At some point in life, nearly every person will find themselves struggling with some degree of financial hardship. Unexpected life changes, career upsets, medical expenses and tough economic conditions can throw even the most responsible, financially conservative lifestyle into turmoil. While all other options should be exhausted first, when all else fails, filing for bankruptcy offers a protective measure intended to help individuals recover from financial strife.
Fortunately, for those individuals experiencing financial struggles, there are alternatives to pursue prior to filing bankruptcy. In terms of money troubles and bankruptcy Canada offers numerous legal options, including debt settlement, debt consolidation, credit counselling, and consumer proposals. These options exist to help those individuals facing the possibility of personal bankruptcy find a less damaging solution to mounting debts. Each option has different benefits and drawbacks, and not all situations fit the criteria for bankruptcy alternatives.
Although money troubles can quickly spiral out of control, few individuals reach the point of needing the protection of bankruptcy Canada offers its residents without first qualifying for alternatives. For example, when a person’s credit is still viable, debt consolidation creates a loan which pays off all other debts and offers a smaller, consolidated monthly payment. Consumer proposals, on the other hand, negotiate a reduced overall debt and smaller monthly payments for those individuals with between $5,000 and $250,000 worth of debt. Bankruptcy alternatives all require at least some ability to make payments on your debts. Once delinquencies and overwhelming debt reach beyond your ability to service them, then formal insolvency proceedings serve as a last resort.
Should the process of declaring bankruptcy become the only remaining alternative, there are things each individual should know about the process. While the benefit is relief from debt and more money to cover basic necessities, the costs are considerable. It is important to always deal with a licensed trustee when filing for bankruptcy. This means a trustee that has obtained a license from the Superintendent in Bankruptcy pursuant to the Bankruptcy and Insolvency Act (Canada). The trustee in charge of each case will determine all assets legally available for liquidation. Assets not otherwise protected by federal law must be sold to cover debts. Additionally, the bankrupt individual must make regular payments to the trustee. Such monies are then paid to creditors in an effort to meet as much of the individual’s financial obligations as possible. Remember that your trustee is working on behalf of your creditors and they must look out for the best interest of the people you owe.
Understand your options
Loss of assets and the destruction of a person’s credit history should not be taken lightly. Information about bankruptcy is made available to the public and it can impact your credit rating for up to 14 years. In some cases, the individual will have to sell or surrender the same assets subject to repossession. However, Canadian law does protect certain essential assets, provided the reasons for filing for protection meet certain criteria. In rare cases, the court may impose fines or other penalties against individuals who commit offenses immediately leading up to or during bankruptcy proceedings.
Personal Canadian bankruptcy laws provide a means of relief from crippling debt, allowing a bankrupt individual to completely eliminate monies owed. There are consequences to bankruptcy in Canada, some of which are severe and difficult to accept. However, for the bankrupt individual, the negative consequences of formally declaring insolvency are preferable to foreclosure, repossessions and utter financial ruin. The inability to buy a home or car with a traditional loan or obtain other forms of credit can seem a small price to pay for freedom from oppressive, debilitating monetary obligations.
As a result, make sure you do everything you can possibly do to avoid going bankrupt. Understanding your options is the first step. Fill out the debt relief form to get started.