Filing for bankruptcy is always a difficult decision when you are faced with ongoing debt and may be a last option for some individuals.

Declaring bankruptcy is never an easy choice, but sometimes it's the best solution to help you get out of debt and start over. Before filing Bankruptcy you should talk to Licenced Insolvency Trustee as he is the one who is licensed by the office of Superintendent of Bankruptcy to administer.

However, you can avoid bankruptcy in some situations by using some strategic financial management strategies that can help you get back on track.

There are many steps you can take before deciding bankruptcy is your best option.

Pay Down Debt

You can make effective lifestyle changes that will allow you to pay down your debt much faster than you might imagine.

Some tips for doing so include:

• Stop using credit. Use cash only.
• Create a new budget and eliminate all unnecessary spending, including lunches and coffees at work, entertainment, dining out, etc. Use all surplus cash to pay off debt.
• Consider taking on a second job and put all your additional earnings towards debt repayment.
• Take public transit more often, and if possible, consider less use of your car to save on insurance and gas.

All cash saved with this new approach can go towards debt repayment. Try to find at least $100 per month to add to the minimum required payment for the highest credit card or loan balance you owe. Apply this addition to your highest balance every month, while you continue to pay the minimum required amounts for other credit cards and loans. Once the first balance is paid off, move onto the next. This time, apply not only your extra $100, but also the amount you had to pay for the minimum payment of the card you just paid off. Your balances will be paid down very quickly using this approach. You will continue to increase the amount you pay each month until all of your balances are paid off. It’s called the Debt Snowball method.

Debt Consolidation

Debt consolidation is your best defence against high-interest rates This is only an option if your credit rating remains respectable and you have regular income as it requires applying for a debt consolidation loan. Your new loan provides you with the funds to pay off each of your debts in lump sums. You then have a single loan to pay off each month, usually at a far lower interest rate. By doing so, you reduce your monthly payments and also see more of your payments go to the primary balance as opposed to interest. It is one of the easiest and quickest ways to reduce your debt burden. Charles Advisory services can provide the assistance you need to provide financial peace of mind.

Debt Management

Of course, often people carrying debt don’t have a large lump sum of cash at their disposal. In this case, credit counselling, or a debt management plan, is an excellent option.Qualified Insolvency counsellors at the Charles Advisory Services would be able to help making a budget with you. The good thing about this approach is that although you do have to pay the full amount, you are no longer burdened with interest. You get a break on interest and repay your debt, so everyone is happy.

Consumer Proposal

If you truly are struggling with the amounts you owe, a consumer proposal is much like a debt management program, but includes negotiations to help reduce your balances. Where a debt management program eliminates interest, but maintains your existing balances, the consumer proposal negotiates a new balance, so you do not have to pay the full amount. The amount is negotiated by a trustee who tries to get the best possible reduction. It offers great relief from debt, which is paid off sans the interest and over an agreed amount of time based on what you can afford each month. However, a consumer proposal will drastically drop your credit rating and remain on your credit record for three years after you paid it off.This is still better than bankruptcy, which remains on your credit record for at least six years.

When is bankruptcy advisable?

If you try these solutions and still can’t seem to reduce your debt, bankruptcy might be the best solution. Bankruptcy could be an option when:

• There is a drastic decrease in your household income, such as job loss.
• Generally speaking ,this may be the best option for someone who spends more than 50 percent of their income towards bills and won’t pay off their balances within five years.
• Your debt payments are just covering interest and you have a high debt ratio.
• You are no longer able to pay cash for everyday expenses and your debt is rising.
• Your debt is unmanageable, causing issues with your health.
• You are no longer eligible for financial assistance due to your credit rating and/or debt load.

In most cases, you will keep your home and car, as well as many other personal items and professional tools following bankruptcy. Bankruptcy laws in Ontario aim to keep you in your home while providing the opportunity to pay off as much of your debt as possible.

All of these options offer the opportunity to reduce the stress of living with high debt, while maintaining the best possible credit rating. It will often also improve cash flow, making it easier for you to save and manage your monthly expenses.

At Charles Advisory Services, we understand that everyone can find themselves in debt or even the need to declare bankruptcy. Our team will treat you with the courtesy and respect you deserve and work hard to help you remove your debt burden as quickly as possible, so you can get back on track to reach your financial goals.

Give us a call to set up your appointment at (416) 486-9660 or contact us here.