The results of this study should cause concern in the US especially since it is generally recognized that American bankruptcy law provides the most generous debt relief system in the world. A similar study has not been conducted in Canada. It is the writer’s opinion that a Canadian study would report similar results.

A March, 2006 study of US debtors, one year after their Chapter 7 discharge, (In Canada, Chapter 7 = personal bankruptcy) reports that one in four debtors was struggling to pay routine bills and one in three debtors reported an overall financial situation similar to, or worse than, when they filed bankruptcy.

This study corroborates a mid-1960’s US study by David Stanley and Marjorie Girth which found that one in three debtors reported, that two years after bankruptcy, they were in a similar or worse situation, than when they filed bankruptcy.

The March, 2006 study by Katherine A. Porter and Deborah Thorne concluded that the lack of steady and sufficient income was the key factor causing these debtors being worse off or in the same situation as when they filed bankruptcy. The study noted that these families are not struggling because they are misusing credit. The debts that worry them are mostly for necessities such as utilities, transportation, housing and taxes.

The study also concluded that there are limitations of bankruptcy as a social safety net and that bankruptcy is an incomplete tool to rehabilitate all of those in financial distress

On a more positive note, the study found that two thirds of debtors, one year after their discharge, were better off financially than when they filed bankruptcy. Therefore, the majority of people seeking a fresh start through bankruptcy did achieve the fresh start they were looking for.

This entry was posted on Monday, May 8th, 2006 at 9:59 am and is filed under Canadian Bankruptcy News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.