If you don't have money to pay off your debts, you have some options. One is to contact your creditors and explain your situation. They may be willing to work with you to create a payment plan that fits your budget. Another option is to seek help from a credit counseling agency. Credit counselors can work with you to create a budget and help you develop a plan to pay off your debts over time. But be aware that you will have to repay all of your debts.
If you are unable to repay your debts, you may consider a consumer proposal or bankruptcy. These federally regulated programs will reduce the amount of debt you owe and give you a fresh start. It is important to consult a Licensed Insolvency Trustee to explore all your options.
The costs of filing for bankruptcy are determined by the Office of the Superintendent of Bankruptcy Canada. The minimum cost is $1,800 for a first request. This cost can be spread over installments of $200 over a 9-month period. These costs can increase with additional administration, postage and trustee time, which are also regulated by the federal government of Canada.
It is important to note that the cost of a bankruptcy can vary depending on individual circumstances, such as the amount of debt owed, the complexity of the file and the debtor's income. The more you earn, the higher your monthly payments will be. These amounts are also regulated by the federal government and are called surplus income payments.
All bankruptcy trustees, i.e. licensed insolvency trustees, offer a free first meeting that allows you to review your budget, financial obligations and debts with a licensed professional. During this meeting you have the opportunity to explore all the debt solutions available to you, ask all the questions you want and decide if you want to work with the person or the company advising you.
Be aware that a declaration of bankruptcy lasts at least 9 months, and a consumer proposal can last up to 5 years. It is therefore important to have a good relationship with your trustee, as they will be the one who will help you rebuild your financial health. If they listen to you with empathy, explain things clearly and give you realistic expectations, these are very good signs.
In Canada, there are certain types of debt that are not covered by bankruptcy. Although bankruptcy can free you from your unsecured debts, such as credit card or line of credit debts and even tax debts, there are exceptions. Here what those are:
Secured debt: These are loans that are secured by some type of asset, called collateral. Examples include your mortgage or a secured car loan. You cannot include secured debts in bankruptcy. If you want to keep the property, you must continue to make payments on the loan or negotiate a payment plan with the lender.
Student loans: if your student loans are less than 7 years old, they will not be covered in the event of bankruptcy. You will still be responsible for paying them back. If your student loans are over 7 years old, you may be able to include them in bankruptcy.
Court fines and penalties: Debts owed to the government, including court fines and penalties, cannot be canceled in the event of bankruptcy. You will still be responsible for paying them.
Child support and alimony: Family responsibility arrears, including child support and alimony, cannot be discharged in bankruptcy. You will still be responsible for paying them.
It is important to note that the rules regarding which debts can and cannot be discharged in bankruptcy can be complex and may vary depending on individual circumstances. It is recommended that you consult with a Licensed Insolvency Trustee to discuss all the options available to manage your debt.
A consumer proposal and bankruptcy are two deleveraging options available to Canadians struggling with their finances. Here are some differences between the two:
Debt repayment: In a consumer proposal, you offer your creditors to pay off part of your debt over a set period, usually up to five years. In the event of bankruptcy, your assets are liquidated to pay off your creditors and you are released from most of your unsecured debts.
Asset Protection: In a consumer proposal, you keep your assets, including your home and car, as long as you continue to make payments on them. In the event of bankruptcy, some of your assets may be sold to pay off your creditors, although there are exemptions for certain assets, such as your primary residence and personal effects.
Credit score: A consumer proposal and bankruptcy will negatively impact your credit score. However, a consumer proposal is generally considered less serious than bankruptcy and may be easier to recover in the long run.
It is important to note that the decision to file a consumer proposal or declare bankruptcy must be made after careful consideration of your personal situation and with the assistance of a Licensed Insolvency Trustee.
The duration of a bankruptcy in Canada varies according to individual circumstances. For a first bankruptcy that has no excess income payments, the bankruptcy will last at least 9 months. However, if the person has required surplus income payments, the bankruptcy will last a minimum of 21 months, unless the court imposes a longer duration.
For a person who files for bankruptcy a second time and has no surplus income payments, the bankruptcy will last at least 24 months before being eligible for discharge.
It is important to note that the duration of a bankruptcy can also be affected by other factors, such as the completion of the required tasks, the complexity of the case and the intervention of the court.
Check your credit report: After your bankruptcy is discharged, make sure that all debts included in the bankruptcy are marked "included in bankruptcy" and have a balance of $0. If there are any errors, you can dispute them with the credit bureau.
Apply for a secured credit card: A secured credit card requires a security deposit, which becomes your credit limit. By using a secured credit card responsibly and making your payments on time, you can begin to rebuild your credit.
Make payments on time: Pay all your bills on time, including credit cards, loans, and utilities. Late payments can negatively impact your credit score.
Keep your credit utilization low: Your credit utilization is the amount of credit you use against your credit limit. Try to keep your credit utilization below 30% to improve your credit score.
Regulate your credit applications: Applying for too much credit at once can negatively impact your credit score.
Be patient: rebuilding your credit after bankruptcy takes time. It is important to note that you should always consult a Licensed Insolvency Trustee before taking steps to rebuild your credit after bankruptcy.