If you have serious debt problems, will declaring bankruptcy solve them?
This is a question we often receive from Canadians with money issues.
Bankruptcy is a topic that most people have a very basic understanding of.
You may understand the gist of declaring bankruptcy, but how will this affect your debts and your future?
What is bankruptcy?
Bankruptcy is a legal process that can help you eliminate unsecured debt.
As such, it can technically be seen as a way of dealing with your debts.
By going bankrupt, you will be released from your obligations and have a chance to start afresh.
However, there are some caveats to consider:
The cost of bankruptcy
Bankruptcy isn’t free – there are fees to pay and other payments you have to make.
If you earn over a certain monthly threshold, you have to make surplus payments each month.
Additionally, if you have a lot of assets, you may be forced to sell them or pay more money into your bankruptcy estate.
This comes on top of the monthly fees to your insolvency trustee for managing the bankruptcy.
When you’re heavily in debt with minimal assets and an average income, the cost of bankruptcy could be in your favour.
That is, it will be worth paying it as it helps you get rid of your debts.
But, in some cases, the costs are too high and don’t make sense for you to pay.
The reason for your debts
Secondly, bankruptcy doesn’t take into account the reason for your debts.
Why are you in debt?
What made you owe so much money?
Yes, you could clear your unsecured debts with bankruptcy, but who’s to say you won’t end up in another debt spiral afterwards?
If you don’t tackle the problems that led to your debt, you will never be free from it.
Secured debt
Lastly, bankruptcy doesn’t deal with secured debts.
It also won’t get rid of student debt if it’s been less than 7 years since you graduated.
So, if these are your main debt issues, bankruptcy is unlikely to help that much.
Focus on the cause of your debts!
Declaring bankruptcy can wipe out some debts, but it is far from the complete solution.
If you want to get rid of your debt problems, you must focus on the cause.
Learn how to manage your finances and be a responsible borrower.
Budget your money and stay on top of your essential payments.
All of this can help you pay off your debts and avoid future financial issues.
It’s also worth checking out other debt-relief options – like debt consolidation or debt restructuring – before going straight to bankruptcy.
If you do declare bankruptcy, you still have to work on managing your money and addressing why you fell into a debt trap.
This stops you from making the same mistakes once you’ve been discharged.
Contact us today for debt relief advice
We will help you break free from your debt spiral and bring some financial stability to your life.
Contact us today to schedule a consultation, and we can analyze your finances to figure out the best course of action.
Call now, or fill in our online evaluation form!
Canadian Bankruptcies
How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
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?
