The Unspoken Truth: Bankruptcy Knows No Bounds
We’ve all heard the aphorism, “Keeping up with the Joneses.” It encapsulates the desire to match the material possessions and status of our neighbors. But, often hidden beneath the surface of these opulent lifestyles is a harsh reality – debt. The truth is, anyone can go bankrupt.
“A farmer with fancy new machinery, is a farmer with debt.” – Grandfather Proverb
1. The Illusion of Wealth and Hidden Debt
Luxurious houses, flashy cars, and extravagant lifestyles often paint a picture of wealth and financial stability. However, these outward displays of affluence can mask a stark reality – financial distress. The general assumption is that individuals filing for Bankruptcy are penniless, relying on food banks, and purchasing from thrift stores. This stereotype is far from the truth.
To accrue debt, one must first have credit, and to have credit, one must have an income. This means that most people who file an Assignment in Bankruptcy or a Consumer Proposal are individuals who once enjoyed a good standard of living, but some unforeseen life event led them into a debt they could no longer manage.
Who files for Bankruptcy? You may be surprised.
2. The Road to Excessive Debt
People often find themselves burdened with overwhelming debt when they are unable to make repayments. There are countless reasons why individuals find themselves in this predicament, ranging from divorce, health complications, job loss, addictions, or simply poor money management skills.
According to the recently published Canadian Consumer Debtor Profile, the average debtor is 47 years old. A surprising 38% are married, while 22% are divorced or separated. Every year, about 4.6 out of every 1,000 Canadians file for insolvency.
The top five causes of financial distress include loss of income (37%), medical reasons (23%), relationship breakdown (15%), business failure (7%), and tax debts (6%). The sobering truth is, anyone can go bankrupt.
3. How Much Debt is Too Much?
The threshold for debt varies widely among individuals. Technically, to file an Assignment in Bankruptcy, you only need to owe $1,000 and be insolvent, meaning you are unable to pay your debts as they become due.
While most people can devise a plan to pay back $1,000, the same might not be said for $10,000, $100,000, or even $1,000,000. Some people can manage a debt of $100,000 with a repayment plan, while others might struggle with a debt of $10,000. The amount of debt one can handle largely depends on their individual circumstances, including income, family size, and existing commitments.
4. The Mirage of Material Wealth
The popular expression about keeping up with the Joneses reflects a society enamored with material possessions. This often leads to unhealthy comparisons with our neighbors. To keep up with the Joneses, people sometimes end up working multiple jobs, causing other problems like poor health, family issues, or income tax debt, which can lead to insolvency.
5. Accumulation of Debt: A Slow Creep
For most people, debt is not an overnight occurrence but a gradual accumulation over time. Individuals with substantial incomes often live slightly above their means, leaving the excess on their credit cards. While this is manageable in the short term, if it continues long-term, the debt will compound with interest.
Sometimes, a catastrophic event like a sudden illness, divorce, or job loss makes previously manageable debt unbearable. When debt starts to negatively impact your family and health, it’s time to consult a Licensed Insolvency Trustee for advice.
6. Bankruptcy: A Reality for All
The reality is that anyone can go bankrupt, regardless of their socioeconomic status, for a variety of reasons. It’s likely that you know someone who has sought the services of a Licensed Insolvency Trustee, and you never realized it. Bankruptcy is a personal and confidential matter.
If you find yourself needing help, contact BankruptcyCanada to explore your options.
7. The Human Desire for More
There’s nothing wrong with wanting the best for your family or being slightly competitive with friends and neighbors – it’s human nature. But remember, the next time you find yourself comparing your situation with someone else’s, you might not want everything the “Joneses” have, especially their debt.
