Canadians will declare personal bankruptcy in record numbers this year and into 2010, according to a new study by the Toronto-Dominion Bank released Friday.

TD Economics said that as many as 160,000 people will walk away from their bills in 2009 and 2010 because of high unemployment and too much existing debt.

"Unemployment and heightened household debt will drive a substantial increase in consumer insolvencies over the next two years," said Craig Alexander, TD's deputy chief economist, a co-author of the report.

That means the current individual bankruptcy rate of 4.3 per 1,000 people — already four times as high as the one per 1,000 level in the 1980s — will grow to a peak rate of almost six debt filings per 1,000 people this year and into 2010, he said.

Consumer money woes

Individual bankruptcies have risen as Canada's economy has slumped. By February, the number of insolvencies across the country rose a "staggering" 28 per cent compared to the second month of 2008.

People often turn to court protection as an economic downturn lengthens. Sometimes, they become unemployed. In other cases, dropping house values hurt their ability to service outstanding debt.

TD pointed out that Canada's jobless rate will hit 10 per cent in 2010 and only drop below the eight per cent range by 2013.

By contrast, Canada's unemployment level stood at 5.8 per cent in February 2008.

As well, the ratio of individual debt to personal disposable income will rise in both years, implying more borrowing or less money to pay the interest and the principle.

The combination of long-standing unemployment and debt leads to insolvencies rising even as the economy recovers, Alexander said.

Worse still, however, even a business improvement might not help, he said.

"Since individuals are carrying a greater amount of debt, they have a greater risk of insolvency regardless of economic conditions, Alexander said.