Toronto is seeing a growing number of bankruptcies. Our analysis of filings with the Office of the Superintendent of Bankruptcy Canada (OSB) show that the total number of insolvencies are on the decline across Ontario. The Greater Toronto Area (GTA) however, is seeing a growing number of bankruptcies – the most serious type of insolvency.
Toronto Bankruptcies Rise 4.96% In June
For those that don’t know, a bankruptcy is a formal filing for people that need rapid relief from creditors. This is the most serious form of financial failure, but the trend has generally been on the decline. Canada is seeing less bankruptcies, even Ontario is seeing fewer, but not Toronto.
Consumer bankruptcies are on the rise in the GTA, bucking the national trend. June saw 824 bankruptcies across the GTA, up 4.96% from the same month last year. Total assets claimed in these filings were $7.32 million, against $44.1 million in liabilities. The combined group of people had just under one dollar, for every 5 they owed in liabilities.
Source: OSB, Better Dwelling.
Toronto Consumer Proposals Are Down 12%
Consumer proposals, the formal act of negotiating a deal with creditors, is on the decline. June saw 467 consumer proposals filed in the GTA, a decline of 12.21% from the same month last year. Total assets claimed in consumer proposals were $38.95 million. Total outstanding liabilities stood at $70.29 million. On average, those filing for consumer proposals had $1 for every $2 in liabilities. Not great, but you can see how this is less of a problem than bankruptcies.
Source: OSB, Better Dwelling.
Total Insolvencies Are Down Almost 2%
Combining the two numbers, we get total insolvencies. The big drop in consumer proposals helped to drag this number down, with 1,291 total filings in June. This is a decline of 1.9% from the same month last year. Racking up June’s grand total, insolvent borrowers had $46.28 million in assets. This is compared to a total of $114 million in outstanding liabilities.
2 In 5 Postal Codes Showed Insolvency Growth
Breaking down how this trend is moving across the GTA, not all postal codes are being impacted the same way. Out of the 162 postal codes analyzed, 65 postal codes showed growth from the same month last year. The other 97 showed a decline from the same month last year. More neighbourhoods appear to be doing better than worse. Growing insolvencies also seem to be appearing faster in the west end of the GTA.
Debt experts have observed that more Canadians are refinancing their homes. This allows them to consolidate debt or borrow against the increased value. This delays the need to file for a consumer proposal, but makes it worse if they can’t find extra income. This could make bankruptcies a more popular filing in the not so distant future. Especially since borrowing against real estate is making record growth, and home prices in the GTA are seeing decelerating price growth.The ability to continue to use real estate values as a tool to delay insolvencies is quickly disappearing.
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