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Money Matters

Insolvency Rates in Canada – Surprising Statistics behind which province is going bankrupt

Let’s Compare – Debt, Housing Costs and Insolvency Rates

When considering insolvency levels it would be a natural leap to equate the high price of housing to a high level of debt and subsequently a increased amount of insolvencies.   That leap would be totally incorrect and the statistics below support the opposite position.

Canadians are sustaining record level debt. However regionally it becomes apparent that particular provinces are bigger consumers and better at sustaining debt than others.

Alberta  has one of the lowest insolvency rate yet the debt to income ratio keeps increasing and the price of housing is rounding out the highest in Canada.

British Columbia has the highest priced housing, the highest average debt levels and yet is situated with one of Canada’s lowest insolvency rates. Vancouver BC tops the charts with $41,077 of  non mortgage debt per person.    

Quebec, the province with the lowest priced housing, the lowest amounts of debt per person is filing the most amount of bankruptcies.  Quebec has one of the highest insolvency rates and the rate is on the rise according to OSB statistics.  Quebecers ironically have the most affordable housing.

It appears there is no direct link to housing costs and insolvency rates.  In fact the opposite appears to be valid, as the provinces with the highest priced homes and the most amount of debt are in fact filing the least amount of bankruptcies.

Next discussion…  Why is Quebec  becoming the bankruptcy capital of Canada?  

 

Price of House, amount of debt and how it rates to insolvency

 

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Canadians household debt and House prices Unsustainable or Maintainable

HOUSE PRICES + HOUSEHOLD DEBT = CRISIS?

Ask anyone who has attempted to purchase a house recently, they will tell you it is getting more difficult to find affordable housing and even more difficult to secure a mortgage. Recently the IMF, International Monetary Fund, released data to support that Canada is top on the list for the most expensive housing in the world.   Canada tops the charts in several key areas, causing concern that if things don’t change, we could see a strong correction. The IMF pointed to several key indicators,

1. House prices vs. Household Incomes

Canada ranked 2nd highest, with the 32% of income Canadian income vs house costs 2014

1. House prices vs. Rental Costs

Ranking top in the world for misalignment of housing prices compared to rent rent vs buy in CanadaThe overvaluation of the Canadian housing market is a conversation that economists have been having for the past 2 years.

Why is it the perfect economic storm?

Canadians are aggressively borrowing to buy into the housing market.  Many scraping to purchase with a 5% down payment.  If there is a correction in the housing prices, even a small -10% adjustment in valuation, this level of pricing correction will create a negative equity situation for many home owners.  There is potential that the mortgage will be worth more than the value of the house.

Next Question… Will the high price of housing increase insolvencies in Canada?

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Bankruptcy | Excluded Debts

Debts That Can Not be Included in a Bankruptcy

Laws surrounding Bankruptcy Canada dictate that not all types of debt can be included in bankruptcy.
There are certain types of unsecured debts that are not released when you are
discharged from bankruptcy.

These are:

  • Fines or penalties imposed by a Court;
  • Debts for alimony or child support;
  • Students loans if the loan is guaranteed by the federal or provincial government
  • and you have not been out of school (part-time or full-time) for a required amount of time;
  • Debts arising from fraud or misrepresentation supported by a Court Order;
  • An award for damages against you for intentionally causing another person bodily harm or death.

If you have concerns that some of your debt would not qualify in bankruptcy talk to a local CAIRP trustee directly.

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Debt Settlement in Ontario | Bill 55 New Law to Protect Consumers

Ontario Government has finally put legal restrictions in place to protect it’s most vulnerable citizens from “shady” debt reduction solutions.

Bill 55 | How will it help Ontario Citizens?

Debt Settlement, operated by over 35 companies in Ontario should be now following a new set of rules.  Given that the industry has not been well regulated in the past, the new law should provide a solid foundation to ending rip-off companies.  However, a law is only as effective as the enforcement surrounding it.  Given that we have not seen strong enforcement to date in consumer protection, we highly recommend the buyer beware, read the fine print to prevent being another casualty to bogus debt help companies.  If you do feel that a company is providing services that contravene the new law, contact the government of Ontario.

  • Eliminating upfront fees for services
  • Regulation of fees to consumers and controlling that the service be successful before payment be made.
  • Requiring clear, transparent, and detailed contracts that include information about the effect of the contract on the consumer’s credit rating
  • Requiring credit counsellors to disclose information regarding the nature of funding of their company, non profit or otherwise.
  • Establishing a 10-day cooling-off period, providing consumers more time to consider their agreements with companies

Read the fine print, ask questions, talk to multiple professionals and the most important criteria, MEET the company in person.  A solid indication of a reputable company is that you can walk in the office and talk to the principles in the business.   Your future depends on your proper due diligence.

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