Bankruptcy watchdog issues debt warning

Canada's bankruptcy watchdog adds his voice to warnings that Canadians should watch their personal debt loads.

Callon warns of 'harsh realities' of insolvency

Canada's bankruptcy watchdog added his voice Friday to warnings that Canadians should watch their personal debt loads.

James Callon, the superintendent of bankruptcy, said it's important for Canadians to be aware of the risks and possible consequences of taking on a large amount of debt.

"Significant events, such as a change in employment or income, a change in family status or a serious illness, can cause a huge drain on finances," he said in a commentary on the agency's website.

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"The combination of a large amount of debt and the sudden occurrence of a major life event could lead to the harsh realities of insolvency."

Callon issued the warning even as he released data showing a 9.6 per cent drop in total insolvencies — filed by either businesses or consumers — in the 12 months ending in October, compared with the same period a year earlier, when Canada was in a recession.

Business bankruptcies totalled 5,349 over the 12 months ending in October, down 22.5 per cent from the same period a year earlier.

Consumer bankruptcies fell nine per cent — to 135,962 — during those same months. But that total is still 22 per cent higher than total consumer insolvencies two years earlier, before the recession.

Total insolvencies, 12 months ending:    
 October 2010October 2009Change
Newfoundland and Labrador 2,4932,619-4.8% 
Prince Edward Island 605 558 8.4% 
Nova Scotia 5,275 5,362 -1.6% 
New Brunswick 3,761 3,946 -4.7% 
Quebec 39,891 43,804 -8.9% 
Ontario 59,675 68,429 -12.8% 
Manitoba 2,769 3,152 -12.2% 
Saskatchewan 2,489 2,594 -4.0% 
Alberta 11,414 12,278 -7.0% 
British Columbia 12,854 13,410-4.1% 
Northwest Territories4350-14.0%
Yukon 38 42-9.5% 
Nunavut411-63.6%
Canada 141,311 156,255 -9.6% 
(Source: Office of the Superintendent of Bankruptcy)    

Canadian household debt has grown to an all-time high, spurred on in part by the impact of historically low borrowing costs.

Mark Carney, the governor of the Bank of Canada, and several economists have voiced concerns that when interest rates begin rising again, some Canadian households will be caught with debt burdens they can't handle.

With files from The Canadian Press