Is Declaring Bankruptcy Your Next Step?
Declaring Personal Bankruptcy in Ontario
Are you drowning in debt?Declaring personal bankruptcymight look like your only option, but it can be hard to know when it’s time to admit you need help .
Bankruptcy can happen to anyone. Regardless of your income, your job, or your family status, you could still fall victim to crushing debt.
When is Declaring Personal Bankruptcy Really Necessary?
How do you knowwhen it’s necessary to file for bankruptcy?Sometimes it’s a matter of being unaware of the alternatives. Make sure that you have explored all of your possible options with your trustee before you decide that bankruptcy is your final answer.
If you’ve been bankrupt before, consider these options before doing so again asa second bankruptcylasts much longer and costs more money.
If your debt is below $250,000 you might be able to qualify for a consumer proposal . This is available to individuals and would allow you to work with a licensed insolvency trustee torepay your debts over a period of time.
If you are a business, you might be eligible for a Commercial proposal , which would allow you to keep your assets while working with a licensed insolvency trustee. With this option,you could extend the time to repay your loanor agree on a percentage of what you owe that is paid to your creditors.
When you do not qualify for these options, or any others recommended by your trustee , it is time to consider the reality that bankruptcy is the only way you are going to get out of debt fast enough to get the financial stability you desire.
Common Causes for Declaring Bankruptcy
It may be necessary to file for bankruptcy when you have found no other way to pay your debts.If you need to get out of debt fast, this might be your only option.
The three most common reasons for filing for bankruptcy aresmall business failures,marital breakdown, anddisruption of employment.
1.Small business failuresare a common factor for declaring bankruptcy. In Canada, small businesses make up 70 percent of the private employment sector. Over 1 million people are employed by these businesses over all industries, from construction companies to restaurants.
Unfortunately, this high amount of small businesses means that there is often a high competition rate within various industries. This can lead to overwhelming debt and often the end of a company. Over the last few years,just over 3,000 small businesses per year declared bankruptcy.
When you own a small business that is not incorporated and need to file for bankruptcy, your business assets are not held separately from your personal assets. This means that filing for bankruptcy as a small business owner also means you are filing for personal bankruptcy.
2.Marital breakdownis also another common reason for declaring personal bankruptcy. Getting divorced can be costly on the heart as well as the wallet.
When many couples get divorced, debt from the process can escalate throughlawyers’ fees, court fees, and various other payments. Once the case is over, one spouse might have to pay a large sum of money to the other, also resulting in accumulated debt.
Some couples get divorced because of financial issues or disagreements. When this happens, bankruptcy is common. Some people end up in a lot of debtbecause of actions their spousehas taken.
For example, if one spouse racks up a large debt they can no longer pay, the other spouse may become responsible for that debt, especially if he or she has co-signed for a loan at some point.
3.Disruption of employment, which is often referred to as job loss, is an unfortunate circumstance when one cannot pay back his or her debts because of no income.
Whether you gotlaid off, fired, or quit your job, the bottom line is you now have no income. But your debt doesn’t just disappear.
For whatever reason, you might find yourself out of work and beginning to panic about the money you owe to your creditors. Bankruptcy might be your best bet if you really want to get out of debt as fast as you can, with a chance for a fresh start.
Filing for Bankruptcy in Canada
Canadian bankruptcy laws state that in Ontario, there arethree main qualificationsyou need to meet to in order to file for bankruptcy.In this Canada, you may claim bankruptcy if:
- You owe at least $1,000.
- You are unable to repay the debts that you owe.
- Your debts are greater than the value of the assets you own.
If you meet these qualifications, and filing for bankruptcy is your only option,book a consultation with a licensed insolvency trusteewho can help you get started. These consultations are usually free and will give you an idea of what will happen next so there are no surprises.
What to Know Before you Sign on the Dotted Line
When you file for bankruptcy, most of your debts will be eliminated and you can have a fresh start on your finances. However, there are some consequences after you are discharged that you must be aware of before you file.
Your credit score is going to be affected.A bankruptcy goes on your credit report and stays there for 6 years. This will make it harder for you to get a loan in the future.
You will also have toreport your income to your trusteeevery month after you are discharged. You will be required to remain in contact with them as well as attend counselling sessions.
A licensed insolvency trustee can tell you exactly what happens once you’ve filed for bankruptcy. There will be very specific duties that you will have to adhere to before you get discharged from bankruptcy and before your loans and debts are discharged.