Canada as a country has a generally high cost of living. This goes for real estate, groceries, gas, and many other things people need to purchase regularly. While some can afford these large costs, others cannot.
Many people take out loans or overspend on their credit cards to stay afloat. This can help in the short term but can leave you stuck under a mountain of debt in the long term. Thankfully, there can be a way out of this insurmountable debt, in the form of bankruptcy in Quebec City.
What is Bankruptcy?
Bankruptcy in Quebec City is a legal process that sees you surrender your assets in exchange for the forgiveness of your debt. The exact assets you need to surrender (and what you get to keep), can vary from province to province. It is designed to offer relief to an honest debtor who got in over their heads, while also being fair to creditors.
In order to file for bankruptcy, you require the services of a Licensed Insolvency Trustee (LIT). They are educated and experienced in the space and are the only people who can administer a bankruptcy in the country. They are licensed by the federal government and regulated, so their costs are quite reasonable most of the time.
As long as you live in Canada and are insolvent (have debts of over $1000 that you cannot reasonably pay off), you are able to go into bankruptcy.
How Does Bankruptcy Affect Your Credit in Quebec City?
While bankruptcy in Quebec City is a great way to start fresh financially, it does come with some drawbacks. One drawback is that a bankruptcy will negatively affect your credit. In Canada, all the credit accounts (credit cards, loans, lines of credit, etc.) you have, appear on your credit report and are given a rating on a scale of 1 to 9. When you file for bankruptcy, all the accounts associated with it will be given a rating of 9 which is the lowest rating.
If this is your first bankruptcy, that credit rating will remain at 9 for 6 years after your bankruptcy is discharged, so almost seven years total. If it is your second bankruptcy, your rating will remain for 14 years. While it is unfortunate to have your credit negatively affected by a bankruptcy (and have it last so long), sometimes it is better to start fresh with a bad credit score than it is to continue drowning in a sea of debt.
How to Repair Your Credit After a Bankruptcy?
While bankruptcy in Quebec City can do some damage to your credit, not all is lost. It is completely possible to build your credit back up to a good place. Some of the things you can do to rebuild and repair your credit include:
- Ensuring all of your bills are paid on time and in full
- Keeping your credit utilization relatively low
- Spending responsibly and not overspending on things you don’t need
- Keeping old and established credit accounts open
- Not frequently applying for new credit
- Getting a copy of your credit report and make sure that there are no mistakes
As long as you stay committed and listen to the above tips, you should be well on your way to improving your credit. However, you need to be aware that improving your credit is a process. It won’t happen overnight and will take a few sacrifices and lifestyle changes in most situations. So while it might be some time before you’re able to borrow money again at an affordable rate, your sacrifices and lifestyle changes will be worth it in the end.
Everything you need to know about bankruptcy court in Canada.
When is Bankruptcy the Right Choice?
Before deciding to file for bankruptcy in Quebec City, it is a good idea to know which situations it makes the most sense for. Bankruptcy isn’t always the right call, and choosing to enter bankruptcy when it doesn’t make sense can be very costly and stressful. In general, bankruptcy is the right choice when:
- You can no longer keep up with your loan payments or have defaulted on your loans
- You are unable to earn more money to make any progress on your loans
- You have already exhausted other options
Of course, every situation is unique, so it’s a good idea to speak to a trusted expert or professional to see if bankruptcy makes sense for your exact situation.
Can All Debts Be Included in Bankruptcy?
So while bankruptcy can often be the right choice if you are struggling with debts, can all debts be included in a bankruptcy in Quebec City? The quick answer is no. There are some debts that cannot be included in a bankruptcy, and it is a good idea to know of these before you attempt to file for one.
Some of the debts that cannot be included in bankruptcy are:
- Secured loans like mortgages and car loans
- Alimony and child support
- student loan debt (unless it can be proven you will never be able to pay it)
- Legal fines like traffic tickets or other infractions
- Any debt that you have forgotten to include in your paperwork
Other than that, most debts are able to be included in bankruptcy and will be forgiven once the legal process is completed. This includes most unsecured debts, as well as lines of credit, medical bills, unpaid utility bills and certain taxes like income tax and property tax.
If you are still confused about whether some kind of debt that you have can or cannot be included, be sure to reach out to an expert and they can likely provide you with some assistance.
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Be Aware of Pre-Bankruptcy Options
Bankruptcy in Quebec City is a decent option in many situations, but it is not the first option you should consider. It is quite extreme and is often only reserved for very specific cases where debtors have nowhere else to turn. Before considering bankruptcy, here are a few other options you should consider.
Credit Counselling
Credit counselling is when you meet with a credit counsellor to speak about your financial needs. You can talk about how to spend more responsibly, how to budget, or even get some tips to get out of debt. This is often most useful when you simply want to get ahead of your problem and get some general advice on finances. If you go to credit counselling before things get too bad, there is a chance it will stop you from ever having to deal with a more extreme debt relief solution.
Debt Consolidation
Debt consolidation is when you take out one large loan to cover all of your smaller ones. The goal is to qualify for a lower interest rate and make your monthly payment much easier to manage. There are two options here, a debt consolidation loan and a debt consolidation program. Each will have slight differences, but the goal of simplifying your payments and getting you a lower interest rate still persists.
Debt Settlement
A debt settlement is when you make an offer to settle your debt with your creditors. For example, if you owe $10,000, you might make an offer to settle the debt for $6,500. If they accept, you still save a lot of money, while they are able to recoup some of what they lent. While it might be tempting to make a low ball offer to save more money, this is often the wrong choice. If your offer is too low, the creditors might deny it, as there are no rules about a debt settlement being required to be accepted. So be sure to make a settlement offer that works for both you and your creditors.
Consumer Proposal
A consumer proposal is, like bankruptcy, a legal process between you and your creditors. It is also set up by a LIT like bankruptcy is. You and your LIT will essentially come up with a proposal to give to your creditors in which you offer to pay back a portion of what you owe or ask for more time to pay back what you owe. Once your proposal is accepted, you will begin making the agreed-upon payments on the schedule that was outlined and accepted in the proposal. Like with a debt settlement, be sure the amount is fair not only for you but also for your creditors.
Is Bankruptcy Right For You?
If you’re struggling to keep up with your debt obligations in Quebec City and have been considering seeking professional advice, Loans Canada can help put you in contact with the right experts.
