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Bankruptcies on the rise

Bankruptcies on the rise

Posted on: 11/28/2017 | Author: ATB Financial's Economics + Research Team

The number of Albertans filing for bankruptcy is growing. According to the latest statistics, insolvencies in our province increased to 450 (+37.2 per cent) in August, up from 328 one month earlier.

Compared to 12 months earlier, the number of personal bankruptcies in Alberta is 2.3 per cent higher than last August when the number reached 440. The most recent stats on bankruptcy also show that Alberta businesses are having a tougher time meeting their debt obligations. In August, 18 businesses declared bankruptcy, a rise of 13 businesses from July. Compared to last year, this number is up by eight.

Over the course of 2017, total consumer bankruptcies had been falling until August when, for the first time this year, they picked up again. It’s important to note that personal bankruptcies are trending lower than last year (see chart below) and are 61 per cent below their peak during the 2009 recession.

Part of this increase has to do with increased borrowing costs. In July, the Bank of Canada increased its key interest rate by 25 basis points. This has made lending a little more expensive for both consumers and businesses. Given the fragile state of Alberta’s economy, there’s a possibility that even the slightest increase in borrowing has had a negative effect.

As we close out 2017, there’s a chance that bankruptcies could tick higher in the province, especially since the statistics do not include the Bank of Canada’s second rate hike that occurred in September.

Personal bankruptcies, graph

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