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Bankruptcies could rise this year

Bankruptcies could rise this year

Posted on: 1/14/2019 | Author: ATB Financial's Economics + Research Team

​​The number of Albertans filing for bankruptcy began to pick up as 2018 came to a close. The latest statistics suggest total insolvencies in our province have grown by nine per cent in the past twelve months, although they remained virtually unchanged from October to November (-0.9 per cent).

Total consumer bankruptcies in Alberta are nearly ten per cent higher compared to last year. More alarming is the rise in consumer proposals, which grew 2.3 per cent from October to November and are up 27.4 per cent from last year.

A proposal is an offer to creditors to settle debts under conditions other than existing terms. Consumers who find themselves in arrears and who are having difficulty managing their credit can make a formal proposal to their financial institution to avoid default. It is often the precursor to bankruptcy.

The growing number of bankruptcy filings is due, in part, to higher borrowing costs. The Bank of Canada increased its key interest rate three times last year—it held the rate steady in January—making borrowing more expensive for both consumers and businesses. These hikes have not helped Alberta’s fragile economy.

Given the higher number of consumer proposals and costlier borrowing, there’s a chance bankruptcies could tick higher in the province in the months to come.

Bankruptcies, graph​​

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