The majority of people will experience financial hardship in some form during their life. From unexpected career issues, life changes or a medical expense can cause financial struggles no matter how financially conservative a person is. Although other available options need to be considered first, bankruptcy is there when everything else fails to work. This approach provides a measure of protection for individuals recovering from a major financial hardship.
However, those going through financial hardships typically have better debt settlement alternatives before bankruptcy is filed. Canada offers many different legal options for people who are going through money issues, such as debt consolidation, debt settlement, consumer proposals and credit counselling. These are available options that help those needing help to reduce debt, or lower damages to their credit history. There are different benefits and disadvantages to each option, and not every option will be suitable for every situation.
While debt problems can easily become hard to manage, reaching the point when bankruptcy protection is required, is rare in Canada. Residents are generally qualified for other options first. For instance, a viable credit rating is enough to qualify for debt consolidation that will provide smaller payments while paying other debts off.
A consumer proposal helps you negotiate to lower total debt while reducing monthly payments when total debt is between $5,000 to $250,000. Although, these alternatives to bankruptcy still requires you to have the ability to repay some amount each month towards the debt. Therefore, when debt becomes overwhelming or multiple delinquencies are stacking up, a formal insolvency proceeding would be your last resort.
If filing for bankruptcy becomes your only option for getting out of debt, there are things to know regarding the process. First, it is a quick way to become debt free and allowing more money to be available for other things, but bankruptcy comes at a considerable cost. When declaring bankruptcy, you always need to go through a licensed trustee. This is an individual who obtained licensing from a Superintendent in Bankruptcy, according to the bankruptcy and Insolvency Act in Canada.
All assets that are legally available t be liquidated will be determined by the trustee in charge. All assets that are not protected under federal law will be sold to help cover debt. In addition, the individual declaring bankruptcy will be required to send the trustee regular payments. This money is sent to creditors as an attempt to meet the financial obligations of the individual quickly as possible. It is important to understand, the trustee is on the creditors side, which means they are looking out for those you owe.
Destroying your credit history and losing all unprotected assets is a major decision. That is why bankruptcy information is publicly available as it can have a negative impact on a credit score for 14 years. Depending on the situation, individuals may be required to surrender or sell the asset that is subject to repossession. Although, certain essential assets are protected under Canadian law, if the reason for declaring bankruptcy meets the criteria. Furthermore, in rare cases, individuals may be penalized or fined by the court if they committed an offense during or just prior to the bankruptcy proceedings.
Canadian personal bankruptcy laws allow individuals to fully eliminate major debts to become debt free. However, bankruptcy in Canada has serious consequences that can last over a decade, and be hard to accept and overcome. Although, when an individual accepts the negative consequences, it is often to avoid repossession, foreclosure or other major financial issues. In these situations, not having the ability to qualify for a traditional, car, or home loan may seem to be a small price for achieving financial freedom.
Before filing for bankruptcy, always ensure you have considered all other options first. You should always avoid going bankrupt when possible. To learn more about bankruptcy, fill out this debt relief form.
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