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Of course, it's the last resort. You only consider it when you feel you have no other option. But if you had to do it, you would suck up the shame of it, feel both guilty and relieved, and think, "It's my second chance."

Personal bankruptcy is like Easter, if you listen to those who might sell you on its merits. It's an unfortunate financial death, followed by Resurrection.

But is it simply a convenient solution to a problem that never gets fixed?

"There's an over-permission to have a second chance," observes Kelley Keehn, an Edmonton-based financial expert and author.

Last week, the federal Office of the Superintendent of Bankruptcy reported that almost 8,000 people in Canada filed for personal bankruptcy in January of this year, an increase of 21.7 per cent from the same month in 2008. And the rate could keep increasing in the coming months.

"We are seeing people in severe difficulty," says Laurie Campbell, executive director of Credit Canada, a not-for-profit charitable organization that helps people in financial extremis. "The number of calls are up 40 per cent over this time last year," she says. "It is quite grave."

Major traumatic events, such as divorce, are often the cause of personal bankruptcy, experts say. Now with job losses rolling across the country in the wake of the global economic storm, many people are suddenly finding themselves unable to pay their bills.

But it's not all the fault of the poor economy. Credit counsellors and financial experts see the increase in personal insolvency as a sign of insidious problems not only in the credit industry, but also in consumer financial habits.

"The credit industry holds the key to this. They could slow or stop the bankruptcies by being easier to get along with," says Margaret Johnson, president of Solutions Credit Counselling Service in Surrey, B.C. "The credit industry has an internal policy that if you can't repay debts in five years, we want you to go bankrupt. Well, why not reduce the interest or forgive the interest or whatever we need to do to get this person back on their feet and retain them as a customer instead of throwing them to the wolves?"

Ms. Johnson, who has been in the credit industry for close to 36 years, first as a loans officer and then as a counsellor, believes that "the system has failed the consumer." To begin with, she says, credit is too easy to get and the consequences are rarely explained. "There is a very large segment of the population that if you get them into debt, they will never get themselves out. And whose responsibility is that? The consumers to know that or the credit industry to present that?"

In an effort to encourage better fiscal habits, Canadian bankruptcy law mandates that anyone who declares personal insolvency must attend two credit-counselling sessions. "The first thing that anyone looking at insolvency needs to understand is that your credit rating is not a reflection of your personal worth," Ms. Johnson says. That's the handholding part of the counselling that attempts to resurrect people's self-esteem. The greater challenge is in trying to reform spendthrifts. The recidivism rate for bankruptcy is close to 10 per cent, according to Credit Canada.

A financial education is imperative. "We have gotten so out of sorts with what it means when we sign our name to something. Back in the old days, if you bounced a cheque, they came and arrested you. Now a Non-Sufficient Funds [notice] is no big deal," Ms. Keehn says.

It is a matter of learning to say no. "Money to me is always a self-esteem issue," she adds. "It's just like your health. It's the simplest thing in the world to remain fit - just eat well and get exercise - and yet we have an obesity epidemic. You have to care about yourself to do those things. And it's the same with money. You need to respect what you have."

Many people are also unaware of what bankruptcy can mean for their future. "Even though it disappears off your credit record six years from date of discharge by the court, some jobs always ask you if you have ever filed for bankruptcy," Ms. Keehn says.

People should take advantage of their rights when they are facing insolvency. "Husbands don't have to pay wives' debt and vice versa," Ms. Johnson points out. "And you have the right to put a notation on your credit rating about anything that's on there .... It's important to note if the bankruptcy was caused by a divorce or a death."

An option other than declaring personal bankruptcy may be available soon. Trustees are waiting to hear about an amendment to Canada's Bankruptcy and Insolvency Act that would give individuals more flexibility to make a consumer proposal - a restructuring plan to repay creditors over time, based on income - rather than file for personal bankruptcy. "They have raised the threshold from $75,000 in total debt, excluding personal mortgage, to $250,000 in debt, excluding personal mortgage," explains John Haralovich, associate partner of KPMG in Ottawa, who heads up the firm's personal and corporate insolvency practice. "With the high debt load that most Canadians carry, the $75,000 threshold wasn't high enough for most to take advantage of it. Bankruptcy became the only option." Trustees expect that the amendment, passed by the Senate, will be in force shortly, he adds.

The real solution, however, is vigilance and early intervention. Think of your finances as a marriage. Before you get to a discussion about divorce, you should be in a therapist's office, talking about your problems. As Ms. Keehn notes: "Most people call credit counsellors too late."

Editor's Note: An earlier version of this story contained incorrect statistics about personal bankruptcy rates. This version has been corrected.