Factors to consider when deciding if you should declare bankruptcy

Bankruptcy is meant for those individuals where after paying for their basic cost of living there is no money left to pay down or put towards your debt. If this describes your situation declaring bankruptcy can provide you with a fresh financial start.

※ Bankruptcy provides these advantages:

○ Legal protection from your creditors (no judgements, wage garnishments);

○ Eliminates most unsecured debts (ie. Credit cards, loans etc);

○ Will usually be debt free in a 9 – 21 month period for a first bankruptcy;

○ The cost is relatively inexpensive, in particular when compared to the cost of the debt;

※ Disadvantages of filing for bankruptcy

The Bankruptcy and Insolvency Act (BIA) is the legislation by which licensed trustees administer bankruptcy files. Its rules and laws are meant to balance the scales between the need of an honest unfortunate debtor for a fresh financial start and the rights of the creditors. For this reason, filing for bankruptcy in Canada has some disadvantages:

○ It will lower your credit score and credit history to the lowest level for a minimum to six years from the time your bankruptcy is completed;

○ While most assets will not be affected by declaring bankruptcy, there may be some assets that will need to be surrendered or may mean your bankruptcy will have an additional cost; and,

○ In bankruptcy you must provide the trustee with detailed income and expense information, and including your income tax information.

If you have reached the point where you are over-extended and can no longer afford your debt, the advantages far outweigh the disadvantages in most cases.