Many struggling with debt ask if filing bankruptcy is the right thing to do, but it entirely depends on personal financial circumstances. By understanding the advantages of filing bankruptcy in Canada, it makes it easier to assess if it is the right thing for you to explore with a Licensed Insolvency Trustee. As a Canadian bankruptcy trustee firm, Spergel has over 30 years’ experience of helping more than 100,000 individuals become debt free.
How does filing bankruptcy help you?
There are a number of key advantages of filing bankruptcy in Canada:
Peace of mind
There are not many worse feelings than financial burden. Whether it is the overwhelming stress of unmanageable debt or the sheer anxiety of not knowing where to turn, filing bankruptcy will most likely make you feel better. Filing bankruptcy is not a process that should be taken on lightly, but it can be incredibly empowering to begin a fresh financial start free from creditors and debts.
A ‘stay of proceedings’
Because filing bankruptcy is a legal process, a ‘stay of proceedings’ is automatically generated. This means that creditors can no longer contact you or enforce legal action against you for owing unsecured debt. Instead, you are protected by the law with your Licensed Insolvency Trustee acting as a mediator. Learn more about the debts covered by bankruptcy.
A countdown to debt freedom
Most first time bankruptcies are discharged within either nine or twenty one months, meaning you have an indication of when your debt relief will be official. Filing bankruptcy is a relatively straightforward process, and most debtors filing for the first time without surplus income will be automatically discharged within nine months.
Cost not associated to debt amount
The cost of filing bankruptcy is not in any way associated with the amount you owe. Instead, the cost is attributed to a few simple factors including household income, assets, and expenses. For many debtors in Canada, bankruptcy costs around $200 per month for nine months, irrelevant of the amount of debt owed. Generally speaking, it is the lowest cost option of debt relief, particularly for those with non-exempt assets and without surplus income. Learn more about the effects of bankruptcy on assets.
What advantages does bankruptcy have over debt relief alternatives?
For alternative forms of debt relief like debt consolidation, creditors are actually permitted to refuse taking part. This can have consequences in your entire debt relief plan. The main advantage of filing bankruptcy is that it includes all unsecured debts. This means that under no circumstances are creditors able to refuse compliance. This in turn provides huge reassurance for those with unsecured debts. As bankruptcy is a universal concept across Canada and runs through the Office of the Superintendent of Bankruptcy, it is fully legally reinforced.
What can bankruptcy not do for you?
Bankruptcy is no mean feat, and should be considered after all other alternative methods of debt relief. In fact, bankruptcy has a number of down sides which should be considered before taking on the process of filing bankruptcy. The disadvantages of filing bankruptcy include the following:
Bankruptcy does not cover all debts
There are a number of exceptional debts that are not covered by filing bankruptcy. These include secured debts like mortgages, as well as child support, fines, alimony, and some student loans – the latter of which can only be covered after seven years. Discover more about which debts are covered by bankruptcy in Canada.
Credit report impact
When filing bankruptcy, all credit cards will need to be surrendered. You will also have a record of bankruptcy declaration on your credit report, which will remain for six years after being discharged of debts. A reputable Licensed Insolvency Trustee can help you in the process of applying for a secured credit card after bankruptcy.
Potential impact on employment
Depending on your role, if you are in a position of responsibility when it comes to managing money or trust funds, filing bankruptcy may affect your employment. You are also void of becoming a company director while bankrupt.
Non-exempt assets must be surrendered
Assets and bankruptcy is a topic that must be considered when it comes to debt relief. If you have many non-exempt assets, an alternative form of debt relief like consumer proposal may be more beneficial. Equity from property, investments, and tax refunds may all be lost when filing bankruptcy, as this value will need to be reassigned to creditors by a Licensed Insolvency Trustee.
Is it a good idea to file bankruptcy?
Filing bankruptcy is a personal choice, and entirely dependent on the unique financial circumstances of each and every individual. Ultimately, the best thing to do is assess the advantages and disadvantages of filing bankruptcy, and to weigh up the option against alternatives including consumer proposal and debt consolidation. It is also advisable to speak to a reputable bankruptcy trustee firm to make an informed decision on your best financial pathway.
Book a free consultation
At Spergel, one of our experienced Licensed Insolvency Trustees will walk you through all you need to know about the advantages of filing bankruptcy, as well as alternatives to bankruptcy. Book your free consultation today.