The social network of backofthebook.ca, Canada's online magazine
A Slice of Bankruptcy Pie
Yesterday morning, GM International filed for Chapter 11 bankruptcy protection, with an estimated debt load of $172.81 billion dollars. GM Chairman Kent Kresa said in a written statement, "Today marks a new beginning for General Motors... The board is confident that this New GM can operate successfully in the intensely competitive U.S. market and around the world." This high-profile industrial bankruptcy comes on the heels of a report last week from the Certified General Accountants of Canada which concludes that, “Canadians’ consumer debt has soared to $1.3 trillion dollars,” with the Superintendant of Bankruptcies finding that there was a 7.5% jump in bankruptcy filings over the same period last year, with many debtors accumulating personal debt of $70,000 or greater, not including mortgages. Many consumers and businesses have coasted through the last two decades running through their money like water, with their fists raised to the sky proclaiming, “Charge it!” with little concern for the ramifications of their actions. In the current “Give it to me now” society, debt equals entitlement and a desire to have everything quickly and easily, whatever the cost.
This seemingly easy access to bankruptcy is beginning to anger many former students who are riddled with non-consumer debt. They spend years in university, many only able to afford it by getting student loans, and come out of school with an average of $24,000 in debt according to the Canadian Federation of Students. The current national debt load for students is nearing $13.2 billion dollars. Many graduates do not find jobs in their particular fields or if they do, start off at salaries that are well below what is needed to be able to make their minimum student loan payments. Up until 1997, it was acceptable for graduates who were unable to make ends meet to declare bankruptcy on their student loans, as their non- student loan contemporaries have done countless times in the past. Now, students are not allowed to file for bankruptcy until 7 years after their last day of classes, and if they return to retrain at any point, the clock restarts from the last day of classes attended, even if their loans were close to 7 years old.
Consumers can load up their homes with any goodies they feel are necessary to life, such as a 2000 sq. foot home, plasma screen TV’s, brand new cars, riding lawnmowers and any other superfluous amenities, but once they find the payments on their credit cards or lines of credit to be too much to bear, they simply walk into a bank, sign the bankruptcy agreement, make small payments towards the debt for 6 months and “Poof!” -- magically eradicated. Small business owners can take out a loan for hundreds of thousands of dollars to try out their idea, and after it fails, walk away from the enterprise with little more than a slap on the wrist and a blemish on their credit report for the next few years. Even mortgage brokers and credit card companies are becoming lenient when offering credit to individuals who recently declared bankruptcy; the stigma is quickly fading and it is becoming a more appealing option than ever before. Yet someone with student loan debt has no choice but to pay the bill for 7 years, unless they use up the 2 years of interest relief available. For many that time period passes before they can find employment that will allow for the monstrous repayment schedule.
If the government is willing to step in and bailout a corporation like GM, with thousands of jobs on the line, perhaps they should bail out the thousands of post-secondary graduates who are struggling to make ends meet. Or at the very least, afford them the same opportunities to wipe the slate clean and start over without government debt looming overhead. Debt is debt, and it shouldn’t matter what form it is in; a person should have the right and the choice to declare bankruptcy if they have exhausted all other options available to them. The amount of the minimum payment should be based on actual earnings, not on what the government randomly thinks you should be earning. Should a receptionist in an entry-level position making $23,000 a year be forced to pay the same monthly fee as a doctor, who makes upwards of $150,000 a year? Being in financial trouble does not discriminate across socio-economic lines and neither should the ability to file for bankruptcy.
This seemingly easy access to bankruptcy is beginning to anger many former students who are riddled with non-consumer debt. They spend years in university, many only able to afford it by getting student loans, and come out of school with an average of $24,000 in debt according to the Canadian Federation of Students. The current national debt load for students is nearing $13.2 billion dollars. Many graduates do not find jobs in their particular fields or if they do, start off at salaries that are well below what is needed to be able to make their minimum student loan payments. Up until 1997, it was acceptable for graduates who were unable to make ends meet to declare bankruptcy on their student loans, as their non- student loan contemporaries have done countless times in the past. Now, students are not allowed to file for bankruptcy until 7 years after their last day of classes, and if they return to retrain at any point, the clock restarts from the last day of classes attended, even if their loans were close to 7 years old.
Consumers can load up their homes with any goodies they feel are necessary to life, such as a 2000 sq. foot home, plasma screen TV’s, brand new cars, riding lawnmowers and any other superfluous amenities, but once they find the payments on their credit cards or lines of credit to be too much to bear, they simply walk into a bank, sign the bankruptcy agreement, make small payments towards the debt for 6 months and “Poof!” -- magically eradicated. Small business owners can take out a loan for hundreds of thousands of dollars to try out their idea, and after it fails, walk away from the enterprise with little more than a slap on the wrist and a blemish on their credit report for the next few years. Even mortgage brokers and credit card companies are becoming lenient when offering credit to individuals who recently declared bankruptcy; the stigma is quickly fading and it is becoming a more appealing option than ever before. Yet someone with student loan debt has no choice but to pay the bill for 7 years, unless they use up the 2 years of interest relief available. For many that time period passes before they can find employment that will allow for the monstrous repayment schedule.
If the government is willing to step in and bailout a corporation like GM, with thousands of jobs on the line, perhaps they should bail out the thousands of post-secondary graduates who are struggling to make ends meet. Or at the very least, afford them the same opportunities to wipe the slate clean and start over without government debt looming overhead. Debt is debt, and it shouldn’t matter what form it is in; a person should have the right and the choice to declare bankruptcy if they have exhausted all other options available to them. The amount of the minimum payment should be based on actual earnings, not on what the government randomly thinks you should be earning. Should a receptionist in an entry-level position making $23,000 a year be forced to pay the same monthly fee as a doctor, who makes upwards of $150,000 a year? Being in financial trouble does not discriminate across socio-economic lines and neither should the ability to file for bankruptcy.
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