In the “old days”, twenty or thirty years ago, there was definitely a social stigma about filing bankruptcy. Much of the media stories about bankruptcy involved companies and not individuals. Canadians believed that if you borrowed money you should pay it back and this belief was reinforced with stories about companies that went bankrupt, leaving their employees with nothing. We all considered bankruptcy to be the wrong choice. Those who filed for bankruptcy were more than embarrassed, they felt they had done something to be ashamed of.
Today, attitudes have shifted along with the change in economic conditions in our country.
Very few people would argue that bankruptcy is a great thing that everyone should experience. However, most people today see bankruptcy as a necessary “safety valve”.
According to recent studies, the majority of Canadians that file bankruptcy do so because their economic circumstances have changed. This may be due to a job loss, marriage separation or divorce, or medical issue, however the end result is the same: despite their best intentions they found themselves unable to repay their debts. We’ve come to understand that in most cases bankruptcy is not simply a result of reckless spending, but instead the result of “life happening” and not always the way we expected.
There are two main reasons why the social stigma about filing bankruptcy has lessened over the years.
First, the number of bankruptcy filings in Canada has increased steadily. Where twenty years ago there were only 10,000 personal bankruptcy filings per year, the number of filings has increased so that over the last few years between 120,000 and 150,000 Canadians have filed bankruptcy or a consumer proposal annually.
That means that over the last decade well over one million Canadians have declared themselves insolvent, or roughly one out of every twenty adults in Canada. If you know twenty people, it’s statistically likely that one of them has gone bankrupt. As more people go bankrupt, the stigma about bankruptcy is decreasing.
Second, our debt levels are increasing. The average Canadian now carries debt of well over one and half times their annual discretionary income. In the “old days” your parents and grandparents may have had a mortgage, and perhaps a car loan, but that was it. Today almost all new cars are financed (almost no-one pays cash), and most purchases are made with a credit card. Debt has become a way of life, and while debt has benefits, one of the disadvantages is an increase in bankruptcy filings.
Does this mean bankruptcy is good?
My message is this: if you have debt problems, don’t worry about the social stigma about bankruptcy. Don’t worry about what other people think. You should only concern yourself with your life and your family, and if bankruptcy is a necessary step for you to take, take action knowing that you are not alone.