Free Consultation

Massive Credit Card Debt Leads to Bankruptcy in Canada

Look in the mirror. It’s likely that you have more in common with the average person who files bankruptcy in Canada than you may think.

I’m a licensed bankruptcy trustee in Ontario, and today we released a comprehensive new research study profiling the average person who files a consumer proposal or bankruptcy in Ontario. We call this average person “John Debtor”.

Who is John Debtor? What does he look like?

John Debtor looks just like the average Canadian. He has a job, and may also own a home. He is very similar to the average person. The only difference between John Debtor and the average Canadian is that John Debtor has a huge amount of debt.

Here are some facts:

Comparison of John Debtor to Average Canadian
Personal Information: John Debtor Average Canadian
Male1 58% 49%
Female1 42% 51%
Average age2 41 41
Married or Common-law3 45% 52%
Divorced or Separated 26% 10%
Widowed 2% 6%
Single 27% 32%
Average family size3 2.3 2.6
Average monthly income4 $2,240 $2,419
Total credit card debt5 $24,390 $3,709
Total unsecured debt6 $59,814 $16,399

The Big Difference: Debt

As you can see, the most significant difference between John Debtor and the average resident of Canada is debt. (That’s not surprising to readers of this blog; the most read post here on Trustees Talk is our post on Personal Debt in Canada: The Ticking Time Bomb.

The average Canadian has about $16,400 worth of consumer credit (debt excluding mortgages), while John Debtor has almost $60,000 in unsecured debt. That means that John Debtor has more than three and a half times as much debt, so it’s no surprise that John Debtor gets into financial trouble.

Simply put, debt is very dangerous.

To find out if you may have a debt problem, take this quick four question survey:

1 Are my debts, not including my mortgage, closer to the Canadian average of $16,400, or closer to John’s average of almost $60,000? If your debt is close to, or higher than $60,000, you owe more than John Debtor, and that’s an indicator that you may have a debt problem.

2 “John Debtor” owes $24,390 spread out over more than four credit cards. In other words, the typical bankrupt person in Canada has a lot of credit card debt. If you owe near that amount, and you are having trouble making your payments, you have a debt problem. If you are carrying a balance each month on any credit cards, you have a debt problem, because credit cards are the most expensive form of borrowing.

3 Am I afraid to open my mail? If you have bills that you haven’t opened because you know you can’t pay, you probably have a debt problem.

4 Am I “robbing Peter to pay Paul”? Do I take a cash advance from my line of credit to pay my credit card, and then next month will I take a cash advance from my credit card to make the minimum payment on my line of credit? If you are simply borrowing from one place to pay another, your debt, with interest, is gradually increasing, and you probably have a debt problem.

How can you solve your debt problem?

Start by taking inventory. Make a list of all of your debts, and the amount you owe. Make a budget to see where your money goes each month. If you can cut expenses and use the extra money to pay off your debts, great; that’s the perfect solution for you.

If you are like John Debtor and you have more debt than you can handle, consider filing a consumer proposal. You make one manageable monthly payment, and your unsecured debts are eliminated. If that’s not possible, filing bankruptcy in Canada may be your final option.

To find out more, use our free, on-line debt options calculator to review your options, then contact a consumer proposal administrator or bankruptcy trustee for a no-charge initial consultation.

1. Statistics Canada: Percentage of population over the age of 20, July 2010

2. Statistics Canada: Median age 2010

3. 2006 Census of Canada: Ontario

4. Statistics Canada: Personal Disposable Income per capita

5. Trans Union

6. Statistics Canada: Consumer Credit, Seasonally Adjusted per adult (18+)

One Response to “Massive Credit Card Debt Leads to Bankruptcy in Canada”

Arturo said...

More than 25% of your monthly income in debt, is a lot of debt.
The best thing to do is to avoid debt, and avoid spending the money you don’t have.
Even better a prepaid credit card would be great.
Sorry banks you don’t want to hear this.