Financial struggles can take a toll on many aspects of a person’s life. No one plans to fall on hard times, but difficult situations can arise at any moment. Without meaning to, events beyond our control can lead us to accumulate more and more debt. It’s likely that if you’re in a position where you’re considering bankruptcy, you’re confused and concerned about what your next step should be.
But bankruptcy is not uncommon and is used as a debt relief process more than one would think. According to the Office of the Superintendent of Bankruptcy, approximately 100,000 Canadians per year turn to bankruptcy or consumer proposals as a solution to their debt problems.
Before You File for Bankruptcy
There are plenty of things to consider before filing for bankruptcy in Ontario, and you need the expert knowledge and skills of a credit professional to show you what can be done about your debt. Licensed Insolvency Trustees used to go by the title “bankruptcy trustees” and they’re the only qualified professionals who can file bankruptcy for your or file a consumer credit proposal for you.
A visit with a bankruptcy trustee in Ontario can help you fully understand your financial situation and answer some of the questions you might have about seeking debt relief. Many things can lead someone to consider bankruptcy. If there’s been a sudden change in employment, you can’t keep up with accumulating interest, and your financial strain is affecting areas of your personal life, then perhaps bankruptcy is the solution for you.
Sometimes if bankruptcy seems too severe or an individual wants to protect certain assets that would otherwise be lost in a bankruptcy, a consumer proposal can be the best debt solution. In this arrangement, the bankruptcy trustee files a proposal on your behalf with your creditors in which you propose to pay back a portion of the debt that is owed in instalments over a fixed period of time (up to five years).
As soon as you file for a consumer proposal, the following things happen:
- If your wages are being garnished, that stops immediately. Collection calls and any legal action in pursuit of debt repayments stop, too.
- No more interest can be collected on your debt.
- Your creditors are made aware of your proposal and are given 45 days to review.
Creditors get to decide whether or not they accept the terms of the proposal. If your proposal is rejected, then you can regroup with your trustee before presenting another arrangement that might be accepted. After the terms of the proposal are carried out and the final payment is made, you are legally released from your debts. A history of the credit proposal stays on your credit report for the next three years before being removed completely.
Division 1 Proposal
In some cases, a Division 1 proposal can be the right course of action. This method of debt relief is usually considered to be a solution to commercial insolvency, but it is also available for individuals who have debts that exceed $250,000.
When you’re under financial stress, you don’t always have the clarity of mind to look at all your options and weigh them objectively. With some research and help from qualified professionals, you can make the right decision to turn the tables on your debt once and for all.