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Alberta bankruptcies rise as oilsands downturn cools economy!!

By
Real Estate Sales Representative with Remax Charlottetown Realty

CALGARY - More and more people have been streaming into bankruptcy trustee Bruce Alger's office in recent months, as a slowdown in the all-important energy sector begins to weigh on the livelihoods of everyday Albertans.
Not long ago, Alberta was considered Canada's economic juggernaut, as torrid development in the oilsands created scores of high-paying jobs and rampant economic growth.
But oil prices have been decimated since hitting an all-time high of US$147 in July. On Friday, the crude contract closed at a four-year low of $40.81 on the New York Mercantile Exchange.
The staggering fall in oil prices has caused many producers to put a kibosh on their ambitious expansion plans, many of which need crude prices close to US$100 per barrel to be viable.
At the same time, though, the inflated cost of living that came with the energy boom has remained stubbornly high.
"It just cuts right through things," said Alger, adding the current slowdown reminds him of the "atrocious" recession of the early 1980s.
In 2007, Alberta saw the lowest number of bankruptcy filings in five years, continuing a prolonged downward streak.
But a report by the federal Superintendent of Bankruptcy last week said total monthly filings in Alberta soared more than 50 per cent between October 2007 and this year. Nationally, bankruptcies were up 21 per cent.
"We're not at quite that hockey-stick curve but we're getting there," said Alger.
Recently it has been oilfield workers and tradespeople who have been finding themselves in dire financial straits. Big project delays and cancellations in the oilsands has caused much of the work in the province to dry up.
"Ever since the price of oil dropped off, the optimism has disappeared," said Alger.
Bank of Montreal economist Robert Kavcic is forecasting flat economic growth in Alberta next year, which doesn't seem too bad when stacked up against the 0.7 per cent decline expected in Canada as a whole.
But compared to the past five years of rampant growth, "that's going to feel pretty tough out West," Kavcic said.
"Pretty much by the day now we're seeing cancellations or at least delay announcements coming across the wire in the oilsands. You went from a period of extremely hot activity in that sector to almost stopping on a dime right now," he said.
"As goes oil prices, so goes Alberta."
Retail sales in Alberta are now the weakest in Canada. And the real estate market in Calgary has been cooling off tremendously, with nine listings for every sale.
"In the case of some of these tradespeople, they've lost their jobs. There's no more home construction," said Alger.
Alger has also been seeing a gradual increase in people living off fixed income filing for bankruptcy in the past few years, largely due to the "crazy" cost of living increase.
Often there is some sort of a trigger - like a medical problem or a mortgage being renewed on less favourable terms.
"All of a sudden they find they have some sort of an emergency. They get into their card one month and then the next month something else happens and next thing you know, it snowballs," said Alger.
"They finally reached the wall. They cannot afford to continue to both service their debt and live at the same time."

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adam affleck

Charlottetown Remax Realty

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