Is filing for personal Bankruptcy your best option?

If you’re struggling to maintain minimum monthly debt payments or don’t see yourself ever getting out of debt on your own, you may consider filing a Bankruptcy.

Perhaps you heard about Bankruptcy in the media, came across it in your online search for debt solutions — or had a friend or colleague tell you it is the quickest and easiest way to get out of debt. 

What you might not have heard is Bankruptcy is not the first option Licensed Insolvency Trustees (LIT) will recommend, nor is it always the best option for dealing with your debt. In fact, Bankruptcy should be your last course of action after exhausting other available avenues.

To determine your best path forward, following are some questions and factors you would discuss with an LIT during a Free Confidential Consultation:

What are your options?

When you meet with the LIT, you will review your financial situation, challenges and goals, discuss the options available and learn about the benefits and detriments of each.

Depending on the extent of your debt, how much you earn, and your personal and financial goals — the right solution to your debt problems could be a combination of:

Budgeting — A monthly financial plan to help balance and monitor your income and expenses, and potentially free up more cash to pay down your debts.

Refinancing — Re-negotiating the term and interest rate on your existing credit accounts to reduce the monthly cost of your debts and make them easier to repay.

Liquidating — Selling high-value assets such as vehicles, recreational properties, sporting goods and jewellery to provide the financing you need to pay down your debts.

Consolidating ­— Combining all your debts into a single monthly payment with a lower average interest rate to reduce the number of payments you make and their total cost.

Credit counselling — Working with a non-profit debt professional to negotiate a non-legally binding payment arrangement with your creditors.

Consumer Proposal — Working with a LIT to negotiate a legally binding debt settlement with your creditors that will reduce the amount you owe, and which you can take up to five years to repay.

What is your current situation?

If you don’t qualify for debt consolidation or refinancing, you may considering fling Bankruptcy or a Consumer Proposal. The LIT will ask specific questions about your situation which will help to determine which option is the best path forward.

• Is your income steady, seasonal, low, fixed?
• Do you have liquid assets?
• Have your bank accounts been frozen?
• Do you have equity in your car or your house?
• Have you been turned down for financing recently?
• Have your creditors sent you to collections or sued you?

When would you file for a Bankruptcy?

Bankruptcy may be the right choice if you:

• Have had your wages garnished
• Are unable to make your credit card and loan payments on time
• Owe more money than the value of things you own (after deducting secured credit lines and provincial exemptions)

We’ve put together a video overview of personal Bankruptcy to help you better understand the process and what it would require from you. 

When would you file a Consumer Proposal?

A Consumer Proposal may be the right choice if you:

• Owe unsecured debt which totals less than $250,000*
• Need more time or a realistic plan to pay back your debts
• Want relief from accumulating interest and wage garnishments
• Want to keep assets you might lose in a Bankruptcy

We’ve put together a video overview of Consumer Proposals to help you better understand the process and what it would require from you.  

* Note: Other options exist if you owe more than $250,000.

Is bankruptcy a common solution?

According to the Insolvency Statistics in Canada reported by the Office of the Superintendent of Bankruptcy, the annual insolvency rates have been dropping year over year since 2016. The type of insolvency filings has also been changing. More consumers are choosing to file Consumer Proposals rather than Bankruptcy.

In British Columbia more than 63 percent of consumer insolvency filings between May 1, 2019 and April 30, 2020 were Consumer Proposals. Only 47 percent of were Bankruptcies.

Contact a Licensed Insolvency Trustee today

No matter what solution you may be considering to overcome your debt, schedule a Free Confidential Consultation with an LIT before making any life-changing decisions.

Whether you would benefit from a Bankruptcy, Consumer Proposal or any of the other options discussed above, an LIT will provide an unbiased opinion about your best path forward — and ensure you have all the information you need to make the most informed choice possible.

Everyone’s debt situation is different, so don’t just rely on what people have told you or what you’ve read online. Contact MNP today to find the solution that works best for you and find the permanent financial fresh start you deserve.