Bankruptcy is seen as the last resort by many people in need of financial help.
It is a dramatic step to take, completely altering your financial life.
Did you know that bankruptcy stays on your credit report for 6 years, even after you’ve been discharged?
This can severely impact your life, which is why many people are advised to avoid it at all costs.
With that in mind, you may assume that you need a substantial amount of debt to file for bankruptcy in Canada.
Truthfully, the laws state that you only need $1,000 of debt.
If you owe this amount – or more – you can trigger bankruptcy proceedings and clear your debts.
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Does it make sense to go bankrupt?
You may look at that figure and realize that you have at least $1,000 in debt.
Does this mean you should file bankruptcy in Canada?
The answer is not crystal clear as it really depends on the individual.
In most cases, $1,000 is not enough of an issue to file bankruptcy.
You have to be in a very bad financial situation, probably with no source of income, a family to feed, and so on.
For the majority of people with this much debt, other solutions can be found.
If you’re struggling to make repayments, a debt restructuring plan can be looked at.
Similarly, a debt consolidation loan can pay off the debt and give you a more manageable loan to deal with.
Ultimately, you have to compare the costs of bankruptcy with the costs of dealing with debts in other ways.
Bankruptcy is not a free service.
In Canada, the cost varies depending on how much work needs to be done.
The absolute minimum fee is $1,800, which can be split across 9 months into payments of $200.
Instantly, you can see that paying for bankruptcy would cost more than paying your $1,000 debt.
Plus, factor in the impact this has on your credit score.
It stays with you for 6 years, inhibiting the ability to apply for credit.
Any plans you had to buy a house are suddenly put on hold as most mortgage lenders won’t approve applications with a bankruptcy on them.
When is bankruptcy recommended?
Usually, bankruptcy is only recommended if your debts have reached an unmanageable point.
If they keep growing in size, and you can’t keep up with your payments, bankruptcy might be the only option.
Especially if you have attempted other debt-relief solutions and seen no success.
So, it only takes $1,000 of debt to file bankruptcy in Canada, but this isn’t the main reason to go through with the process.
Instead, it’s more to do with how manageable or uncontrollable your debts are.
Contact us for debt-relief solutions
If you’re worried about your debts, you should take action right away.
The sooner you address the situation, the sooner you can get out of the debt spiral.
We offer a range of debt-relief solutions tailored to your individual requirements.
All of the different options will be discussed during a consultation.
Call us now – or fill in an evaluation form – to book your appointment.
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?