But embarrassment and a lack of trust in debt firms is holding them back
Millions of people have debts and most can manage their liabilities but when things get out of control you would think asking for help would be a priority.
Not so, says insolvency firm MNP which has published the findings of a survey conducted by Ipsos, which shows that seeking professional help is often avoided due to the stigma of bankruptcy and embarrassment about losing control of finances.
“Unmanageable consumer debt or financial hardship is extremely lonely and isolating because the guilt prevents people from talking about it. Unfortunately, our survey shows those who are most in need of help are the least inclined to ask for it,” says Grant Bazian, president of MNP.
Despite rising numbers of insolvencies and the ever-rising level of Canadian household debt, MNP’s survey found that 46% of respondents say they would be embarrassed to get help if their financial situation was bad enough to consider bankruptcy and 31% say the stigma surrounding bankruptcy prevents them from seeking help.
Worryingly, the share who would be too ashamed to seek help includes 61% who say their personal debt situation is bad and 54% who say it is so bad that they would consider bankruptcy.
“The number of people filing has increased, but this doesn’t reflect the magnitude of the consumer debt challenges in the country because so many people delay getting help until they are in an absolutely dire situation. By the time they speak with a professional, many may be forgoing basic necessities to avoid filing a Consumer Proposal or Bankruptcy,” says Bazian.
Trust and knowledge
Two key factors in the survey results are trust – in professional firm to help with debts; and knowledge – the lack of financial literacy.
While 30% do not know where to turn for help, 52% say they lack trust in professional firms being able to help get them out of debt (this rises to 58%) among millennials.
“The trust issue may stem partially from a lack of financial literacy and awareness about debt relief options in Canada,” says Bazian. “Many people – particularly young people – don’t know there is a regulated system in place to help severely indebted individuals regain financial stability. Licensed Insolvency Trustees are the only professionals authorized to offer relief options such as Consumer Proposals and Bankruptcies,” says Bazian, adding that Canadians should be wary of any companies that aggressively market quick-fix debt forgiveness.
The survey also found that the majority of Canadians say there is no shame in seeking help for debts and just 37% believe those who declare bankruptcy are looking for an easy way out of their financial problems.
MNP Consumer Debt Index: Canadians Wary and Embarrassed About Seeking Debt Relief Survey finds a mix of social pressures, mistrust and lack of information is preventing many from seeking professional debt help. #MNPcdi To learn more: https://t.co/fSBldIq6ze— MNP 310-DEBT (@MNPdebt) July 29, 2019