Is having debt or filing a consumer proposal or bankruptcy an admission of defeat? Does that mean I’ve failed?
This is such a common fear or concern among people who call us that it became Myth #2 in my book Straight Talk on Your Money.
Some of our clients tell us that the feelings of guilt are one of the main reasons why it took them so long to reach out to us for help. I’m here today to say that you shouldn’t blame yourself.
The answer is that our high debt levels are everyone’s fault. The banks and credit card companies earn a huge profit from lending money, so they may lend more than they should lend in some cases. Companies that sell products (like electronics, cars and houses) also encourage you to borrow; it’s not their job to determine whether or not you can afford to pay it back.
Part of the problem is just the massive opportunity and pressure there is today to obtain credit. There are so many more options to borrow money today than in the past. Alternative and online lenders make it easy to rely on debt as a way, not so much to live the high life, but to live day to day. With low interest rates, mortgage brokers and car loan lenders have enticed us with low monthly payments, encouraging too many people to buy a bigger home or a better car because hey, why not, it’s cheap.
Of course none of us are forced to borrow; we can choose to borrow, or not. However, the underlying truth is that, for many people, debt creeps up over time. You could manage the debt payments for a while, until something unexpected happened. A job loss, illness or divorce can have a severe impact on your finances. Next thing you know you are using credit to make ends meet. Pile this new debt on top of old debt, and eventually you find yourself in a situation where you can no longer keep up with your debt payments.
This is the situation faced by the majority of people who file a bankruptcy or consumer proposal with us.
In these circumstances, filing insolvency is not an easy way out but often, it’s the only viable solution. It doesn’t make sense to continue to struggle, continue to accumulate more debt just to avoid dealing with the real issue: you can no longer afford the debt you are carrying.
My point: I’m not interested in how you got into debt. I’m more interested in how we can work together to eliminate your debt, and help you manage your money in the future.
At Hoyes Michalos we focus on tomorrow, not yesterday.