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The advantages of filing for bankruptcy in Canada

The Advantages of Filing for Bankruptcy in Canada

Posted by on October 07, 2020

Household debt in Canada has been rising since 2018. Statistics reveal that the debt level for most Canadian families is now around 177 percent. In other words, for every dollar Canadians earn, they owe $1.77.  Furthermore, experts predict things will get worse due to the COVID-19 pandemic. The government has also noted that credit market debt was $2.33 trillion in the first part of this year. 

There are several solutions for Canadians who find themselves in a tough spot financially. One of these is to file for bankruptcy, which can remove much of the unsecured debt you owe. As of March of this year, before the COVID-19 crisis, insolvencies were up by about eight percent compared to 2019. 

Filing for bankruptcy in Canada is not the right choice for everyone. To know whether bankruptcy is a good option for you, you should discuss your financial situation with a debt management professional. 

It’s important to understand that there are some advantages to filing for bankruptcy in Canada. These include:

  • Creditor calls will stop
  • No more wage garnishment
  • Your unsecured debt will disappear
  • You’ll feel less anxiety
  • A chance to rebuild your credit rating

While it may seem intimidating, filing for bankruptcy might be your best way forward. It will give you a chance to rebuild your finances and your life. Most importantly, filing for bankruptcy does not always mean you’ll lose everything. You may still be able to hang on to your home, car, and other personal items. 

Depending on your financial circumstances, bankruptcy might be your best option. As you consider what you want to do, keep in mind these advantages to filing for bankruptcy in Canada.

Creditor Calls Will Stop

One of the best parts of filing for bankruptcy is that you’ll stop being harassed by your creditors. This includes any proceedings against you in civil court. A legal order called a “stay of proceedings,” will be issued. As part of this order, creditors will not be able to contact you to collect money to pay off your debt. 

They will also not be able to take legal action against you concerning what you owe or enforce any court action unless they have the Bankruptcy Court's approval. Essentially, once you file for bankruptcy, you will be given protection from your creditors. 

No More Wage Garnishment

Once you file for bankruptcy, you’ll stop seeing your work wages garnished. This means that you’ll be able to start saving and get yourself into a healthier financial situation. It also means that if any of your bank accounts are frozen due to creditor action, they will be released. Having access to more money will help you take control of your financial future. It’s a second chance for you to start to plan, budget, and be responsible with your money. 

Your unsecured Debt Will Be Eliminated

After your bankruptcy is discharged, you will be debt-free from unsecured debts. Now you’ll be able to rebuild your credit rating and borrow money again. None of your creditors will be able to ignore your bankruptcy situation. That means they won’t be able to continue to pursue you to get you to pay back the debt. 

This is a big difference between filing for bankruptcy and other debt management options, like settlement programs or management plans. Unlike bankruptcy, creditors can decide not to participate in settlement programs or debt management plans. 

However, it is important to note that not all debts are erased after you file for bankruptcy. Certain debts such as child support, some student loans, court fines, and penalties will still need to be paid. 

You’ll Feel Less Anxiety

While no one is particularly happy to file for bankruptcy, it can bring a feeling of relief. This usually happens because you have been dealing with collection calls, legal action against you, and a loss of wages because of garnishing. 

Knowing that you have put all those troubles behind you will give yourself  the peace of mind that you did the right thing. You can start to look forward to the future and take control of your financial situation. In essence, filing for bankruptcy can turn your life around for the better.

Rebuild Your Credit Rating

After your bankruptcy has been discharged, you can plan for ways to rebuild your credit rating. You will be given a clear discharge date by the court, which is the date that you can start borrowing again. 

In Canada, bankruptcies if filing for the first time are usually discharged either at the 9-month mark or the 21-month mark. Your income standards determine how long the bankruptcy will last. If you are at or below the government income standards, you should expect your bankruptcy to be discharged in 9 months. However, if your income is higher than the government standards, or if it is not first time you are filing then you’ll have to wait 21 months or longer.

Bankruptcy is an Affordable Option

In Canada, filing for bankruptcy can be one of the more affordable options for getting rid of your debt. It’s important to understand how much you pay to file is not related to how much you owe. Rather, it’s determined by how many people live in your household and your contributions to household income. On average, Canadians pay $1,800 to file for bankruptcy. 

Filing for bankruptcy has its advantages, but it isn’t something that you should do lightly. It is best to get the advice of a Licensed Insolvency Trustee who is licensed and skilled in dealing with bankruptcy.

If you are interested in learning more about the advantages of filing for bankruptcy, call Charles Advisory Services at 416-915-9007 or contact us here.

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