Last year saw the number of consumer bankruptcies in Ottawa-Gatineau climb by almost 17 per cent from 2002 as easy credit vehicles and a languishing tech sector continued to plague many households.
Industry Canada reported on Tuesday that 132 consumer bankruptcies were filed in Ottawa-Gatineau in December, a big drop from 193 in November. However, the month of December traditionally sees a decline in activity as people try to put their financial woes aside for the holidays. In December 2002, there were 146 consumer filings for bankruptcy.
The year as a whole paints a much more telling picture. In 2003, 2,027 local households filed for bankruptcy, up by 16.8 per cent from 1,736 in 2002.
"It's pretty scary to se that," said Stanley Kershman, a bankruptcy lawyer with local firm Perley-Robertson, Hill & McDougall.
Kershman has repeatedly cited a desire for instant gratification and a lack of financial discipline as major factors behind the growing number of personal bankruptcies.
A strong local housing market and strong job growth in other sectors of the local economy has led many people to overestimate their resources, spend beyond their means and mount up huge amounts of household debt. Banks only aggravate the problem by tempting consumers with new credit cards and easy lines of credit.
Kershman warns that the situation will only worsen. One problem that he warns is looming on the horizon is the vast number of people who have moved into home ownership with small down payments to take advantage of low mortgage rates. As the Bank of Canada begins to raise rates a year or two down the road, the costs of carrying those mortgages will begin to rise, challenging homeowners to make the payments.
Kershman is also wary of debt consolidation vehicles that erode home equity and threaten to leave people with big chunks of their mortgage still outstanding as they approach retirement.
The irony of it all is that, in spending themselves into bankruptcy, consumers are proving a boon to small business.
On the business side, the picture was not so bleak. In all, 192 local businesses filed for bankruptcy in 2003, up by only two per cent from 188 the year before.
"Business fared better because people were spending more money," Kershman said.
However, some business sectors did struggle in 2003. Kershman said the region continued to see the fallout of the high tech business, while the hospitality and accommodation sectors suffered from the SARS outbreak and the mad cow scare.
Across Canada as a whole, Industry Canada reported that 84,251 consumers went bankrupt in 2003, up by 7.7 per cent from 78,232 in 2002. On the business side, the picture improved, with the number of failures falling by 6.6 per cent to 8,844 from 9,472 in 2002.
