TORONTO — More Canadian consumers and businesses went broke in June than in May, bucking a seasonal trend and providing further evidence that the economic recovery is slowing.
“The fact that we’re apparently out of the recession doesn’t necessarily mean that people aren’t struggling any longer,” said Andy Fisher, a bankruptcy trustee at A. Faber & Partners Inc.
The Office of the Superintendent of Bankruptcies reported Tuesday that the total number of insolvencies — which include both bankruptcies and bankruptcy proposals — increased by 7.1 per cent in June.
About 12,345 individuals and businesses became insolvent in June, compared to 11,526 in May, according to the monthly insolvency data.
The figures show that despite a growing economy, the recovery that began last fall is fragile and the pace of job creation and income growth is still uncertain.
Canadians are carrying extraordinarily high debt, and Fisher predicted a further spike in the number of bankruptcy filings as interest rates rise and more Canadians struggle to pay off heavy debt loads taken on when rates were at historical lows.
“A lot of people are putting off the inevitable. With the amount of debt people are carrying they’re going to have to seek some kind of (debt relief),” he said.
The office said this is only the third time in 10 years that bankruptcies rose in June — usually a strong month for construction and other sectors — from May.
But related economic data from June, including a slump in housing sales and consumer confidence levels, have been weak.
Bankruptcies rose by 4.3 per cent and bankruptcy proposals jumped by 14 per cent in June from the month before.
Insolvencies, almost all of which were reported by consumers, rose steadily during the recent economic downturn and peaked last June. This June, 14.4 per cent fewer Canadian businesses and consumers filed for bankruptcy.
However, for the 12-month period ended June 30, total insolvency increased 5.1 per cent compared to the same period ended in June 2009, entirely due to an increase in consumer insolvency.
Business insolvency fell by 16.7 per cent during that 12-month period, led by a reduction in filings in the transportation, warehouse and retail trade sectors.
But Fisher said it’s important to note that the number of bankruptcies fell during that period, while the number of proposals — an alternative to bankruptcy — has risen.
“There are other options out there and what we’re seeing from these numbers is that more and more people are seeking relief from their debts from a trustee, but they’re able to avoid bankruptcy through the other options that are available,” he said.