Never underestimate the harmful effect that too much consumer debt can have on your life, whether you live in Halifax or anywhere else in Nova Scotia. Unfortunately, some borrowers in Halifax have a harder time dealing with that effect than others and will need a lot of help, possibly even the legal kind.
While declaring bankruptcy in Halifax can also have a profound impact on your financial health, it may still be the best, if not the only course of action when your debts become too large to manage alone. Want to know how this drastic but ultimately beneficial debt solution can help you? Keep reading to find out.
Bypassing Bankruptcy
Declaring personal bankruptcy in Halifax is the most significant choice you can make when you’re trying to get rid of your outstanding debts. A bankruptcy in Halifax involves a legally binding procedure that’s administered by a Licensed Insolvency Trustee who is a court-appointed professional regulated by Canada’s Bankruptcy and Insolvency Act.
Click here for more information about Canada’s Bankruptcy and Insolvency Act.
However, as we said, it’s important to consider the fact that declaring bankruptcy in Halifax does not come without some severe consequences for your finances, which we’ll explain further below. Therefore, before you decide that bankruptcy is right for you, be sure to research some of the less drastic alternatives in Halifax, such as:
- Borrowing funds from friends or family members
- Dipping in your home equity loan or HELOC (home equity line of credit)
- Going to credit counselling
- Trying to reach a debt settlement with your creditors
- Applying for a debt consolidation loan or a debt consolidation program
- Filing for a consumer proposal
Understanding Personal Bankruptcy
Choosing Between a Bankruptcy and a Consumer Proposal
When your debts are unmanageable and no conventional methods are effective, there are two legal procedures that you can file for in Halifax, one being a bankruptcy and other being a consumer proposal. Both procedures can only be filed by an Insolvency Trustee and can be helpful in eliminating your unsecured consumer debts. Once approved, both techniques will also put an end to any collection efforts, late penalties, added interest, and/or wage garnishment that were assigned to you.
That said, a consumer proposal, while similar in many ways, is actually a step above bankruptcy because the impact on your credit and finances will be less significant. For instance, consumer proposals are different because:
- You must have a minimum of $5,000 and a maximum of $250,000 of consumer debt to qualify.
- Your credit rating will drop to an R7.
- A record will stay listed on your credit report for 3 years after it’s over.
- The debt remaining can be paid off through installments toward your Trustee, who will send them to your creditors for you.
- None of your assets will be at risk of seizure.
- You’ll have the option of adjusting your payments to be larger and on a more frequent basis to finish the process quicker.
- Although not recommended, you can miss 2 payments without penalty. Missing 3 payments (or more), however, will result in your proposal being annulled.
- Even though you’ll be given a high interest rate, you’ll still have an easier time getting approved for new credit than you would following a bankruptcy.
Can you get approved for a loan after a consumer proposal? Find out here.
A bankruptcy is different and ultimately more costly for you because:
- You can file once you’ve reached $1,000 of consumer debt and there is no maximum limit you can have in order to qualify.
- Your credit rating will drop to an R9 (the worst of all).
- A record will stay listed on your credit report for 7 years after it’s over.
- All of your unsecured consumer debt should be eliminated.
- Depending on the size of your income, you may be required to make surplus income payments to your trustee.
- If they have enough value, your assets may be seized to repay your creditors. This can include your home, vehicle, or other valuable property you own.
- Your payment schedule, once set in motion, is likely not adjustable. Failure to make your payments will result in further financial damage.
- It will be almost impossible to secure new credit during and even after your bankruptcy. A lot of credit improvement and financial repair will be necessary before any lender will trust you.
In the end, the option that works best for you will depend on your financial situation in Halifax. If you’re making a reasonable income and can afford all the costs associated with a consumer proposal, then it’s definitely a safer choice for you. However, if your debts are completely unmanageable and you don’t see a way out, a bankruptcy in Halifax may be your only option, so it’s best to look into the procedure before it’s too late!
Look here to know what happens to your house when you file for bankruptcy.
Debts That Qualify For Bankruptcy in Halifax
Prior to declaring bankruptcy in Halifax, know that certain debt types are not going to qualify. As we said, qualified debts will need to be unsecured, meaning those where you haven’t provided collateral, such as your home or car, as security. Since the concept of secured and unsecured debt can be a bit confusing, we’ve included a few examples below.
Secured Debts (Don’t Qualify)
- Collateralized loans
- Mortgages
- Home equity products (loans or HELOCs)
- Loans for cars and other vehicles
- Bills from other legal procedures (alimony, child support, divorce, lawsuits, etc.)
- Student loans provided by the federal government
Unsecured Debts (Qualify)
- Uncollateralized loans (installment, short-term, bad credit, etc.)
- Personal lines of credit
- Medical bills (hospital costs, elective surgeries, medications, etc.)
- Traditional student loans
- Bills from non-credit providers (cell phones, internet/cable, utilities, etc.)
Check out this infographic to learn how to create a debt repayment plan all on your own.
The Cost of a Bankruptcy Filing in Halifax
Remember, filing for bankruptcy in Halifax is not free, and this is true in more ways than one. Not only will the process come at a great personal cost because your financial profile will be damaged, but there are also many physical costs associated that may deter you from it entirely. These costs are going to vary depending on the legal regulations of your home province, your income, and what you owe in the first place.
Additional costs may include, but aren’t limited to:
- Base contribution – Most borrowers pay $1,800 minimum to file for bankruptcy, which can be paid all at once or divided into $200 increments spread over 9 months. Those who have a higher income may need to pay a larger contribution. However, this price is mostly for your Trustee’s services.
- Surplus income payments – Those who make an average of $200 over a specific income threshold will be required to make surplus income payments on a monthly basis and may have their bankruptcy term extended.
- Seizure of assets – If your assets are valuable and you owe a substantial amount, they may be seized as compensation. Any RRSP contributions and other investments you made over the past 12 months may also be taken.
- Windfalls – Money that you receive unexpectedly when the bankruptcy is in progress, such as lottery winnings or inheritance may also be subject to seizure.
Wondering what it costs to file for bankruptcy a second time? Find out here.
Is Bankruptcy in Your Future?
If you are worried about the prospect of declaring bankruptcy in Halifax or would like to know some ways of avoiding the process altogether, be sure to contact us for a solution. Remember, Loans Canada is here to help!
