If you were to be asked, “how can you break the debt cycle?” your answer would likely not be, “file for bankruptcy.”
But for some people, that’s exactly how you can break out of debt, and how you can get back on track.
When you’re constantly trying to pay back bills you can’t afford, and settle your payments month after month, only to have your wages garnished for other overdue credit, it’s hard to realize that yes, there really is a way to get out of it.
By claiming bankruptcy, many of your debts are erased, and over time, you can build your credit back up so you can live within your means.
A family in Burlington did just that.
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When Sarah and Allen* came into one of Bankruptcy Canada’s offices in Ontario, they didn’t think they’d be able to change their lives.
The family of five had incurred high-interest credit card debt, and when Allen lost his job due to a company-wide layoff, things got tricky.
More and more debt was piled on to various credit cards as they made their mortgage payments and keep their heads above water.
By the time Allen was able to go back to work, the family was unable to pay the minimum monthly payments of over $1,000 on their credit cards, while still pay for everything else.
Sometimes, life comes at you hard.
Stop the stigma of bankruptcy
One of Allen’s first questions, when he met with one of our financial experts, was, “How can we file for bankruptcy if we’re both receiving an income?
Will it even be possible?”
In Ontario, you’re still able to file for bankruptcy when receiving an income if you’re financially insolvent.
The most ideal scenario for claiming bankruptcy is to continue making a living so you have a way to live relatively normally.
If you make beyond a certain amount, your bankruptcy will be prolonged over 21 months while you make smaller payments towards your debt.
In Sarah and Allen’s case, they had been making regular payments on their mortgage and their car loan, so the goal was to reduce the amount of credit card debt to pay down.
Our Licensed Insolvency Trustee examined their finances and realized that they had been living beyond their means, but not drastically so.
Mortgage payments were up to date, and there was equity in their RV and boat, though neither were paid off fully,
Our financial experts worked with them to file for bankruptcy while helping them maintain their home and vehicle.
Their boat and RV were taken as assets, but they were able to keep a roof above their family’s heads, as well as many of their assets.
Bankruptcy allows you to save money
Once Sarah and Allen declared bankruptcy, their monthly payments were reduced to $250 dollars a month, for 21 months.
Before, they were barely treading water to pay $1,000 towards their credit card bills, so the change is significant.
They are able to put more towards savings in case either of them loses their jobs in the future.
They continue to live in their home and have a car they continue to make on-time payments on.
Declaring bankruptcy does not mean you’re giving up all your assets; in the case of Allen and Sarah, their lives were drastically changed by declaring bankruptcy.
They are able to put money towards savings, and they have broken the debt cycle.
Now, when we meet with the Burlington couple, the dread that they had when they came into our office is replaced with a sense of ease.
*names have been changed for confidentiality
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Personal Bankruptcy in Canada
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