Canada Debt Warnings

Canada Debt Warnings
Canada's Superintendent of Bankruptcy issued a warning to Canadians about the dangers of high household debt Friday, adding his voice to the chorus from officials concerned about the amount of leverage the average resident now has. In a letter attached to the latest report on bankruptcy statistics, James Callon said it was "important for Canadians to be aware of the risks and possible consequences of taking on a large amount of debt." He noted that a significant event - a change in employment such as job loss, or a change in family status such as a divorce, or a serious illness - "can cause a huge drain on finances." If such an event were to suddenly occur in a household carrying a large amount of debt, that could lead to "the harsh realities of insolvency," Callon said. The number of consumer insolvencies filed in Canada in October 2010 was 22.5% higher than in 2007-08, before the economic crisis that led to the recent recession. Household debt in Canada reached a record C$1.41 trillion in December.

According to Statistics Canada, debt to household income levels has reached a record 148%, rising above comparable U.S. figures for the first time since the late 1990s. Bank of Canada Governor Mark Carney recently warned that a growing number of Canadian households were vulnerable to adverse shocks, and more would become vulnerable if interest rates go up from record low levels as expected. Finance Minister Jim Flaherty has also sounded numerous warnings on household debt levels in recent months.