A new report on insolvency in Canada shows the number of people and businesses filing for bankruptcy this year has increased by 10 per cent since the same time last year.
According to the Office of the Superintendent of Bankruptcy Canada's June report, there were 4,294 total insolvency cases filed in Alberta during the second quarter of this year, up from 3,884 the year before.
MNP Ltd., Canada's largest insolvency firm says one of the chief contributors to household debt are home equity lines of credit (HELOCs) and many Albertans often find themselves ramping up borrowing against their homes to cover other forms of debt.
"HELOCs are particularly troublesome for those who don’t have firm financial footing because there is a lot of uncertainty with them. They can put people on the fast track to an endless cycle of debt, especially if the borrower accumulates more debt on credit cards after paying them off with a HELOC," says Zaki Alam, licenced insolvency trustee with MNP Ltd.
Alam says too many people are using their house as an ATM, where the cash withdrawn is being used to pay bills or fuel household spending.
Newfoundland and Labrador had the highest increase of insolvency cases between Q2 2018 and Q2 2019 while they dropped by 3.6 per cent in Saskatchewan over the same period.
