Business Bankruptcy? Stick to the program and you’ll be sure to pass.
Maroney on Money for September 13, 1998
According to statistics published by the Office of the Superintendent of Bankruptcy, there was good news for Canadians in the month of May (the most recent statistics available) as bankruptcies continued to decline. Canada wide, there were 7668 bankruptcies (consumer and business) this May compared to 8,677 the year before. Year-to-date figures show bankruptcies dropped almost 12% from 42,868 to 37,739 over the twelve-month period ended May 1998.
Unfortunately, in B.C., we were headed in the opposite direction with May bankruptcies increasing a whopping 22% from 738 to 904. Looking at our provincial counterparts, we are joined by only New Brunswick and Newfoundland in this dubious distinction. Every other province saw their total bankruptcies drop in the month of May.
Of the 904 May bankruptcies, 798 or 88% of these were of the consumer (i.e., individual) variety. With back-to-school well underway, it seems a short lesson, Bankruptcy 101, is in order. Passing this course isn’t particularly difficult. The following thirteen-step program will virtually guarantee an honours grade in Bankruptcy 101:
1. Always strive to keep up with your neighbour. If your neighbour owns something, then be sure that you have a right to own the same thing; in fact, convince yourself that you deserve to own something even better. Disregard the possibility that your neighbour may have a better paying job than you or perhaps he inherited money. Then again, maybe he’s in hock up to his eyeballs just like you.
2. Finance everything you buy. Spread your payments over the maximum period allowed so you can “afford” to buy more.
3. Make only the minimum payment due on your credit cards. That’s all they’re asking for so that’s all they’ll get. Convince yourself that, even with notoriously high credit card interest rates, the payments really aren’t that bad.
4. Use your line of credit at the bank to make your credit card payments. It’s a great way to free up more room on your cards.
5. Invest as much as you can in depreciable assets. After all, they’re assets just the same so they must be good. Besides, these are the things that have the greatest “wow” effect on your friends and family. And don’t forget to never let your depreciable assets get old – what would people think?
6. Rest assured that you’ll always have your current job. Ignore the corporate restructuring that is going on and the big company names that no longer exist.
7. Forget setting aside a cash reserve for a rainy day. Why have money just sitting there earning more money? Get with it and spend it.
8. Take advantage of all the “don’t pay ‘til…” deals you can find. Why wait for tomorrow when you can have something today. And while you’re at it, when your payment comes due roll it into one of those handy dandy financing packages the vendors provide. They make it all so simple, how can you turn it down?
9. When your creditors call, just ignore them. They don’t know what they’re talking about – they’ll get their money in time.
10. Live for today while you’re still young and can enjoy it. Retirement is tomorrow’s concern – there’ll be lots of time to deal with retirement and, besides, you’re contributing to CPP.
11. Accept every new credit card offer that comes to you in the mail. These companies must think pretty highly of you to keep offering all that credit. And when your shiny new card arrives, take a cash advance to pay off the balance on your old cards.
12. Never keep track of how much you owe and certainly don’t worry about charging more each month than your take-home pay.
13. Don’t pay your taxes on time and certainly don’t bother planning to reduce your taxes in advance. Take the easy road and buy one of those tax shelters that come out in the fall – that’ll take care of your tax bill in short order.
While taking Bankruptcy 101 remember that nothing beats a blind eye. A problem ignored is a problem that will disappear. Rest assured. Stick to the program and you’ll be sure to pass.
Jim Maroney is a chartered accountant with Andrews Brown Maroney in Maple Ridge.
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