2009: A Very Eventful Year for Bankruptcy in Canada
December 28th, 2009 by A Licensed Insolvency Trustee
A s the year draws to a close, it’s easy to see that 2009 was the most eventful year in bankruptcy in Canada in at least the last decade. There were two stories that captured our attention:
First was the massive increase in the rate of personal bankruptcy in Canada in 2009. It was only a few short years ago that Canada had it’s first year of more than 100,000 personal insolvencies, but when the final numbers are tallied for 2009 the number will be well over 150,000, by far the highest volume level in Canadian history.
Why the massive increase? Canadians are carrying more debt than ever, so they have no margin for error when times get tough. The unemployment rate in Canada increased in 2009, so as job losses mount, personal bankruptcy becomes the only solution for many. The other reason for the increase was the second major story of 2009:
On September 18, 2009 new bankruptcy rules came into force in Canada, and the new surplus income rules increased the cost of bankruptcy for many. Under the old rules most first time bankruptcies ended in nine months. Under the new rules, if you have average surplus income of more than $200 per month, your bankruptcy will automatically be extended for one year, and you will be required to make surplus income payments for that extra year. It’s therefore no surprise that many Canadians in financial trouble rushed to file bankruptcy prior to September 18, so that their bankruptcy would be administered under the old rules.
Some of the new rules were helpful to people in financial trouble, such as the increase on the debt limit for filing a consumer proposal. However, overall the new bankruptcy rules hurt some of the people they were designed to help.
What’s ahead for 2010? Unless the economy stages a remarkable recovery, it’s likely that bankruptcy levels in Canada will remain high. If you are experiencing financial trouble, consult a licensed bankruptcy trustee, and check back here every Monday morning in 2010 for the latest news and comments on bankruptcy in Canada from leading experts in the field.