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The 10 main causes of personal bankruptcy

Causes of Personal Bankruptcy

Causes of Personal Bankruptcy

Financial problems are waiting for us all. Whether temporary or permanent, they can come forward without warning and are often out of our control. Who can really consider themselves safe from the misfortunes and unforeseen life sometimes has?

My intention is not to scare you, but rather to discuss one of the last taboos in Quebec: money problems. Indeed, it is rather rare that we discuss it with our family and friends, but it is more than 35,000 Quebecers who had to resort to the Bankruptcy and Insolvency Act in 2011 according to the Office of the Superintendent bankruptcies.

One may well wonder what causes all these people to declare bankruptcy? That’s a question that has 35,000 different answers. However, some answers are repeated often.


Here are the 10 leading causes leading to personal bankruptcy:

Here are the 10 leading causes leading to personal bankruptcy:

1. Overuse of credit (18%)

1. Overuse of credit (18%)

This is not a surprise, the main cause of financial problems is a misuse of credit leading to over-indebtedness. Accumulated debts are of all kinds: credit cards, mortgages, personal loans, student loans and others.

In most cases, people get into debt and do not even realize that their situation is problematic. One day, they wake up in panic and seek solutions to their now very severe problem.

If you feel that your debts become problematic, consult a trustee in bankruptcy before it is too late because it is often possible to counter the over-indebtedness. Prevention is better than cure!

2. A job loss or a decrease in salary (16%)

2. A job loss or a decrease in salary (16%)

Losing one’s job is tragic for many people. Often they are very experienced in their field but can not find work again. It’s a stressful and very difficult time on the wallet… and on the credit card.

Wage reduction is also a difficult test. If you can barely make your monthly payments, even a slight drop in salary could put you in troubled waters.

3. Medical problems (15%)

Medical problems are one of the main causes leading to bankruptcy. Not only are treatments often expensive, but if your energy levels or physical condition deteriorate, you will not be as good at work.

In addition, over-indebtedness is a vicious circle because it is particularly difficult physically and psychologically. If your health is fragile, the stress of indebtedness could make your situation worse.

4. Separation or divorce (15%)

4. Separation or divorce (15%)

A difficult separation or divorce puts a lot of emotional and financial pressure. It is never easy to recover from a grief and often it is too late and you no longer have control over your finances. Especially if you have to assume alone the financial obligations that you assumed to two before.

5. Seasonal employment (11%)

Nearly 5% of Quebecers have seasonal jobs and are therefore more vulnerable to economic changes in their lives. In addition, because they earn their salary over a short period of time, they must be extra careful and plan their personal finances.

6. Non-payment of taxes (8%)

Tax debts accumulate quickly, especially if you are self-employed and have not planned to pay as much taxes. It is important to set aside the amount and not to touch it. You can even take advantage of this money to grow temporarily in a guaranteed investment.

7. Financial mismanagement (6%)

Managing personal finances is not an easy task for everyone. Setting up and respecting a budget is crucial if you are struggling with money problems. If you spend more than you earn, you go into debt and unless this situation is only temporary, the debt problems will knock on your door sooner than you think.

8. The failure of his company (5%)

Going into business is a financial risk, it’s undeniable. As much as this risk is positive, it weakens you. And unfortunately, not all business projects are successful. There are many successful business people who have gone bankrupt one day. Not all projects succeed, even the good ones!

9. Insufficient pension (4%)

Will you save enough money to support your retirement needs? Too often people underestimate their expenses in retirement and do not save enough. It is not out of bad will, they are braked by their debts!

10. Gambling problems (2%)

Sadly, gambling problems cause financial problems sometimes very serious in the excessive gamblers. We sometimes see people with hundreds of thousands of dollars of gambling-related debt simply. To add to the misfortune of these people, their gambling addiction is also often the cause of a divorce or a job loss. Other addictions (drugs, alcohol, etc.) are often also the cause of serious debt problems.

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