British Columbia is a gorgeous place to live and more people are realizing it by the day. Home and property prices in BC are among the highest in Canada. As a result, people in the province often take on a lot of debt in order to buy a house and enter the real-estate market.
The delinquency rate in B.C. is dropping, which is great news. It means most people are in control of their debts and are able to handle them responsibly. However, this isn’t the universal situation in British Columbia. There are definitely people who struggle to keep their heads above water when it comes to managing debt. While there are many services and programs out there to help people get out of debt on their own or with the aid of professionals, sometimes that isn’t enough.
What is “debt forgiveness” in Canada? Click here to find out.
For some individuals, bankruptcy is the only option available. It is a very drastic step but is one that is necessary for people who see no other way to escape the various debts they have accumulated over the years. With that in mind, in this article, we’ll take a closer look at British Columbia bankruptcy and ensure you are educated about it, in case you need to consider filing for it at some point in your life.
What is Bankruptcy and Why Do People File for Bankruptcy?
As we mentioned, bankruptcy is designed to help people who have no foreseeable or reasonable chance to get out of debt. Most of the time, bankruptcy will stem from unsecured consumer debts, such as credit cards. As long as your debts are more than $1000, you can technically file for bankruptcy, according to the Bankruptcy and Insolvency Act of 1985, which governs bankruptcy in the province of BC and the rest of Canada.
There are many pros and cons that go along with filing for bankruptcy. In terms of pros, the biggest is that you get to start over financially, will no longer be in debt, and will get a fresh outlook on life. Also, filing for bankruptcy will enable you to get the financial counselling you need to avoid finding yourself in insurmountable debt again in the future.
On the other hand, there are many cons of bankruptcy to consider before you decide to file for it. The first is that your credit will suffer for around 7 years following your first bankruptcy and 14 years following your second. This means it will be very difficult to get a mortgage, take out new loans and other things that utilize your credit report or credit score. Also, bankruptcy will often force you to surrender certain amounts of equity in your home, vehicle, household items, and tools.
Look here to learn how you can rebuild your credit after bankruptcy.
As for why people file for bankruptcy, it is quite simple. They do not see another way out from under of their debts. Things like credit counselling, debt consolidation, or debt settlement can help, but if their debts are too large to manage on their own, these options might not be enough to get them out of debt.
How Do You Know If You Need to File for Bankruptcy?
So, how do you know if you need to file for bankruptcy? Well, there is no right or wrong answer. It is a personal decision and will depend on how you are handling your debts, and whether you think you need immediate help or not.
In truth, bankruptcy should be one of the last things you consider, as it is fairly drastic compared to other debt relief solutions. Once you have exhausted other options, you may consider bankruptcy. Make sure to speak to friends, family, and financial professionals about your decision to see if anyone is willing to offer any advice or assist you in any way.
Here are the best options to consider before you file for bankruptcy.
What to Expect When You File For Bankruptcy and the Bankruptcy Process?
Filing for bankruptcy is a daunting task, but knowing a bit about the process and what to expect can make it somewhat easier to handle. The first step when it comes to filing for bankruptcy is to find a Licensed Insolvency Trustee, who will assist you along the way.
When choosing a trustee to work with, they should be local and you should feel comfortable discussing your finances with them. These trustees will provide you with all the information you need and you can ask them any questions about the process of filing for bankruptcy in British Columbia. They will also look at other options to consider before deciding to go with bankruptcy.
Before you can file, you will need to provide your trustee with a wide variety of personal information including name, address, birth date, assets, and creditors/debts. The entire process of bankruptcy should last no more than nine months and if you abide by the agreement throughout the months, your trustee will recommend a discharge which will completely free you from your debts.
Want to know what elements can and can’t be included in a bankruptcy? Click here.
How Much Will It Cost You To File Bankruptcy?
That’s right; bankruptcy isn’t always free. In fact, most people will pay a minimum of $1,800 for their bankruptcy. This can, of course, be paid at once or over 9 months (at $200 per month). The fees are set by the government and will be the same no matter which trustee you work with. However, the overall costs of bankruptcy will depend on how much you make, how big your family is, your assets, and more.
In total, there are three main costs associated with bankruptcy, which are the base contribution, surplus income and of course, the costs of the assets you might lose.
For more information about the typical costs of bankruptcy, read this.
Filing for Bankruptcy vs. Filing a Consumer Proposal
As we mentioned, there are many other options for debt relief in addition to bankruptcy. One common and popular alternative to consider is a consumer proposal. A consumer proposal is a legally binding agreement between you and your creditors to arrange for a partial repayment of your debts. Unlike a bankruptcy, your assets aren’t at risk and the effect on your credit score will not be as big.
Read this to find out if the Federal Government provides debt relief.
However, you will be required to make frequent payments, which can be tough if your income is too low. The reason a creditor may take a partial repayment is that oftentimes they will get nothing when you file for bankruptcy, so they would rather have a partial repayment. There are some qualifications you must meet in order to be able to take advantage of a consumer proposal instead of bankruptcy.
How much debt should you have before you file a consumer proposal? Find out here.
Is Bankruptcy the Right Choice for You?
Seeking the help of a professional when you’re considered filing for bankruptcy in British Columbia is one of the most important steps in the process. If you’re looking for guidance or a second opinion, we can help.