ARE BANKRUPTCY FILINGS UP?
LITs often hear “you must be busy”.
The truth is actually quite different from perception, whenever the economy takes a tumble, of any kind, media outlets start looking to LITs with speculation that bankruptcy filings are increasing. Yet, the busiest year that Canadian bankruptcy trustees have ever seen was 2009. Since then, all insolvency filings have been in steady decline.
The number of insolvency filings dropped again last year over the preceding year. However, this is not necessarily indicative of a vibrant economy – in fact quite the opposite. When banks are lending, money (or at least the illusion of money) is circulating around the economy and inevitably some people get into difficulty. By filing a bankruptcy, consumers can flush away their debt problems and get a fresh start, allowing them purchase goods and services, sometimes using credit to do so.
Banks have recently taken to offering competing Credit Card products Master Card and VISA, some have also brought AmEx into their portfolios. This action effectively helps to reduce defaults and defer the number of insolvency filings by facilitating balance transfers and the ability to use one card to pay down another to maintain the illusion of a “good payment history”.
Remember, Trans Union reported that 70% of bankrupts had “strong credit reports” at the time they filed for bankruptcy.
What does all of that mean for the economy:
Canadians do not earn enough money to either live adequately, or to be able to repay their obligations, so lenders (banks) are creating imaginative new ways to mitigate defaults. Reducing minimum mothly payment requirements, raising credit limits, adding more varieties of debt products, are just some of the shady practices. We also see an ever increasing number of people using their homes like ATMs (constantly refinancing to secure unsecured debt) effectively shifting debt from one pocket to another .
If you have had enough of consolidating and reconsolidating and extending your mortgage into perpetuity talk to a Licensed Insolvency Trustee and review all of your options. Don’t forget to ask about how to keep your assets, many are exempt from seizure, and how to live debt free. Trustees look at family budgets everyday – we have become quite adept at finding ways you can change your lifestyle (if you are willing) to save money and be able to live without debt.
To find a local trustee go to this website and type in your city or the nearest one to you if you live in a rural area.