As a Burnaby resident, there are plenty of ways to live and prosper in your city, especially when you have the right financial tools, such as loans, credit cards, and mortgage products. Then again, those same tools can be a major source of debt when all the costs involved become too much to handle alone.
Since unmanaged debt can cause severe damage to your financial well being, it’s essential to do what’s necessary to reverse the situation. If you’re currently struggling to stay afloat and are looking for professional help with your debt, filing for personal bankruptcy in Burnaby British Columbia, could be the solution you’ve been looking for.
When is Bankruptcy Your Best Option?
Although personal bankruptcy can put an end to many kinds of debt, as well as any collection penalties (wage garnishment, lawsuits, etc.) that have been laid against you, it’s certainly the most serious debt relief program available in Canada.
The Bankruptcy Procedure
Essentially, when you have at least $1,000 of unsecured consumer debt, you have the option to file for bankruptcy in Burnaby with the help of a Licensed Insolvency Trustee. These legal professionals are tasked with administering both bankruptcies and consumer proposals, as well as negotiating with creditors on your behalf.
Once the filing is approved, you’ll need to make a series of payments toward the court over a minimum period of 9 months. The whole affair will then become a matter of public record and all proceedings will be regulated under the Bankruptcy and Insolvency Act of Canada. As soon as you’ve completed all your bankruptcy duties, including any associated costs and credit counselling sessions, you may be eligible for discharge.
Click here to learn about Canada’s Bankruptcy and Insolvency Act.
While the terms of your own repayment period will vary according to how much debt you have, what your income looks like, and what assets you own, most bankruptcies start with a base contribution of $1,800 – $2,000. If your monthly income surpasses the court-designated threshold, you’ll also have to make surplus income payments over several months, maybe even several years.
In addition, if you own any assets, such as a house, vehicle, or an RRSP fund, the court may withdraw payment from them. If your debts are large enough, this can result in your asset being totally seized.
Wondering what happens to your house when during bankruptcy? Find out here.
The Impact on Your Credit
A different but equally negative kind of cost is the impact that bankruptcy in Burnaby can have on your credit. Firstly, a bankruptcy will show up on your credit report and remain there for 7 years (after you’ve been discharged) each time you file. During that time, any credit accounts associated with the process will be given an R9 credit rating.
All this can cause a ripple effect that totally diminishes your creditworthiness. After all, most lenders are unwilling to lend money to anyone that has bad credit due to such significant financial troubles. Until you recover from the process, you may only be eligible for very small amounts of credit with sky-high interest rates.
Knowing When to File
Essentially, your choice to file for bankruptcy in Burnaby should depend on how much (and what kind of) debt you have, as well as your ability to complete your mandatory duties. Despite your debt, it’s important to have a steady job and an income that allows you to make all your payments but comfortably survive without credit products.
Read this for more information about bankruptcy court in Canada.
Remember, bankruptcy is a serious decision that’s reserved for consumers who have no other way to manage their debt. Before you decide, consult a financial advisor or credit counsellor so that you can weigh your other (less drastic) debt relief options, such as:
- Borrowing from friends or family
- Borrowing from your home equity
- Applying for a debt consolidation loan
- Entering a debt consolidation program
- Offering your creditors a debt settlement
- Filing a consumer proposal
Does the Federal Government provide debt relief? Look here for the answer.
How Does a Consumer Proposal Differ from Bankruptcy?
A consumer proposal would be your last option before resorting to bankruptcy in Burnaby. Although it’s a similar legal process that reduces your consumer debts, prevents any collection penalties, and needs to be conducted by an Insolvency Trustee, it’s also substantially less harmful to your financial profile.
- Rather than a base contribution and surplus income payments, monthly installments are sent toward your creditors over 1 – 5 years maximum.
- You can pay off your proposal at any time during that period (without penalty).
- Your credit report will only retain the information for 3 years (after your last installment). Your credit rating will drop to R7. However, you’ll have a higher chance of being approved for more credit at a lower rate.
- None of your assets will be seized during the procedure.
So, it’s clear that while a consumer proposal can still have a negative impact on your finances, the overall effect is much less severe than that of a bankruptcy. Nonetheless, consumer proposals are also serious and you shouldn’t attempt one unless your situation is bad enough and you’ve got the financial strength to overcome.
Are All Debts Eligible for Bankruptcy?
Unfortunately, there are many types of debt that aren’t eligible for bankruptcy in Burnaby. Traditionally speaking, the process is restricted to debts that are unsecured and don’t involve collateral, as well as certain bills from sources that are unrelated to credit.
Secured debts, on the other hand, cannot be included because your creditors may still retain the rights to any assets involved, such as your house, car, or other property. The same goes for any debt that is held by a legal or government institution. We’ve listed a few examples belows so that you can confirm the eligibility of your debt.
- Credit cards
- Unsecured loans & lines of credit
- Unpaid income taxes
- Regular student loans
- Non-credit bills (internet, cell phone, utilities, etc.)
- Home equity products
- Secured loans & lines of credit
- Federal student loans
- Legal bills (lawsuits, tickets, alimony, etc.)
Is Credit Improvement Possible After Bankruptcy?
Bankruptcy can have some harsh after effects, any of which can result in a lack of affordable credit products for some time. However, it’s still better to resolve things quickly and recover over time than it is to let the situation drag out.
Don’t worry, if you’re about to or have recently filed for bankruptcy in Burnaby, there are several ways to rebuild your credit so that you can get approved and find reasonable rates once the ordeal is over.
Try These Techniques:
- Check your credit report frequently
- Dispute any errors, signs of fraud or identity theft on your report
- Request your non-credit bills to be reported to Canada’s credit bureaus
- Create a budget and cut out non-essential expenses
- Watch out for ‘credit repair’ scams
- Go regularly credit counselling sessions
- Make responsible payments using a secured credit card
- Make responsible payments using a guarantor loan
Click here if you’re interested in credit counselling in Burnaby.
Ask Loans Canada For Help!
If you’ve recently declared bankruptcy in Burnaby, your recovery can start right here at Loans Canada. With any luck, we can even help you avoid the process altogether. Contact us today for more information about bankruptcy in your hometown.