What to Do Before Declaring Bankruptcy
When you find yourself in a difficult financial situation and dealing with significant debt, filing for bankruptcy can be a suitable solution to your problems.
But bankruptcy is a big decision, and can impact you for several years to come.
If you’re thinking about filing for bankruptcy in Canada, make sure you get all of the information first.
Here are five things to do before declaring bankruptcy.
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1. Make changes to your bank accounts
Opening a new bank account is recommended before your file for bankruptcy.
By doing this, you eliminate the risk that your bank will close your account while you’re still in credit, which could affect outgoings such as your mortgage and other bills.
When debts become significant, a ‘right of offset’ may be applicable, which would allow the bank to take payments from your account for loans, credit cards, etc.
Opening a new account can prevent this, while filing for bankruptcy will mean creditors will stop chasing you for repayments.
2. Check your payments
After changing your bank account, you’ll need to make sure that all of your automatic payments are moved to the new account.
You don’t want any missed payments for your house, car, etc. on your account.
Some banks can change over your payments automatically, but if not, you’ll need to do this yourself by contacting the relevant companies.
Checking through your payments can also help you establish what your outgoings are, enabling you to budget better in the future.
3. Consider cancelling your contracts
After filing for bankruptcy, you’ll want to keep your outgoing to a minimum to help you learn to budget better and to be able to afford to live on what you have.
You should consider cancelling contracts for things like your cell phone before you file for bankruptcy, as the repayments could be included within your bankruptcy term.
If there are costs that you can no longer afford, or things are considered a luxury and not a necessity, you should consider cancelling them.
4. Assess your living expenses
You may be advised to wait to file for bankruptcy in order to make sure you can live off your income.
You need to be able to live within your means for bankruptcy to be effective.
Cutting down your living expenses can help you manage your budget and make sure you’re not spending recklessly.
You should have enough money to live on, as well as put money aside for savings.
Take a look at your outgoings in detail and find the areas you can cut back on to bring down your living costs.
You may even be able to negotiate better rates with your service providers to help you save even more money each month.
5. Consider all of your other options
Bankruptcy is one of several options for dealing with significant debt.
But it also has some of the most serious consequences.
There’s a possibility you could lose your home, and your credit rating will be affected for several years, even after you’re no longer ‘bankrupt’.
Some of the other options available to help you deal with your debts include a debt consolidation loan, a debt management plan or a consumer proposal.
To help you establish which solution is right for you, you should consult a Licensed Insolvency Trustee to help you.
They will be able to assess your situation and make recommendations based on your personal circumstances.
Bankruptcy can seem like a simple solution to your debts, but with serious long-term consequences, it’s important to consider other options first.
Getting help with your debts
Dealing with debt can be stressful and exhausting.
Taking the first steps towards clearing your debts will help you lift a weight off of your shoulders and help you enjoy a fresh start.
If you want to talk to someone about your debts, we can help.
We’ll provide you with a free consultation to help you understand your options so that you can become debt-free.
If you decide to file for bankruptcy, one of our Licensed Insolvency Trustees will be able to action this on your behalf.
Start your debt-free journey today by contacting us on (877) 879-4770.
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