Bankruptcy Information in Surrey, BC
What happens when you can no longer pay your debts?
You struggle to pay your monthly bills, have loans and credit card balances to pay, and everything mounts on top of one another.
It creates a nasty pile of debt that can’t even begin to reduce.
You’ve exhausted all of your options, so what’s the next step to take?
For some of you, bankruptcy might be the best solution.
We provide bankruptcy services in Surrey and can help you through the process.
Before you jump to this decision, you must know all the relevant bankruptcy info and alternatives.
Who knows, there could be an option out there that helps you avoid filing for bankruptcy altogether.
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What is bankruptcy?
Bankruptcy is a viable solution when you can’t pay your debts.
However, it should usually be considered in ‘worst-case’ scenarios.
Nobody wants to file for personal bankruptcy.
It is a less than desirable position to be in.
Nevertheless, it is the only option for some individuals.
When you become bankrupt, you default all of your unsecured debts.
This means that they are basically wiped out.
You no longer have to pay them, you’re no longer in the claws of creditors, and you can start afresh.
Typically, you will have to pay something to your creditors.
This may include selling your assets and finding ways to generate as much money as possible.
But, you will pay a lot less than if you had to repay all the debts in full.
How does bankruptcy work?
Bankruptcy is typically a process that can last anywhere between 9 and 36 months.
If this is your first time declaring bankruptcy, you can be discharged within 9 months.
This means you’re able to get on with your life and start rebuilding credit.
The process begins when you consult with a Licensed Insolvency Trustee.
You can only file for bankruptcy with an LIT, this is the law in Canada.
From here, you can get all the paperwork drawn up and submitted.
The next step involves selling your assets to raise money for your creditors.
From here, creditors are informed of your decision.
You may have to attend meetings with them where the situation is discussed.
However, most of your creditors should already be aware you’re planning on filing for bankruptcy, and we will explain why when looking at the alternatives to this decision.
After this, you are legally obliged to attend two bankruptcy counselling sessions.
In short, these sessions are designed to give you financial advice.
They help you avoid getting into money problems in the future.
As such, you should never need to declare bankruptcy again.
This is followed by reporting to an OSB – the individual responsible for regulating insolvencies.
If they are satisfied that you’ve met your obligations, you are granted your discharge.
From here, you can start building your credit back up and starting fresh.
Be warned that bankruptcy stays on your credit report for the next 6 years.
This doesn’t make it impossible to improve your credit, but it does act as a black mark of sorts if you need to borrow money.
What debts aren’t included in bankruptcy?
When you declare bankruptcy, the majority of your unsecured debts default.
However, some debts may survive.
This means you need to repay them, even if your other ones have been wiped out.
Typically, three different types of debt aren’t part of your bankruptcy:
- Secured debts – this includes any debts where you’ve used an asset as collateral against the loan. A mortgage is a great example.
- Student loans – if you have a student loan, and you graduated within the last 7 years, your debt isn’t covered. Student loans are online included when they are over 7 years old.
- Any child or alimony support payments
Should you file for bankruptcy?
Ideally, you should avoid bankruptcy at all costs.
Nobody wants to go through the stress that this process entails.
Yes, you can be free from your debts, but it still impacts your life a lot.
You may need to sell your home and completely restructure your life.
Not only that, but you have the 6-year black mark on your credit report.
Instead, it is better to pursue some bankruptcy alternatives before you take the plunge.
It may surprise you how many options are at your disposal.
If you’re considering bankruptcy, this suggests you’re struggling to pay your debts.
It means you keep missing repayments and can’t find a way to pay what you owe.
So, here are 4 alternatives for you to consider:
Debt consolidation loans
A consolidation loan is one that’s used to group all of your debts together.
Instead of owing numerous creditors, you only owe the loan provider.
This is a smart way of transferring your debts to an easily manageable loan.
You will still pay everyone, it just becomes far simpler for you to deal with all your payments.
As an example, owing to multiple creditors can lead to lots of different interest rates and fees.
It ends up costing a lot of money, which is why you’re struggling to pay your debts.
A debt consolidation loan may offer 0% interest for a period, or a very low rate at the least.
This instantly makes it easier to repay.
Plus, you will be put on a payment plan that suits your budget.
Your creditors get paid with the funds from your loan, and you have fewer things to worry about.
Debt management plans
If you don’t want to take out a loan or borrow more money, a debt management plan may suit you better.
With this option, you negotiate with creditors.
The idea is that you come to an agreement that restructures your debts.
This typically includes removing interest payments or extending your loan length.
In turn, you benefit by having more favourable terms to adhere to.
Your monthly payments can decrease and be spread over a longer duration with lower interest rates.
Suddenly, you can actually keep up with repayments and get rid of this debt without incurring any extra charges.
Normally, this option works best when you have a few debts to pay.
The more creditors on your back, the harder it is to negotiate with each of them.
A debt settlement follows a similar route in that you negotiate with creditors.
The difference is that you settle on a figure that you can feasibly pay.
Some of you simply can’t repay the debts you have.
But, you’re willing to offer what you can, which is where a debt settlement comes in.
The process is fairly straightforward.
You negotiate with creditors and agree on a lump sum of money to pay them.
They get this money, and the debts are paid.
You may think this idea won’t work as your creditors lose a lot of money.
That’s true, but the alternative to this is bankruptcy.
In some cases, creditors will get a lot less from bankruptcy than they would if they agreed to a settlement.
Therefore, it’s well worth pursuing this route to test the waters.
Like bankruptcy, consumer proposals are a legal option.
In effect, this is similar to a debt settlement.
You will only pay a portion of your debts back, based on what you can afford.
There are a few key differences:
- A consumer proposal is a legal process whereas a debt settlement is not;
- You will make monthly payments with a consumer proposal instead of a lump sum;
- Your credit score is affected by a consumer proposal.
The last point is well worth noting.
A consumer proposal will stay on your credit report for 3 years.
While this isn’t ideal, it is still half as long as bankruptcy stays there.
So, it still remains a better alternative to bankruptcy.
Which option is right for you?
Truthfully, it all depends on your debts.
If you are heavily in debt to just one creditor, then a debt settlement or debt management plan could help you out.
If you are in debt to numerous creditors, a debt consolidation loan may be your best bet.
Still, if you’re so heavily in debt that you can’t afford to pay everyone, a consumer proposal can come in and provide one last chance before bankruptcy.
Of course, if all of these options fail, you have one choice left.
That’s right, you’ll need to declare bankruptcy to default your debts.
Hopefully, all of this information has shown you that bankruptcy shouldn’t be your first thought.
Explore the alternatives and only declare bankruptcy if it’s absolutely necessary.
Call us for debt-relief help today!
We offer a range of debt-relief services related to all of the above.
If you’re struggling, we can help you with everything from debt consolidation loans to filing for bankruptcy.
Call us today, or fill in our online evaluation form, and we can book a consultation ASAP.
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?