Consumer insolvencies in Ontario for the month of June fell to their lowest seasonal levels since June of 2006. Total consumer insolvencies (both Ontario bankruptcies and Ontario consumer proposals) fell to 3,564 in June, a decrease of 12.3% from June 2012 and a dramatic drop of 42% from their peak in June 2009.
“Sustained economic recovery is what is driving the improvement in bankruptcy numbers” says Douglas Hoyes, Bankruptcy Trustee with Hoyes, Michalos & Associates, one of Ontario’s leading consumer insolvency firms. “Unfortunately, it is also driving people’ security with maintaining a high level of household debt.”
The continued positive outlook for consumer insolvencies in Ontario depends on two factors:
- sustained economic growth as it drives full time employment prospects, and
- the affordability of debt payments.
Initially, as employment levels rise during economic growth, individuals who relied on debt during a downturn, start to feel the pressure of phone calls from creditors to catch up their debt payments. During the early stages of economic recovery, more people turn to bankruptcy or a consumer proposal to deal with potential wage garnishments or to eliminate the burden of debts they accumulated while their family income was reduced. Once family incomes return to a level where most can afford to maintain their monthly debt payments, bankruptcy and proposal filings level off to a more normalized level which we are approaching now.
Unfortunately our current economic recovery has been partially maintained by lower borrowing rates. This has created a false sense of security for many consumers. As interest rates rise, many more will find an unmanageable portion of their household budget taken up by debt repayments.
The solution is to reduce your debt now, while rates are low. If you have more debt than you think you can repay, take action today to eliminate or reduce that debt.