Declaring Bankruptcy: Why It Should Be Your Last Resort
Statistics show that over 125,000 (1) Canadians file for bankruptcy each year.
Furthermore, it will be a very attractive prospect for anyone that is faced with significant debt while thousands will find that it is the best way to draw a line under their past mistakes and start again from the bottom.
Nonetheless, declaring bankruptcy should only ever be used as a last resort.
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Why Bankruptcy Appeals (& Why It Should Be Bottom Of Your List)
When drowning in a sea debt, you will be eager to grab onto any type of floatation device.
Filing for bankruptcy is something that everybody knows about, which is why it is often seen as the go-to solution for finally putting an end to the collection calls, demand letters, and stress of falling deeper and deeper under the weight of compounding interest rates.
In reality, though, filing for bankruptcy is an option that should only be pursued when all other avenues have been ruled out.
Some of the telling reasons to avoid bankruptcy where possible include:
- Filing for bankruptcy doesn’t clear all debts. The monies on secured debts will need to be paid while student loans from the last seven years also require repayment. So, the debt relief and discharge agreements may be far less significant than you’d hoped;
- If secured loans use your property as collateral, you may lose the home as a direct upshot of the bankruptcy;
- When your income levels are high, or you have a significant level of surplus income, the bankruptcy fees are extortionate. As such, filing for bankruptcy may not be the cheapest option despite the fact its lasting impacts are the worst;
- The financial repercussions remain on your file for years while you will be significantly limited during the undischarged bankruptcy era.
Bankruptcy may still be the best solution for individuals in certain situations, but this needs to be confirmed at a consultation for the sake of your financial future and peace of mind.
What Are The Alternatives To Bankruptcy
Before starting any procedures relating to bankruptcy filings, you must first consider a variety of alternative debt relief and financial management strategies.
The key options are as follows:
- Changing your financial situation either through reduced outgoings or increased income. If your financial situation has recently changed due to improved career prospects or you are able to cut some expenses out of your life, temporary hardships could be the key to securing long-term stability;
- Consolidation loans are often able to reduce your overall payments by securing lower interest rates than the existing debts you owe. It additionally helps you clear the debt in a shorter space of time, thus enabling you to move on with your life and put past financial errors behind you;
- Consumer proposals are a growing route to debt relief in Canada. They see a Trustee make a proposal to creditors in which your overall obligations are reduced, and unsecured debts are discharged. It still brings negative fallout, but the impacts are far smaller than a bankruptcy filing.
Bankruptcy may be the best option, but each of the above should take priority where possible.
To discuss your financial situation and debt relief options in further detail, call Bankruptcy Canada on (877) 879-4770.
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