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Insolvency refers to a financial state where an individual (or business) can no longer meet their debt obligations. This typically happens when liabilities exceed assets, meaning you owe more than you own and are unable to pay your debts on time.
Insolvency can affect both your credit rating and your ability to obtain future loans, leading to increased financial stress. However, insolvency is not the end. There are several legal and financial pathways to manage insolvency, such as debt consolidation, consumer proposals, or filing for bankruptcy. These solutions offer a structured way to regain control over your finances, allowing you to either reduce or eliminate your debts over time while protecting yourself from creditor actions like lawsuits and wage garnishments.
Determining whether you're insolvent is a case of assessing your financial situation. Key indicators include:
If any of these issues apply to you, it may be time to consult with a Licensed Insolvency Trustee at your local MNP LTD office. We can help you evaluate your options and develop a strategy to overcome your financial challenges.
Becoming solvent again means taking control of your debt and financial situation. There are several options to help you achieve this, depending on your unique circumstances. Some approaches provide immediate relief, while others offer long-term solutions for debt repayment.
It’s important to choose the right method for your situation and seek guidance from a Licensed Insolvency Trustee or financial professional to explore your options, whether it’s through a legal process like bankruptcy or a financial strategy like debt consolidation.
If you’re struggling with debt but also have assets you wish to keep, a consumer proposal might be the life-changing debt solution you’re looking for.
View Consumer ProposalYou may be able to combine multiple debts into one overall loan—provided by your bank or financial institution—to make budgeting for repayment easier.
View Debt ConsolidationBankruptcy is a legal process that provides immediate relief from your unsecured debts, such as credit card debt, but it’s not necessarily an all-encompassing solution.
View Personal BankruptcyThough both terms deal with excessive debts, insolvency is a state that can lead to declaring bankruptcy. In very simple terms, an individual becomes insolvent when he or she is unable to pay back lenders on time.
Although filing for bankruptcy is a possible resolution for insolvency, this type of situation does not automatically lead to bankruptcy. Depending on your circumstances, you may be able to address your insolvency by other means, such as making a consumer proposal or taking out a debt consolidation loan.
In very simple terms, you are insolvent if your debts exceed your assets in value. To calculate this, make a list of every debt you owe including loans and credit cards. Add up these debts to get your total in liabilities. Then make a list of assets including savings accounts, stocks, property, and more—using their fair market value rather than what you paid for them. Compare these two values to see if you are insolvent.
People often get the terms bankruptcy and insolvency mixed up. Insolvency is a financial condition, not a legal declaration like bankruptcy. However, if you are insolvent, there are other ways to take care of your debts before you consider declaring bankruptcy.
You can first see if there is anything you can do in your current situation to get out of debt, such as going on a strict budget or getting an extra job for more income.
If your situation is past your control, there are still other debt solutions that your Licensed Insolvency Trustee can recommend based on your unique situation. For instance, you may choose to negotiate paying a portion of your debt by making a consumer proposal—or you may be able to consolidate your debt into one monthly payment at a reduced interest rate, which will keep your credit score intact.
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