Bankruptcy levels are improving, but we have not recovered from the 2008 recession yet

While bankruptcies continue to drop as economic conditions improve, they still remain above pre-recession. A longer version of the following article was published earlier this week in

According to data released by the federal Office of the Superintendent of Bankruptcy, insolvencies fell 11.5 per cent in Canada in 2010, with 140,234 new cases filed compared with 158,441 cases in 2009. Consumers accounted for the vast majority of the cases – 135,008 last year, down 11 per cent from 151,712 in 2009. Business insolvencies dropped an even larger 22.3 per cent in 2010 to 5,226 cases from 6,729 cases in 2009.

While trends were broadly positive in 2010, the volume of insolvencies still remains higher than pre-recession levels, the bankruptcy superintendent said.

Insolvencies in 2010 were 20.6-per-cent higher than during the 12-month period ending September, 2008, just before the economic downturn began. Insolvencies spiked 29 per cent in 2009 to 158,441 cases compared with 123,234 cases in 2008.

“One of the factors that will impact Canadian’s with marginal debt is the Minister of Finance’s new ruling that mortgage refinances will not be able to go beyond 85 per cent loan to value or exceed 30 years on a refinance,” one broker told

Those Canadians who purchased at 40-year amortizations, or even 35-year amortizations due to high debt service ratios at that time, may not have an alternative to refinance some of their debt by accessing home equity.

Bankruptcy levels are expected to continue improving

The figures showed some strengthening as the months progressed through 2010, however, with December insolvencies falling almost 17 per cent from November levels.

Ontario saw the biggest improvement last year, with total insolvencies dropping 16 per cent as hard-hit manufacturing and other sectors posted improvements. Ontario insolvencies fell to 58,479 cases from 69,494 in 2009.

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