Most people have debts of some kind.
From mortgages to credit cards and personal loans, borrowing money helps us to spread the cost of larger expenses or things that we might not be able to pay for in one go.
A certain amount of debt can be healthy for your finances, especially if you are trying to improve your credit score.
However, does getting into debt inevitably cause problems?
How often does it lead to bankruptcy?
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In Canada, the average household debt ratio is 176.9%, according to Statistics Canada.
This means that there is $1.77 in credit market debt for every dollar of household disposable income.
With levels of debt already high for the average Canadian, it’s also important to take rising interest rates into account.
When interest rates rise, repayments for debts rise with them.
This could mean that people find themselves owing hundreds of dollars more each month.
Many Canadians already live paycheck-to-paycheck, and they could find themselves struggling even more if their payments increase.
When debts start to get out of control, it could lead to bankruptcy.
Bankruptcy offers an option to eliminate most debts, allowing people to start over.
However, it shouldn’t be the first choice for people who want to deal with their debt.
It’s something to consider after exploring other methods of managing debts.
Having debts certainly doesn’t have to lead to bankruptcy, there are other options that help people to avoid bankruptcy and get their debts under control before bankruptcy becomes a necessity.
Even for those who are considering bankruptcy, there are alternatives to consider, such as consumer proposals.
If you are worried that your debts are overwhelming you, it’s best to try and tackle them sooner rather than later.
You don’t want to wait until interest rates have risen, when your debts could become even more difficult to deal with.
There are many ways to address your debts, from creating a budget to seeing a credit counsellor and talking to a Licensed Insolvency Trustee.
A trustee can help you to explore which debt solution options are available and which might be the most suitable option for your circumstances.
High levels of debt could result in bankruptcy if things get out of your control.
However, bankruptcy is definitely not inevitable, even if you have a lot of debt to contend with.
You can look for ways to deal with your debts that allow you to avoid bankruptcy and get your finances in order.
However, if you do decide that bankruptcy is the right option for you, a trustee can help you to ensure it’s the best step and complete the process of filing bankruptcy for you.
We can help you find a trustee to get the advice that you need.
How to File for Bankruptcy
What is Bankruptcy?
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?