Being in debt can be incredibly stressful. While a certain amount of debt is required to buy big-ticket items like homes and cars, having far too much debt can wreak havoc on your financial health.
And if you’re unable to make your bill payments on time and in full every month, you could really be facing some tough situations. Creditors will demand their payments and collection calls will be seemingly never-ending.
If you’re drowning in debt, it’s important to take steps to rectify the situation. And if you’ve exhausted all options available in Mississauga, bankruptcy might be your only hope.
Let’s dig deeper into what bankruptcy in Mississauga is and whether or not it’s the next logical step for you to take.
Can you file for bankruptcy online in Canada? Find out here.
What Does Bankruptcy Entail in Mississauga?
Consumers in Mississauga have a variety of avenues to take in an effort to effectively deal with their debt. But in some cases, none of these options are viable. For some consumers in Mississauga, bankruptcy is their only option.
Bankruptcy is a last resort that should only be chosen after all other avenues have been taken. The reason for this is because the consequences of filing for bankruptcy are serious and long-lasting. For years afterward, consumers in Mississauga will have poor credit and limited ability to secure loans and credit accounts. Not only that, but valuable assets may be lost.
Bankruptcy in Mississauga is governed by the Bankruptcy and Insolvency Act (BIA) and carried out with the help of a Licensed Insolvency Trustee (LIT), who takes care of the bankruptcy process on behalf of the consumer.
The purpose of bankruptcy is to alleviate debt problems for consumers who are no longer able to deal with or pay off the debts they still owe. When filing for bankruptcy, debts can be eliminated off the books, while ensuring that all creditors involved are treated fairly.
Consumers in Mississauga who file for bankruptcy agree to surrender many assets of value in exchange for protection against creditors and collection agencies. But, there are still repercussions that must be faced.
Do You Surrender All Assets With Bankruptcy?
Part of the deal when it comes to filing for bankruptcy is that valuable assets are surrendered. That said, not all assets are necessarily given up. There are certain exemptions that apply in Ontario, Mississauga, which include the following:
- Necessary clothing
- Household furniture and appliances up to a value limit of $13,150
- Tools needed to operate business operations up to a value limit of $11,300
- One motor vehicle up to a value limit of $6,600
- Home equity if under $10,000
- RRSP and RRIF savings, excluding contributions made over the last 12 months
When Should You File For Bankruptcy?
Bankruptcy shouldn’t be approached right away. Instead, it should be the last option after all others have been tried. This includes credit counselling, debt consolidation, debt settlement, and consumer proposals. If all of these other avenues have been tried without success, then bankruptcy Mississauga may be opted for.
Bankruptcy may be appropriate in the following situations:
- You can’t keep up with all of your bills
- You’re defaulting on your loans
- You can’t find any other way to earn more money
- You’ve tried all other debt relieving options
How Will Bankruptcy Affect Your Credit Score?
Out of all programs available in Mississauga to alleviate debt issues, bankruptcy has the hardest-hitting effect, especially when it comes to your credit score. An R9 rating will remain on your credit report for as long as six years if this is your first bankruptcy. If it’s your second bankruptcy, that rating will remain for at least 14 years.
During this time, you won’t be able to make any improvements to your credit score.
How to Improve Your Credit Score After Bankruptcy Mississauga
Once you’ve been discharged from your bankruptcy, now is the time to start taking steps to improve your credit score. Here are some useful ways to give your score a boost:
Pay all bills on time. The most important thing you can do after bankruptcy is to make sure that you pay all your bills on time. Missing even one payment will cause your score to further decrease while being timely with your payments over time can help give it a boost.
Look over your credit report. Get a copy of your credit report, which you’re able to get at no charge every 12 months from any one of the major credit bureaus. Look for any errors, and if you notice any, have them reported and rectified.
Be careful with your spending. You should not go overboard with your spending, especially shortly after being discharged from your bankruptcy. Be sure to keep your spending under control.
Save up. Rather than spending money, save it. A financial cushion is a good thing to have, especially if you’re ever in a situation where a large sum of money is needed. Instead of having to take out a loan to cover these large costs, you’ll have a lump sum of money ready to bail you out.
Take out a secured credit card. It will be next to impossible to get approved for a conventional credit card after filing for bankruptcy. But you can probably get a secured credit card. In fact, taking this step will be a great way to help you improve your credit score.
A secured credit card requires upfront collateral in the form of a cash deposit. This deposit serves as your credit limit. You won’t be able to spend any more than that.
Since you already put money against the card, all that you’re actually spending is your own money. There is actually no credit involved, despite the name of this type of product.
Take a look at this infographic for more information about what affects your credit score.
What Sorts of Debt Can Bankruptcy Mississauga Alleviate?
Bankruptcy in Mississauga is not applicable to all types of debt. Instead, it’s only suitable for discharging unsecured debt. On the other hand, secured debt is typically not eliminated with bankruptcy, as creditors will likely repossess the collateral involved if you you’re unable to pay your debt
Debts that bankruptcy Mississauga can alleviate include the following:
- Credit card debt
- Unsecured personal loans
- Unsecured credit lines
- Payday loans
- Medical bills
- Taxes in arrears
- Unpaid insurance premiums and utility bills
Debts that could remain after bankruptcy may include the following:
- Mortgages
- Child support
- Spousal support
- Court-awarded damages
- Student loans less than 10 years old
- Debts as a result of fraud or theft
For more information about how secured debt is created during bankruptcy, click here.
What is the Cost of Filing for Bankruptcy in Mississauga?
Filing for bankruptcy is not a free process. Instead, there are costs involved that you should be aware of before filing, including the following:
- Your base contribution. This required cost covers administrative duties needed to deal with your estate. The cost of this fee is approximately $200.
- Surplus income. Your monthly income will be looked at on a regular basis, and if you make more than a certain limit, you will end up having to make surplus income payments.
- Assets surrendered. The value of the assets you give up when filing for bankruptcy will be considered.
Check out this article to learn how to calculate your bankruptcy payments.
Alternatives to Bankruptcy
As already mentioned, bankruptcy in Mississauga is a last resort because of how negatively it can affect your financial health and credit score. Before you consider bankruptcy, consider other alternatives available in Mississauga first, such as the following:
- Debt consolidation – Dealing with many different debts can be very difficult. By taking out a debt consolidation loan, you can combine them all into one easily-managed loan. Further, if the debt consolidation loan you take outcomes with a much lower interest rate compared to the highest-rate debt on your books, you can save a lot of money, too.
- Debt settlement – To have your debt alleviated, you can work with a debt settlement company that will negotiate with your creditors on your behalf to come up with an agreement in which you pay less than what you owe or have the interest rate lowered or both. Your debt will be considered “settled” instead of “paid,” which will negatively impact your credit score.
- Consumer proposal – This is the last resort before bankruptcy and involves submitting a consumer proposal with the help of a Licensed Insolvency Trustee. The proposal will be sent to your creditors to have your debt forgiven in exchange for paying a much smaller amount. A consumer proposal will also have a negative effect on your credit score, but not as bad as bankruptcy.
What does bankruptcy discharge mean? Learn more here.
What’s the Difference Between Bankruptcy and Consumer Proposals?
Both bankruptcy and consumer proposals are designed to help you be relieved of your debt, but they’re different in a few ways, including the following:
- Assets – With bankruptcy, you will likely lose many of your valuable assets, which is not necessarily the case with a consumer proposal.
- Expenses – With a consumer proposal, your only costs are the monthly payments you make to your Licensed Insolvency Trustee until the full debt amount is paid back. With bankruptcy, however, your costs can fluctuate depending on how much your monthly income changes.
- Credit score – Both bankruptcy and consumer proposals will negatively affect your credit score, but bankruptcy’s effect will be slightly worse.
Is Bankruptcy Right For You?
If you have a ton of debt that seems to be getting worse and you’ve tried everything to deal with it, bankruptcy might be the only way to climb out of your debt. If you’ve determined that bankruptcy is your only hope, let Loans Canada help. We can connect you to an appropriate professional in Mississauga who can help you finally get rid of your mounting debt. Call Loans Canada today!
