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While those in Winnipeg and the rest of Manitoba have been experiencing significant income growth over the last decade, their average income is still lower than the national average and many in the Winnipeg are living in poverty. As a result, there are many people who are struggling with debt and other financial issues.
Some people in Winnipeg can get out of trouble on their own or with a simple debt relief solution, others in Winnipeg might not be so lucky. For these consumers, one of the options they may need to consider is bankruptcy. For those unfamiliar, bankruptcy is the legal status for someone who cannot pay off their debts. These people in Winnipeg will often have to exchange nearly everything they own in order to eliminate their debts and start fresh.
How Does Bankruptcy Affect Your Credit?
As you can probably expect, a bankruptcy in Winnipeg will affect your credit in a negative way. In fact, a first-time bankruptcy will stay on your credit report for six years after your discharge date. So if you are bankrupt for the minimum of nine months, the blemish will be on your report for almost seven whole years. Unfortunately, things get even worse during your second bankruptcy will remain on your report for a total of 14 years.
Wondering how much it costs to file for bankruptcy a second time? Find out here.
In addition to a bankruptcy hurting your credit report and lowering your score, it will also affect the credit ratings of all your accounts associated with the bankruptcy. In Canada, all credit accounts are given a letter rating (I, O, R) and a number rating (1-9). The number simply represents the type of debt while the number represents the status of the account, 9 being the worst rating. As you may have guessed, when you file for bankruptcy your credit rating will be lower to an R9 (I9 or O9) for six years, which could really hurt your ability to borrow more money.
Now, while it can severely damage your credit, sometimes going through the bankruptcy process is worth it to eliminate your debt. Sure, your credit will be low, but at least you will be free from your debts and can now work hard to grow your credit back up and ensure you avoid dealing with another bankruptcy in the future.
Read this to learn some ways of rebuilding your credit after a bankruptcy.
When is Bankruptcy the Right Choice in Winnipeg?
So now that you know just how serious bankruptcy can be, when is it the right choice for you as a Winnipeg consumer? Knowing what debt relief option to go with can be very stressful and to help you out, we have decided to go over a few different scenarios of when bankruptcy is a good choice. These include:
- When you cannot keep up on loan repayments and see no way that you will be able to keep up with them in the future
- When you have defaulted on all of your loans
- When you simply cannot earn any more money through working or borrowing
- When you have considered all other debt relief options
- When you have worked with a licensed insolvency trustee and they have said it is the right move for you
If you are still unsure or confused as to whether it is right for your unique situation or not, it is a good idea to reach out to a professional to see what they think and if they have any recommendation about what you should do. It can’t hurt to ask, and it’s good to be sure of your decision before making anything official.
Which debt management option is right for you? Check out this infographic to find out.
Know the Pre-Bankruptcy Options in Winnipeg
So if you decide that bankruptcy isn’t the right choice for you or want to know if there is anything else you can do, it is a good idea to familiarize yourself with other debt-relief options in Winnipeg that are less intense than bankruptcy. Some of these options are:
Debt settlement is where you and your creditors agree on a partial repayment of your debt if you are not able to pay it back in full. For example, you might offer to settle your $10,000 debt for $4,500. It is up to your creditor to decide whether they want to accept your offer or not. In certain situations, it can be beneficial to work with a professional for the best chance of success.
Credit counselling is an option wherein you will meet with a counsellor in Winnipeg who will help you get back on track financially. They can help you create a budget and develop good financial habits so that you are well equipped to handle any future issues.
Debt Consolidation Loan
A debt consolidation loan is a way to simplify your monthly payments. You will take out one large loan to pay off all of your smaller loans, which will then leave you with only a single payment to make every month. Debt consolidation can often get you a better interest rate, too.
Any good insolvency trustee in Winnipeg should go over all of these options (and more) before deciding that a bankruptcy is right for you. If they haven’t, and this is the first you’re hearing about these other options, you should begin to look for another professional to work with.
To see more ways of conquering your high-interest debt in 2019, check this out.
Providing You Bankruptcy Assistance
If you feel as though bankruptcy could be the right choice for you and are looking for assistance, reach out to us at Loans Canada. We are confident we can find you a professional in Winnipeg.