Attitudes towards people having debt problems: Have you ever noticed how in casual conversation welfare recipients are labeled as “leaches” and various other derogatory names while people who are more successful or affluent are viewed as “hard working”? As a society we are extremely judgemental and we often simply get it wrong when we snap to judgement. This weekend I was having a conversation with a relative about the insolvency process – not a person seeking assistance, in fact quite the opposite a very affluent person with a great career and no knowledge of insolvency. He asked “where all the people come from” who are filing for bankruptcy and “why so many seem to be doing it second and third time”. The obvious implications of the question were that perhaps there is a segment of society that is more likely to file or that people simply “don’t get it” after the first time. These are definitely valid questions and ones that have been taken quite seriously by Federal Government studies. The issues, from my perspective, are very complex but for the majority of filers are related to income, at least for many of the people that I see who are having difficulty. The Provincial Premiers recently met and discussed minimum wage – advocates and economists have suggested that it should be set at about $15.00 an hour, but the studies that number is based on are already aging so $18-20 would be more realistic. The Low Income Cut Off (LICO), the closest thing that Canada has to an actual poverty line, and a guide used by bankruptcy trustees to gage incomes, indicates that a single person requires a net income that be roughly equivalent to a salary of $30,000.00 a year. We pride ourselves on being a “socialist state” one that offers medical assistance, fire, police and ambulance services as well as access to government to all citizens. If any of those elements were removed people would be in an uproar, yet ironically few people look at the causes of hardship with more than a quick glance unless it affects them directly. Please think about and comment on this: A welfare recipient in the city of London is expected to be able to live on $360.00 a month along with a free bus pass and prescriptions. The average rental cost in the city of London is in excess of $800.00 per month. When we give someone Welfare is the idea to create a cycle of poverty from which there is no escape or is the idea to provide a bridge over a period of financial hardship? Would it make more sense to pay a reasonable living income based on the LICO and provide more support to exit the system? Or, do we start out with the belief and expectation that poverty is real and that certain people deserve to live in it or that as a capitalist society the strong will survive? The step up for long term welfare recipients, trapped by lack of opportunity, is to apply for ODSP (medical disability) and caring physicians (typically earning $200,000.00 a year and more) are only too willing to do their compassionate bit to help people afford groceries. To qualify for ODSP a person must have some form of medical impairment. On ODSP recipients receive about $900.00 a month – still a far cry from the $2,006.00 set out by LICO but certainly better than $360.00 form general welfare. All things being relative Canadians are very resourceful people and when they want or need something they try to find a way of getting it. When the typical welfare recipient makes an assignment into bankruptcy they are forcing up the cost of bank write-offs, or at least that is common view. But actually the average welfare recipient who has tried to resort to credit to augment their income (or lack thereof) will typically only be carrying about $5-10,000.00 in debt. Contrast that with the national average wherein it is estimated that we are all carrying an average of $29,000.00 per Canadian in unsecured (typically credit card) debt and one must wonder who is carrying all the debt. In my practice I have seen professionals with as much as $150,000.00 in institutional (banks and credit card company) debt. That would be one couple carrying five times the national average consumer debt level and 15-30 times the average welfare recipient’s debt level. We can see then that there really is not a single sector or demographic of society that is experiencing debt problems. In fact we might recall that the Canadian Banks themselves were on the verge of bankruptcy they were insolvent and required a taxpayer bailout to the tune of $114,000,000.00 which came largely in the form of mortgage buyouts from CMHC. The Canadian government is in debt to the tune of almost $615,000,000,000.00 so why should it poorest citizens be any different? Anyway, much of the foregoing is “opinion” supported by a smattering of statistics. The fact remains that the national debt is still growing and so is the person debt level of the average Canadian. Prior to the 1980s few people had access to credit cards and lines of credit, today people have liberal access. Prior to the 1980s very few people made assignments into bankruptcy. Since the early 1990s as lending practices and policies changed people have had easier access to credit and as a response to the increased debt loads they have been more likely to turn to insolvency practitioners for solutions. But once out of debt is it possible to stay debt free? I believe that it is possible to live debt free, but it requires a dramatic change in attitude, not only individual attitudes towards debt but also a systemic change of attitude. We might start by changing our attitudes towards those less fortunate members of society and reconsidering just who is in debt. Rather than viewing debtors as being exclusive “poor people” recognizing that most of our friends, family and neighbours are in debt should change our perspective.
Posted on: Tue, 06 Aug 2013 14:50:19 +0000
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