Sometimes knowing the causes of indebtedness can help you avoid insolvency and bankruptcy. Other times insolvency occurs suddenly, due to circumstances beyond your control, like the sudden death of the major household income earner, natural disasters for which you are uninsured or underinsured (such as flooding), or your employer’s business collapses, and your employment has ceased or has been interrupted.
What if you lose your job and can’t find another? After a layoff or termination, it doesn’t take very long to churn your way through considerable savings, even if you received a severance package. What about divorce? Not only must you cover the seemingly endless legal fees, but you also have to worry about dividing property, paying child support or alimony, and still maintain living expenses.
Overspending: Do you spend more than you make? Do you know how to make and stick to a budget? Inflation can throw a wrench in your financial planning, if you’re not careful. Poor budgeting habits and a lack of financial self-control often leads to insolvency.
Car loans: Across Canada, consumers are being lured into long-term auto loans to keep monthly payments low. It sounds like a bargain until you realize that you will be paying for this vehicle long past the point at which you will have traded it in for a newer car – and the remains of your former debt are rolled into your new loan (negative equity). This situation creates a treadmill of debt that prevents you from ever catching up. The average car loan 7 years ago spanned less than 5.5 years – now the average is up to 6 years.
Student loans: The average university graduate now owes more than $26,000 upon leaving the vaulted halls of learning, and that’s not counting the extended college careers of lawyers, doctors and other professionals or the private or provincial loans students may accumulate during post-secondary schooling. Before taking on advanced education, students and their supporters, like parents, must plan, in advance, for ways to save money, earn extra money and apply for scholarships to devote to an education fund. Without a rigorous action plan the student may start out adult life owing thousands of dollars.
Credit card debt: Do you feel like you’ll never be able to pay off your credit card debt? According to the Financial Post, credit card interest rates have skyrocketed. While most bank card interest rates total about 20 per cent annually, some store cards can charge up to 30 per cent interest! It’s no wonder that when you make the minimum monthly payments, charges can quickly raise the debt load. Credit cards can be a good financial planning tool, but unless you pay off each monthly debt, in full, they can wreak havoc with your finances. So pay off all monthly debts in full and live within your means.
The Edmonton-based Licensed Insolvency Trustees at A.C. Waring & Associates Inc. are here to advise you on the solution to your insolvency issues. Call us for an appointment or just walk into our office anytime from 8:30 AM to 5:00 PM Monday through Friday to talk to one of our professionals. Your first consultation with us is always free of charge. You can also call us at 780-424-9944 or toll-free on our long distance Alberta line 1-800-423-3328. We can help you now.