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Discussion – 


Discussion – 


Why a law that forgives?

Canada and the United States have one thing in common. In both these countries, household spending is the main driver of the economy, accounting for over 60%. The Bankruptcy and Insolvency Act seems to be based on this observation. This offers a route to “economic rehabilitation” for individuals facing serious financial difficulties. It allows them to be legally relieved of some of their debts and to get back on their feet financially.

The economic situation

In both Canada and the US, over 60% of income is generated by households. In other words, what we consume feeds our country’s economy! And yet there are many other economic activities and sectors:

  • Production and processing of raw materials ;
  • Buildings and renovations ;
  • Virtual creation ;
  • Achievements in the digital and IT sectors;
  • Research and knowledge industry ;
  • Services provided ;
  • Agri-food sector ;
  • Chemical and petrochemical industry…

An economy dependent on household spending

Household spending includes goods and services purchased to meet their needs and desires. In many economies, they account for the majority of overall demand.

Consumer demand stimulates production. This, in turn, supports job creation. Many industries, such as retail, services and the manufacture of consumer goods, are heavily dependent on household spending.

Fluctuations in these rates have a major impact on the economic cycle. In times of growth, an increase stimulates economic activity, while in times of slowdown, a decrease contributes to a recession.

The overall health of the economy is often measured by the strength of household spending. Stable growth in consumption is generally seen as a positive indicator of economic health.

Encouraging consumption

In times of economic crisis, governments are quick to encourage consumption to stimulate the economy. This is often achieved through fiscal and monetary policies designed to increase the availability of money and reduce uncertainty.

Encouraging people to consume means maintaining overall demand. In times of crisis, if consumers massively reduce their spending, this can lead to a drop in production, job losses and a spiral of depression.

Sustained consumption has a positive impact on businesses. They can maintain production and avoid mass redundancies. This also contributes to the financial stability of companies.

Campaigns to encourage consumption also aim to restore consumer confidence. Increased confidence encourages people to spend, which strengthens the economy as a whole.

Incentives can take different forms, such as tax cuts, economic stimulus programmes, credit initiatives or subsidies specifically targeted at consumer sectors.

Bankruptcy and insolvency laws

The aim of the bankruptcy law is to give over-indebted individuals a chance to re-establish their financial situation. By allowing part of the debt to be discharged, the law offers debtors a fresh start.

Economic regeneration

Bankruptcy offers the debtor the opportunity to discharge certain debts, often after a period of a few months. This allows the debtor to start afresh financially.

The reference to “economic rehabilitation” suggests that bankruptcy is not simply an act of discharging debts. It is also an opportunity for the debtor to regain control of their financial life and rebuild their financial credibility. Bankruptcy laws often provide for exemptions allowing debtors to keep certain essential assets, which facilitates their recovery.

In conclusion, if you’re up to your neck in debt, there’s always an alternative. Ideally, you should be able to pay off all your debts according to the terms agreed with the lender. However, there are times when this is impossible, for one reason or another. In this case, there are solutions that are accessible and adaptable to your situation. Don’t hesitate to contact us for more information.

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