If you are suffering from overwhelming debt, you may find yourself considering bankruptcy. People generally start to consider filing for bankruptcy when they are no longer able to pay their bills on time and are starting to get buried in their debt. While bankruptcy is a viable solution for many, it should always be your last resort. If you’re in a situation where debt has taken over, make sure to talk to an advisor about what your options are. Read on as we dive deeper into the details of personal bankruptcy.
What is Personal Bankruptcy?
Personal bankruptcy is a legal process, that is governed by federal law. When you declare bankruptcy, you effectively surrender everything you own to a Licensed Insolvency Trustee in exchange for the elimination of your debts.
Pros of Declaring Personal Bankruptcy
Filing for bankruptcy, while an extreme measure, does offer a number of advantages:
- protects you from collectors taking legal action
- eliminated debts
- can be filed relatively quickly
Cons of Declaring Personal Bankruptcy
Filing for bankruptcy shouldn’t be thought of as a quick and painless solution. It comes with its fair share of disadvantages, such as:
- it’s hard on your credit score
- it may require you to surrender some or all of your possessions to your trustee
- it requires you to keep detailed records while you’re in bankruptcy
Alternatives to Personal Bankruptcy
As stated earlier, filing for bankruptcy should be your last resort. There are several alternatives that you should explore with a trusted advisor before you decide to declare bankruptcy. Some of the alternatives include:
- a debt consolidation loan
- credit counselling
- a consumer proposal to creditors
How To Declare Personal Bankruptcy
If you are considering declaring personal bankruptcy, here are a few of the steps you’ll need to take:
- Select a licensed trustee to help you handle your affairs. Look for a trustee who you are comfortable with and that is easily accessible. You’ll also want to confirm that they are licensed by the Office of the Superintendent of Bankruptcy Canada (OSB).
- Discuss your options. Chat with your trustee to see if there are any other options out there to help you manage your debt.
- File the paperwork. If you and your trustee have decided that filing for bankruptcy is the best option, it’s time to your file and process the required paperwork. Your trustee will submit this paperwork on your behalf.
- Stay on track. During bankruptcy, you will be required to keep detailed reports of income, as well as attend credit counselling sessions.
Liu & Associates Can Help
If debt has taken over your life, talk to an expert at Liu & Associates. Our team can help discuss your debt management options and assist you in filing for bankruptcy if applicable.