 DEFINITION |
A bankruptcy is a legal proceeding that occurs when
the liabilities or debts of an individual or firm exceed their assets
or revenues over an extended period of time. When individuals or firms
declare bankruptcy, their assets are taken and allocated to various creditors,
and courts may impose restrictions on their future borrowing capacities.
| HOW
DOES IT AFFECT CANADIANS? |
The bankruptcy rate is one indicator of the general economic
wealth and prosperity of a country. High bankruptcy rates may indicate
a weakening of the overall economy. However, bankruptcies can also be
high during times of prosperity, because more individuals and companies
take greater business risks at such times.
Bankruptcies can have devastating consequences for individuals and firms.
Not only can they harm a person’s credit rating, making it harder
to borrow in the future, but their association with failure can lead to
social stigma.
| EXAMPLES |
In 2000, there were over 10,000 commercial bankruptcies in Canada, down
from 14,200 in 1996. A decline in bankruptcies isn’t surprising given
the strong economy in the latter half of the 1990s. The sectors with the
highest levels of bankruptcies are retail, accommodation and food services,
construction, manufacturing and business services. All of these sectors
are prone to cyclical swings in the economy.
| LINKS |
Bankruptcy Statistics
Source: Industry Canada
http://strategis.ic.gc.ca/epic/site/bsf-osb.nsf/en/h_br01011e.html
Office of the Superintendent of Bankruptcy
Source: Industry Canada
http://strategis.ic.gc.ca/epic/site/bsf-osb.nsf/en/h_br01545e.html
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