Bankruptcy

Bankruptcy is certainly a popular topic with the growing crisis and as growing numbers are faced with their own personal financial crises. The Globe and Mail had a couple of good articles dealing with the topic today.

First, Sarah Hampson had a piece entitled “Personal bankruptcy. A new start or just a Band-Aid?”  Here she explores the causes of bankruptcy, notably the fact that we spend too much. She writes:

Last week, the federal Office of the Superintendent of Bankruptcy reported that almost 8,000 people in Canada filed for personal bankruptcy in January of this year, an increase of 21.7 per cent from the same month in 2008. And the rate could keep increasing in the coming months.

“We are seeing people in severe difficulty,” says Laurie Campbell, executive director of Credit Canada, a not-for-profit charitable organization that helps people in financial extremis. “The number of calls are up 40 per cent over this time last year,” she says. “It is quite grave.”

Major traumatic events, such as divorce, are often the cause of personal bankruptcy, experts say. Now with job losses rolling across the country in the wake of the global economic storm, many people are suddenly finding themselves unable to pay their bills.

But it’s not all the fault of the poor economy. Credit counsellors and financial experts see the increase in personal insolvency as a sign of insidious problems not only in the credit industry, but also in consumer financial habits.

Simply put, we are not frugal enough. Unfortunately, most people (myself included) realize too late how mired they are in debt. You always are certain that you will find that extra contract that will pay it off or you will get that better job. We deny a problem exists, until you hit a wall. My wall was divorce.

Sadly, we must learn financial planning and budgeting when it is already too late to salvage your credit rating. This from another Globe and Mail article:

It’s only with stock market calamities, foreclosures and layoffs dominating the news for months that many Canadians have been jolted into getting the crash course in financial basics they should have mastered years ago.

So they’re calling and pouring into the offices of credit counsellors, and experts across Canada are reporting a spike in attendance at personal finance seminars.

“We are getting more calls than ever in our 27 year history,” said Al Antle, executive director of the Credit Counselling Service of Newfoundland and Labrador.

Fortunately, it is never too late to return to the path of financial sanity and learn how to be frugal. I learned my lesson about spending money that I do not have, and I am doing my best to be more financially prudent and to embrace frugality. Too bad I didn’t do this 10 years ago, but I hope to be better off in ten years from now.

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One Response to Bankruptcy

  1. Timely advice. Thank you for the reminders.

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