What To Do Before Going Bankrupt in Canada
Filing for bankruptcy can be a challenging decision to make. Often, it’s considered the last resort when all other financial solutions have failed. However, before you proceed with bankruptcy, there are several important steps you should take.
This guide will walk you through 5 Things To Do Before Declaring Bankruptcy.
1. Transition to a New Bank Account
This is the first step we advise all of our clients to take before declaring bankruptcy. The logic behind this move is simple. If you have any outstanding debt or credit (like loans or overdrafts) with your existing bank, they could shut down your account as soon as they receive notice of your bankruptcy.
Rather than being caught off guard when your bank stops processing your payments for mortgage, rent, car, insurance, and so on, it’s better for you to take charge of the situation and set up a new account. This recommendation holds true even if you don’t owe anything to your bank. The parties you owe money to might be authorized to make automatic withdrawals from your account. These should cease once you file for bankruptcy. However, if they don’t, you could unexpectedly find yourself cashless.
2. Review All Your Automatic Payments
After changing banks, you need to inform all entities that have been making automatic withdrawals of your new account details. If they attempt to access your old account, your payment might bounce. This step is particularly crucial if you’re negotiating to retain a car or home during your bankruptcy or consumer proposal.
3. Terminate Any Contracts Before Filing for Bankruptcy
Before filing for bankruptcy, you should critically analyze all your monthly expenditures and contracts with a view to decrease your living costs. If you’re tied into a 3-year cellphone contract that you don’t really need or want, you can terminate it by filing for bankruptcy. However, you must decide to do this before filing so that the company can be included in your bankruptcy.
This advice applies to any contract you have, including car loans and leases. You’re filing for bankruptcy to resolve your financial difficulties. If you can’t afford your car lease, you can relinquish the car as part of the bankruptcy and get relief from the payment.
4. Ensure You Can Survive Without Credit
We often advise individuals to wait 30, 60, or even 90 days before filing for bankruptcy to ensure they can live on their income alone. If your monthly income is $2000 and your living costs amount to $2500, declaring bankruptcy won’t solve all your financial problems.
You need to be certain that if you have $2000 coming in every month, you can survive on this amount or less. Realizing you can’t afford to live on your income after you’ve filed could exacerbate your situation. Review your living expenses meticulously and find ways to live within your means after your bankruptcy.
5. Re-evaluate Your Other Options Just Before Filing
Even though you’ve probably considered a debt consolidation loan, a debt management plan, or a consumer proposal, it’s not a bad idea to discuss all your options with your bankruptcy trustee again before filing. Once you file for bankruptcy, you must see it through to the end.
Conclusion
If you follow these 5 Things To Do Before Declaring Bankruptcy, your bankruptcy process is likely to proceed smoothly. Your objective when declaring bankruptcy is to resolve your financial issues. It’s crucial to avoid any legal complications and additional expenses by preparing adequately for the bankruptcy process.
If you’re unsure about which contracts you can terminate or how your car or home might be affected by a bankruptcy, it’s advisable to consult a bankruptcy trustee in Canada.
