How to Avoid Bankruptcy
It’s natural that people want to avoid filing bankruptcy. While the process can help those who are unable to meet their financial commitments and pay their bills, it’s typically the last option considered after all others have been contemplated.
The good news for those who want to avoid personal bankruptcy is that there are many personal bankruptcy alternatives out there. The option that is best for you will depend on your personal financial situation. For instance, someone who wants to avoid bankruptcy during divorce may be better suited to one option over another. Whether bankruptcy is right for you will depend on your financial circumstances, your assets, your debts, and several other factors. Speaking with a Licensed Insolvency Trustee can help you determine which debt relief options is right for you.
How to Avoid Bankruptcy During a Divorce
One situation where many people hope to avoid filing bankruptcy is when they are getting divorced. It’s natural to have questions about how your finances will be handled when you’re exiting a relationship, and this can include situations where someone has filed for bankruptcy before or during the divorce process.
One reason why you may wish to avoid bankruptcy during divorce is that joint debts remain the responsibility of both people. If one person files for bankruptcy, the debt becomes the responsibility of the other. Joint debts are not eliminated by a divorce or separation. This means they will still remain the responsibility of the person who is not bankrupt, even after the divorce is finalized.
Another situation that comes up is what happens to your assets. When it comes to assets, if you file for bankruptcy before your divorce is final, you could lose these assets as part of the bankruptcy process. If you finalize your divorce before filing for bankruptcy, and your assets are transferred to your ex-spouse, they are no longer available to creditors.
Whether you should look to avoid bankruptcy during divorce will depend on your specific circumstances. Speaking with a Licensed Insolvency Trustee can help.
Should I File Bankruptcy or Not?
The decision to file for bankruptcy is an individual one that will depend on your financial situation. A Licensed Insolvency Trustee can help you understand the bankruptcy alternatives available to you so you can make a wise decision for your financial future.
If you are struggling with debt, you may be looking for strategies to avoid bankruptcy or information on common causes of bankruptcy and how to avoid them. It is good to look at your own situation and see what you can do to improve it. However, if you are overwhelmed by debt and unable to meet your financial commitments, working with a professional can be a good idea. A trustee can help you understand your options. They can provide you with alternatives to avoiding bankruptcy and details on all options available to you.
When is Bankruptcy a Good Option?
While you may wish to know how to avoid bankruptcy in Canada, there are situations where filing can make sense. Bankruptcy allows you to eliminate debt and start your financial life over.
You receive legal protection from your creditors when you file. This means they cannot contact you, they cannot take any collection action against you, and any actions that are currently in place (such as a wage garnishment) must stop.
However, bankruptcy is typically the last option considered. For most people, there are many debt relief options available. A Licensed Insolvency Trustee can give you information on personal bankruptcy alternatives that could help you avoid personal bankruptcy.
Looking for common causes of bankruptcy and how to avoid them can be a great idea, but for some people in some situations, there is no alternative. Rather than drown in debt, filing for bankruptcy can help you start your financial life fresh.
Why You Should Avoid Bankruptcy
As mentioned, bankruptcy isn’t for everyone. In fact, there is likely an alternative to bankruptcy that could make more sense, depending on your situation.
Filing for bankruptcy can mean you’ll lose some of your assets. The process will also be noted on your credit report, which can make it more difficult to get loans. You may also have to make monthly payments to the trustee who will distribute them to your creditors, depending on your income.
These are potential reasons why you may wish to consider another option. If you want to know how to avoid bankruptcy in Canada, discovering more information on these alternatives is a good idea.
While it makes sense to start by learning some strategies to avoid bankruptcy, if you are feeling overwhelmed by debt, know that there are other debt relief options out there. A Licensed Insolvency Trustee can help you find them.
What Are the Options and Alternatives to Bankruptcy?
If you wish to avoid filing bankruptcy, the good news is that there are many other options. Not all options will be suitable for you, however.
While learning the common causes of bankruptcy and how to avoid them can be important, it is perhaps equally important to learn about the personal bankruptcy alternatives. There are many debt relief options that allow you to avoid personal bankruptcy while improving your financial situation. A Licensed Insolvency Trustee can help you understand these options, learn which ones apply to your situation, and figure out which one may be best for you.
An Overview of Consumer Proposals
One of the most common ways to solve debt problems but avoid bankruptcy is a consumer proposal. Like a bankruptcy, this is a legal process that is also administered by a Licensed Insolvency Trustee. However, unlike bankruptcy, the process begins with the trustee reviewing your finances, then making an offer to your creditors that will see you pay a portion of the outstanding debt (rather than the full amount).
When the trustee sends the proposal to your creditors, they will then vote on whether they wish to accept it. If those creditors that are owed the majority of the debt vote to accept, then all of your unsecured creditors must abide by the terms of the proposal.
If the consumer proposal is accepted, you receive legal protection from your creditors (just like with a bankruptcy) and will be responsible for making monthly payments according to the terms of the proposal.
In Canada alternatives to bankruptcy exist that can help you eliminate your debt. Through a consumer proposal, you can eliminate all your unsecured debts by paying a percentage of what you owe. Talking to a Licensed Insolvency Trustee can help you determine if this option is right for you.
When to Consider a Consumer Proposal Instead of Bankruptcy
Much like bankruptcy, and all alternatives to avoiding bankruptcy, whether you should proceed with a consumer proposal will depend on your financial situation. Differences between a consumer proposal and a bankruptcy include:
- You do not lose any assets when you file a consumer proposal. With a bankruptcy you may lose some assets.
- Once the proposal has been accepted by your unsecured creditors, the amount of the payments do not change, regardless of your income. In a bankruptcy, you may have to make “surplus income payments” to your creditors if you earn more than an amount set by the government.
If you are in a position where you can pay off some of the debt you owe, but not the full amount, a consumer proposal could be the right choice for you. Speaking with a Licensed Insolvency Trustee can help you decide.
By meeting with a trustee, you will learn that in Canada alternatives to bankruptcy exist, the pros and cons of each of these solutions, and gain the information you need to make a wise decision for your financial future.
An Overview of Debt Consolidation
Another option that many people consider when they’re looking to avoid personal bankruptcy is debt consolidation. With this process, you combine all your debts into a single debt. The goal of this process is to simplify the process of paying your debts and reduce the amount of interest you pay.
If this alternative to bankruptcy is successful, your debts will be rolled into a debt that has a lower interest rate than the overall interest rate on your current debts. This can save you money in interest costs.
When to Consider Debt Consolidation Instead of Bankruptcy
If you’re looking for how to avoid bankruptcy in Canada, and you are currently paying a lot in interest on your debts, debt consolidation may work for you. However, it’s important to note that debt consolidation doesn’t reduce the actual amount you owe. What it does is potentially reduce the interest.
Debt consolidation could be the option for you if you can pay the debt you owe, but high interest rates are making it difficult.
An Overview of Debt Settlement
Another of the most common bankruptcy alternatives is debt settlement. In this process, a debt settlement company will negotiate with your creditors and attempt to get them to agree to reduce the amount of interest you pay or extend the time you can take to pay your debts, thereby lowering each monthly payment.
Debt settlement companies may also provide credit counselling, explain strategies to avoid bankruptcy, and teach money management skills.
While this alternative to bankruptcy can potentially save you money in interest charges, you will still need to pay the full amount of the debt you owe. Also note that companies are not required to negotiate with a debt settlement company and those that do not agree to negotiate are free to take collection action against you for the full amount of the debt.
When to Consider Debt Settlement Instead of Bankruptcy
If you wish to avoid bankruptcy, and you can pay the debts you owe but wish to reduce the interest or adjust the payment terms, debt settlement pay work for you. However, it is important to consider the pros and cons of this process. Also, debt settlement companies are not regulated, so their fees can vary. Before you agree to work with a debt settlement company (Or agree to any alternatives to avoiding bankruptcy), it’s important to understand the fees involved.
How We Can Help
We provide information on debt relief options and help people find the right process to solve their debt problems. While bankruptcy is the right choice for some, there are many processes that help people reduce debt and avoid bankruptcy. One of these process may be right for you. When you meet with one of our Licensed Insolvency Trustees, they will review your situation and provide you with details on the available options.
For instance, bankruptcy alternatives such as a consumer proposal could be the right choice for you, but talking to one of our trustees can help you understand all options and how they may apply to your situation. Trustees are regulated by the federal government and required to give information on all options, not just the ones they administer.
In Canada alternatives to bankruptcy exist. Our trustees can help you find them. We offer a free consultation so you can get all the information you need to make the right choice for your financial future. Contact us today.