Main reasons why Canadians file bankruptcies.
The first reason that causes people to file a bankruptcy is loosing job. When you face this problem, the goal is to reduce your expenses as fast as you can. This will help you to continue servicing your debts. Of course there are some expenses, that cannot be easily reduced, such as rent or mortgage, but there are always some. This may help you to stay away from bankruptcy.
The next reason that leads to many bankruptcies in Canada are health problems, leading eventually to financial problems. Canada government covers most of your medical expenses, but it is about the money you don’t get, when you are ill and cannot work. Your income reduces and you may find very difficult to service the debts.
Another reason is divorce. When you live together, you cover your expenses together. When you divorce, your income is the same but the expenses increase. One third of bankruptcies in Canada is caused by divorces or separation.
You should consider these facts and find a way to protect you and your family in case of financial problems. Remember – it is often easier to avoid bankruptcy, than it seems. You may use professional help. There is more information about bankruptcy and FREE consultation on our site.
A personal bankruptcy. What it is?
Personal bankruptcy is a legal way to give up your assets (some of them) to discharge your debts in return. It is filed by a licensed trustee in Canada.
So how does filling personal bankruptcy help?
First and the most important reason is that your debts will be discharged. But you can lose your assets such as your house or your car.
Your credit rating will worsen. A note of personal bankruptcy will be on your credit report for up to 10 years. You will have higher rates of interest and down payments.
A personal bankruptcy is obviously a last resort. So if you live in Canada and no ready to file it, you should try other alternatives to bankruptcy such as consumer proposals, debt consolidation, credit counseling, Chapter 13 Wage Earner Plans, or using a budget to pay debts.
So don’t despair and choose what way is better for you. You can find more information and FREE consultation about personal bankruptcy and alternatives on our site.
Alternative to Bankruptcy? Consumer proposal.
This is available in Canada. It is an agreement between your creditors and you. It is an alternative to bankruptcy.
You will have to find a trustee with license to file a proposal. He will review your monthly budget and the money you own to find what you can offer as a proposal.
It will usually include monthly payments. For example a payment of $400 for up to 5 years monthly. A consumer proposal may involve money from the cashing in of an RRSP or from sale of a house. Administrator will place the money in trust and then administer it to the creditors.
When the term of the consumer proposal is ended, all debts will be discharged, even if you still have some debts left.
The best favour of a consumer proposal is that your debts (almost all of them) will be discharged (except debts like court fines or child support payments). There will be no interest charges and you know the sum of money you have to pay monthly, so it is easier for you to make plans. But you should deal with a consumer proposal only if you are sure, you can afford monthly payments.
You should also remember, that a consumer proposal will be on your credit report for 3 years after your debts are discharged.
So if you are a Canada resident and still want to start a consumer proposal, read more on our site and check our free consultation about this alternative to bankruptcy.
The steps you should take during bankruptcy.
-After you have filed your bankruptcy, your trustee should get from you non-exempt assets and your credit cards.
-Then you have to be present on the Creditor meeting if there is one (rare for personal bankruptcies).
-Give your trustee T4 slips to complete tax returns before filing bankruptcy. Don’t forget to file 2 different tax returns, because “the tax year” is considered to be ended, when you start your bankruptcy procedure.
-You will have to report your expenses and your income to the trustee. The more is your income, the more you are obliged to pay to your creditors.
-You have to attend 2 counselling sessions to be eligible for “9 month discharge”. The first counselling session has to be held between 10-60 days after filing bankruptcy. The second one -No later than 210 days. You can learn how to manage your money and how to avoid further financial problems on these meetings.
-You have to inform your trustee if you change your address and provide him with information he requires.
-If you want to borrow more than five hundred dollars, you have to inform the lender about your bankruptcy.
-You may not be a head of a company.
These steps are to help you to learn how to manage your finances to avoid problems in the future. You can find more information and FREE consultation on our site.
What happens after bankruptcy in Canada? Are there any debts left?
Your situation after bankruptcy will depend on the types of your debts. Some debts will not be removed.
Bankruptcy will discharge only debts that are unsecured. Still there are some exceptions:
-fraud debts or resulted by theft
-spousal and child support
-court awarded damages
-student loans (less than ten years old)
-some government overpayments (if you have these, you should consult with your bankruptcy trustee)
The debts that will be discharged after bankruptcy.
-medical bills
-unpaid utility bills
-lines of credit and personal loans (only if they are unsecured)
-payday loans
-credit card ballances
-retail store accounts
-insurance premiums past due
-arrears of income taxes
You may find it difficult to deal with your financial problems on your own. Especially, if there is a chance to avoid bankruptcy with professional help. Find more information and FREE consultation on our site.
