According to Bankruptcy Canada, 1 in every 6 Canadians will declare bankruptcy or are experiencing it right now!
If we look at the reasons why people file for bankruptcy in Canada, a lot of similarities will begin to emerge. Loss of job, illness, divorce, and income reduction are just some of the reasons most commonly cited.
However, accumulated debt, i.e. the amount you owe is a huge risk factor as well!
Recognizing what kind of debt will bring you closer to the doors of bankruptcy is very important when it comes to starting anew with a clean, debt-free slate.
Common Types of Debt That Cause Personal Bankruptcy
At the end of 2013, nearly 118,000 Canadians filed a consumer proposal or personal bankruptcy in various regions of the country. You are not alone. However, it will be better if you learn to recognize the following types of debt.
Almost 50% of people who file for personal bankruptcy have some kind of tax debt, unpaid for a long time. Small business owners and self-employed individuals come in the majority of this type of debt, as there can be times when these people simply can’t afford to pay tax debts.
Credit Card Debt
Credit cards are used by everyone. However, this similarity is also found in majority filers of personal bankruptcy. One person in average holds about 4 credit cards, in addition to following irresponsible credit usage behaviour. With credit card usage follows a line of credit debt that is hard to ignore and avoid!
Car Loan Shortfalls
Contrary to belief, a car loan doesn’t simply disappear even when the car is taken in by a secured creditor. The lender of your car loan will demand (and collect payment) until outstanding debt is fully paid. Bankruptcy is inevitable if you fail to make payment on any secured loan.
Payday Loan Debt
This type of loan is considered as a short-term loan. A payday loan company will generally provide $500 (or less) to $1500 that you’ll have to pay back on your next payday.
Taking on a payday loan even of a small amount is something many consumers are guilty of. On average, more than one payday loan companies demand debt repayment when an individual files for bankruptcy (with payday loans listed as the cause).
1 in 10 bankruptcies in Canada are filed by people in student loan debts. This statistic is appalling! Consulting with a bankruptcy trustee is a good idea if you are still struggling with student loan debts, even after graduating from university more than 7 years ago.
Learning the different kinds of debt that cause personal bankruptcy isn’t enough. Recognizing these warning signs and knowing what should be done in your unique situation will help. Get in touch with EmpireOne today!