Personal bankruptcy Canada
The first cause of bankruptcy in Canada is loss of job or decreased income. If there is a loss of job or the income is decreased, it becomes very difficult to make the debt payments. If a person has to face job loss, there must be a reduction in expenses in order to continue servicing the debts. Although, it is hard to quickly decrease the rent or car payments, one must realize that decreasing other expenses is the road to avoiding bankruptcy.
The second cause of personal bankruptcy is marriage separation or divorce. Almost one third of the people filing personal bankruptcy are either separated or divorced during filing. A couple has to pay rent just once and there is one phone bill, hydro bill and other expenses are shared. However, after separation, each individual is paying self bills and thus the expenses rise. In such a separated state, if there are debts, it may become hard to service these.
The third cause of bankruptcy is medical problems. A good aspect is that in Canada most of the medical expenses are covered by the government. In case the person is sick or injured, there is absenteeism from work for a number of months. Although, there is medical insurance, the income is reduced and servicing the debts becomes difficult.
Alternatives to bankruptcy
When the above causes take shape, personal bankruptcy is not the singular solution. Some of the alternatives for bankruptcy are debt consolidation loan, credit counseling, debt management plan, and consumer proposal to creditors.
Advantages of personal bankruptcy
This is relatively a fast procedure of finding relief from bankruptcy. It is cheaper as compared to its alternatives. It leads to elimination of a persons unsecured debts. It protects a person from collection action, legal action and wage garnishees.
Disadvantages of personal bankruptcy
This has a bad effect on the credit history. It resets the credit history to zero after completion. The procedure may need the person to surrender some possessions to the trustee. While the person is bankrupt, there is a necessity to keep detailed records of the income and expenses.
Bankruptcy and credit rating
A persons credit rating is badly affected due to bankruptcy. However, those people who become bankrupt, already have such a bad credit rating, that nothing can make it worse. On the opposite, after bankruptcy, a person has no debt and has a better credit risk. Personal bankruptcy is a potent method for a debtor to start afresh.
Necessity of personal bankruptcy
Canadian residents, who are unable to pay their bills which are due in spite of trying all possible means to do so, should opt for personal bankruptcy. In Canada, if a person owes more than $1000, he is eligible for personal bankruptcy. Those people who need a fresh financial start ought to try personal bankruptcy. However, choosing personal bankruptcy is a difficult decision. Although, it eliminates most of the debts, it hampers the possibility to procure credit in the future. So, before finalizing to become bankrupt, a Canadian must discuss with a licensed trustee to consider the various options.
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