the August bankruptcy statistics shows that a devastatingly high percentage of insolvency filings in Ontario (and across Canada) are filed by individuals. So far this year, 97.2% of insolvency filings in Ontario (both bankruptcy and consumer proposal) were filed by consumers. This number is up from 96.9% in 2011 but more significantly much higher than pre-recession levels of 93.5% and 94.6% in 2007 and 2008. Ontario consumers are still struggling with too much debt, preventing their return to better financial health in our slow economic recovery when compared to Canadian businesses.
The economic recovery has been slow in Ontario and despite small economic growth, not all Ontarians are benefiting. The unemployment rate rose 0.4 percentage points to 8.3% in Ontario in October as more people returned to work. Overall employment was largely unchanged in the month as growth in full time work was not enough to offset a decline in part-time work. Under-employment is as significant a factor in bankruptcies as is unemployment, if not more.
There is some good news in the figures. In Ontario, more than 50% of consumer insolvencies are now consumer proposals, the highest rate among all provinces and above the overall Canadian rate of 39%. A consumer proposal is a great alternative to bankruptcy for people who have the money to pay off debts, but need some time to do so. Administered by Consumer Proposal Administrators, who are also Trustees in Bankruptcy, a consumer proposal is the only government debt settlement program, administered through the Bankruptcy and Insolvency Act.