Word on the Street

Do you think the financial meltdown will affect you personally? If so, how?

This was a question posed to individuals across Canada by Metro News.

“I don’t think so. I’m a student and I don’t have any investments. I think maybe if the banks went under, I wouldn’t have to pay back my credit card debt.”

Brad Jones

age 27, Toronto

Granted Brad, I do detect a hint of sarcasm here, but rest unassured, a bank failure will not alleviate you of any obligations. Even if a worst case scenario finds one of our financial institutions entering into receivership, the receiver has a fiduciary obligation to the debt-holders to maximize their return on investment. This means that the assets, among which include the credit card division that has extended liens to you, will be sold to another organization in order to repay the debt holders (even if only a fraction on the dollar).

Best advice: don’t put all of your eggs in the ‘banks going under’ basket. Better to develop a real strategy for managing your debts.

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2 responses to “Word on the Street

  1. i was told by my bank advisor that the canadian banks are all controlled by the canadian government so they don’t have the same chance to go under as the banks do in the usa. since the banks in the usa are privately owned and not controlled.

  2. that is correct. it is unlikely that Canadian banks will fail. However, in the event that such a scenario does indeed transpire, creditors will not abnegate their claims.

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