With Saskatchewan having one of Canada’s highest levels of consumer debt, many citizens in the provincial capital of Regina experience financial turmoil. Unfortunately, while some borrowers can handle their debts easily, that might not be the case for every resident in the city. After all, everyone’s financial situation is different.
When your own debt level has gotten so bad that simple solutions are no longer effective, it might be time to consider a more drastic alternative, declaring personal bankruptcy in Regina.
When to Consider Bankruptcy in Regina
It can be difficult to determine when bankruptcy in Regina is the right avenue to take. Therefore, a brief explanation as to what declaring bankruptcy entails may give you some insight.
Firstly, personal bankruptcy is a process you should only consider when:
- Your back is against the wall and no other debt relief option can help
- Creditors and debt collection agencies are pursuing you for payment
- Interest and penalty fees are piling up
- You aren’t able to get a better job, a pay increase, or work more hours
- You have at least $1,000 worth of consumer and/or household debt
- You are well prepared for the financial damage the process can result in
What the Bankruptcy Process Will Look Like
By learning more about the process, you’ll gain a better understanding as to why bankruptcy in Regina can be so helpful, yet so harmful to your financial profile, and why it should only be considered as a last resort.
The process may go something like this:
- You’re in such bad debt that, without a solution, total financial ruin is imminent.
- You’ll then have to hire a licensed insolvency trustee, who is permitted to administer both consumer proposals and bankruptcy filings.
- The trustee will file a motion, which relieves you from the vast majority of your unsecured consumer debt.
- Once the motion has passed, any collection efforts, wage garnishments, mounting interest, and penalty charges should come to a stop.
- Depending on the size of your income, you may have to make surplus income payments toward the court over several months to several years.
- It’s probable that many of your assets, such as your home and car, will be seized as partial payment.
- The bankruptcy will be reported to both of Canada’s credit bureaus (Equifax and TransUnion) and a record of the event will be placed on your credit report.
- Your credit score will drop significantly and your credit rating will be changed to an R9, the lowest possible rating.
- Your bankruptcy will remain on your report for 7 years (per filing). Despite your debt being cleared, this will make it extremely difficult, if not impossible to get approved for new credit products, at least until you can repair your credit health.
Click here to see how much it will cost you to declare bankruptcy in Canada.
Repairing Your Credit After Bankruptcy in Regina
As we said, one of the areas where bankruptcy can do the most damage is to your credit health. Remember, a record of the event will show up on your credit report for 7 years following its completion. You may have to get by using just your income and savings during that time, which can be tricky if you’re used to having credit cards to fall back on. It’s important not to panic. Instead, consider the fact that you now have a clean slate to work with. And, fortunately enough, the bankruptcy process in Regina usually involves some mandatory credit counselling sessions, during which you can learn to budget properly and modify your financial habits as a whole.
When all is said and done, you can start doing some simple things to fix and rebuild your damaged credit, including but certainly not limited to:
Make Any Remaining Bill Payments On Time
Falling behind on your payments is one of the possible causes of your bad debt situation, and the first thing you should do is make to never miss a payment for a bill of any kind. While utility, cell phone, and internet bills don’t normally affect your credit, the companies that send them do have the ability to inform the credit bureaus of your progress, whether negative or positive. If you are able to secure any type of bad credit loan or product, the same responsible behaviour must apply in order to avoid the process repeating itself.
Apply For a Secured Credit Card
One bad credit product that you may still get approved for after bankruptcy is a secured credit card. To be approved, you’ll have to give a security deposit equal to the credit limit you’d like. You can then spend some time making good payments, repairing your credit score as you go, the overall goal being to reach the point when you would once again qualify for a traditional card. When any outstanding balance is paid and the card expires, your deposit will be reimbursed.
Click this link to know the difference between a secured and a prepaid credit card.
Regularly Check Your Credit Report
Something you should do even when you have good credit, checking your credit report on a regular basis is the simplest way of monitoring your credit health. In fact, you’re entitled to one free yearly copy of your report through either Equifax or TransUnion (you should always check both). During your bankruptcy in Regina, your report may look at bit worse for wear. However, it’s the best way to know which areas could use improvement. You can also check your report for any errors that might be caused by improperly reported information, identity theft, or fraud. Any of these errors might also be doing serious harm to your credit, so it’s best to dispute and rectify them as soon as possible.
For even more information about credit, check out this infographic. Alternatives to Bankruptcy in Regina
Does the resulting damage from bankruptcy worry you too much? Are you determined to work hard to avoid it? Good, because there are other safer and less devastating debt relief alternatives that may work for you under the appropriate circumstances. Before bankruptcy in Regina truly becomes your last resort, research the following:
- Credit counselling
- Debt consolidation loan
- Debt consolidation program
- Debt settlement
- Guarantor loans
- Home equity loan
- HELOC (home equity line of credit)
- Consumer proposal
Choosing a Consumer Proposal Over Bankruptcy
One of the alternatives above is the consumer proposal. While this does involve a similar legal proceeding and should only be considered when you have a lot of debt but no solution, the process is still much less detrimental to your finances than bankruptcy.
A consumer proposal also involves:
- Hiring an insolvency trustee to administer the process.
- Ending all collection efforts, garnishments, and penalties against you.
- Making regular payments to the trustee for numerous months, possibly years.
- A lasting black mark on your credit report.
- Several years worth of financial and credit-related damage following completion.
However, a consumer proposal is different because your trustee will reach out to your creditors on your behalf and offer them a proposal that allows you to pay back a large portion of what you owe, rather than the full amount.
Why a Consumer Proposal Is Still a Better Option
Even though this might seem less favorable than a bankruptcy, which would totally free you almost all of your debts, it’s actually more beneficial because of one simple fact – the effect on your credit will be far less impactful.
A record of your proposal will only remain on your credit report for 3 years following completion and there won’t be as much damage to your credit score. Not to mention that, while you’ll still have problems getting approved for credit products with reasonable interest rates, potential new creditors will still find you somewhat more creditworthy than a borrower whose gone through a full-on bankruptcy.
You can rebuild your credit after a consumer proposal and here’s how.
Considering Bankruptcy in Regina?
You should only consider declaring bankruptcy in Regina when you’ve exhausted all your other debt relief options. If you’re looking for more information about the bankruptcy process or are trying to avoid it altogether, Loans Canada is here to help. Contact us today!
