The vast majority of people who file for personal bankruptcy in Canada never dreamed they would find themselves in that situation. For many, bankruptcy poses a number of moral dilemmas; one of the questions that often comes up for them is Should I feel guilty if I go bankrupt?
Something to note is that most bankrupts had good jobs and were able to borrow but then, unexpectedly, problems started. For many people financial problems start with job loss, or a marriage break up, or even medical problems that prevent them from working.
They use credit to pay their bills, but then find themselves so far behind that they have no choice but to go bankrupt.
This creates something of a moral dilemma for many people. They know they owe the money, and they want to pay it, and they feel guilty about going bankrupt. They are afraid they are taking the “easy way out.”
Should you feel guilty when you go bankrupt?
For a few people, the answer is a definite yes. If you have committed fraud, you should feel guilty. Fraud in this case means you had no intention of ever repaying your credit cards, but you ran them up anyway, and then went bankrupt. Someone who buys a $10,000 stereo system one day, and then goes bankrupt the next day, has obviously committed fraud. They knew they would never repay the credit card, but they used it anyway for a luxury item.
However the vast majority of people who go bankrupt do not commit fraud. They incurred debt for normal living expenses, and then when their circumstances changed, they were not able to repay their debts.
Ask yourself this question: “When I used my credit cards, or borrowed from the bank, did I plan to repay them?” If the answer is yes, you have probably not committed fraud. You are a victim of unfortunate circumstances.
While no-one wants the banks to lose money, they charge high interest rates on credit cards for a reason. They know that some people will not be able to repay their debts, so everyone pays more while they are borrowing. If you have carried a balance on your credit cards for the last few years you have probably paid more in interest than you originally borrowed, meaning that the lender has already been repaid what you originally borrowed. Your bankruptcy will mean that they won’t get all of their interest.
The point is this: Most people don’t want to file for personal bankruptcy in Canada, and they feel guilty about doing it, but if your debts are overwhelming, bankruptcy may be the option.
It is better to go bankrupt than have your wages garnisheed for many years. It is more important to feed your family and pay your rent than to service a wage garnishment.
Of course there is always the option of a consumer proposal. If you want to avoid bankruptcy, a consumer proposal as a negotiated settlement between you and your creditors might be the right choice. Even though a proposal will cost more than a bankruptcy, by negotiating a settlement with your creditors your feelings of guilt may be reduced.
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