Debt issues plague many Canadians, putting them in difficult financial situations that make it incredibly challenging to keep up with bill payments. And as bills are consistently paid late or regularly missed, defaults will occur, starting a string of collections calls and potential lawsuits that can cause undue stress.
If you’re currently experiencing a difficult situation with your debt in which you’re having trouble making your payments in full or on time every month, you may be looking for a solution to help alleviate you of your debts. While there are several steps that can be taken to deal with debt, bankruptcy is typically the last step.
If you’re considering bankruptcy in Saskatoon, continue reading to find out if you should opt for this last resort to deal with your mounting debt.
Looking for information about how to file for bankruptcy in Saskatchewan? Check this out.
How Does Bankruptcy Work in Saskatoon?
As already mentioned, bankruptcy is typically the last resort when dealing with debt. If you’ve already exhausted all other efforts, perhaps filing for bankruptcy in Saskatoon may be your best bet. That said, it’s essential that you try every other effort to avoid bankruptcy before choosing this measure.
In Canada, bankruptcy is overseen by the Bankruptcy and Insolvency Act and is designed to provide consumers with relief from their debts while treating creditors fairly.
Basically, filing for bankruptcy in Saskatoon involves surrendering many of your valuable assets to a Licensed Insolvency Trustee (LIT) to alleviate you of all your debts. That said, there may be certain exceptions in Saskatoon when it comes to the assets that you may be able to keep, which may include:
- Up to $7,500 in clothing and jewellery
- Up to $10,00 in cars
- Furniture
- Tools
- Up to $10,000 of the equity in your home
- Medical aids
- Personal property needed to earn an income
Do you know what the true cost of borrowing is? Find out here. When Does Bankruptcy Make Sense?
If you’ve already tried other methods to alleviate your debt and they haven’t worked, then bankruptcy may be your last shot at dealing with it. More specifically, bankruptcy might be best suited for certain situations, including the following:
- You’re unable to keep up with your debt payments
- You’ve defaulted on all loans
- You can’t earn any more money
- You’ve sought debt relief with other options
How Will Your Credit Score Be Affected By Bankruptcy?
As you might suspect, bankruptcy has a negative effect on credit scores. If you file for bankruptcy in Saskatoon, you can expect your credit score to take a major hit.
Bankruptcies result in a rating of R9 on credit reports which will remain for years. Your credit cannot be improved until after your bankruptcy has been discharged and you’ve fulfilled all your obligations.
The number of bankruptcies filed also makes a difference in your credit score. If it’s your first time filing for bankruptcy, it will stay on your credit report for at least six years after it has been discharged. A second bankruptcy will remain on your credit report for at least 14 years.
For more advice on how to rebuild your credit after bankruptcy, click here.
How to Improve Your Credit Score Following Bankruptcy
Bankruptcy can definitely be tough on your credit. Your score will be negatively affected for years, during which time you’ll be unable to apply for new credit.
That said, there are things you can do to improve your credit after your bankruptcy has been discharged, including the following.
Be timely with your payments. The biggest factor that influences your credit score is your bill payment history. Be sure to be diligent with paying your bills in order to give your credit score a boost.
Get a copy of your credit report. You’re allowed to get a copy of your credit report for free every 12 months from one of the three major credit bureaus. By pulling your report, you’ll be able to see if there are any errors that might be mistakenly pulling your score down. If you notice any, report them to the respective bureau and have them fixed.
Keep your expenditures to a minimum. Don’t rack up our debt. Instead, try to spend as little as possible so you don’t pile on the debt and get yourself into the same predicament you did before. Having a minimum amount of debt will help you improve your credit score.
Save more. If you can save up a nice financial cushion to fall back on, you’ll have cash available for a rainy day if money happens to be tight on occasion.
Apply for a secured credit card. It might be hard to get approved for an unsecured credit card after filing for bankruptcy. But a secured credit card is easier to obtain because it requires a cash deposit up front, so there’s actually no credit involved.
Once you get one, you can improve your credit score by ensuring that you pay off your monthly payments on time and in full.
What Happens to Your Debt After Filing For Bankruptcy?
By filing for bankruptcy, you’ll be relieved of all your debt and will no longer be responsible for them. As such, you can finally alleviate all the stress associated with drowning in debt.
It should be noted, however, that while bankruptcy in Saskatoon can help discharge much of your debt, not all debt can be dealt with. More specifically, bankruptcy only discharges debts that are unsecured, such as credit card debt. Secured debts, on the other hand, involve collateral, which can become the property of the creditor in the event that you’re unable to pay your debt (for more information about secured debt and bankruptcy, click here).
For example, if your home – which is a secured asset of value – is worth more than what is still owed on your home loan, then whatever equity remains may have to be given up.
Debts that bankruptcy can alleviate include:
- Credit card debt
- Unsecured personal loans
- Unsecured lines of credit
- Payday loans
- Medical bills
- Taxes in arrears
- Unpaid utility bills
- Overdue insurance premiums
Certain debts may still remain even after filing for bankruptcy, including:
- Child and/or spousal support
- Fines
- Court-awarded damages
- Student loans less than 10 years old
- Debts resulting from theft or fraud
- Secured debt, such as mortgages
Can you file for bankruptcy online? Find out here.
What is The Cost to File For Bankruptcy in Saskatoon?
If you’re in serious debt, the last thing you want to do is add more debt to the pile. But even though bankruptcy is meant to help eliminate your debt, there is still a cost associated with it. How much you end up paying will depend on several factors, including the following.
Your base contribution. The administrative costs associated with dealing with your estate are covered by your base contribution, which is a mandatory cost for anyone filing for bankruptcy. In general, you can expect to pay somewhere around $200 for this fee.
Surplus income. Your monthly income will be assessed regularly, and if it’s over a certain amount, the excess amount will be considered “surplus income” that will need to be paid out.
Assets surrendered. You’ll need to factor in the value of the loss of assets that you may have had to surrender when you filed for bankruptcy. The overall costs associated with assets lost will depend on your income, assets, and household size.
For a more detailed look at the cost of bankruptcy, check out this article.
Are There Any Alternatives to Bankruptcy?
Bankruptcy in Saskatoon Saskatchewan should only be considered once all other options have been looked into, which can include any one of the following:
Debt consolidation loan – If you have several loans or credit lines with high-interest rates that you’re having trouble managing, a debt consolidation loan can help. With this option, you would take out a larger loan at a much lower rate compared to your highest-rate debt and use the funds to pay off all your other debt. As such, you would essentially be replacing all your current debt with one larger loan that’s more affordable and easier to manage.
Debt settlement program – In an effort to cut down on the amount of debt you still owe and even reduce your interest rates, a representative from a debt settlement company will negotiate with your creditors to come up with an agreement.
Consumer proposal – This is often the last step before choosing to go with bankruptcy. A consumer proposal involves submitting a written proposal to your creditors with the help of a Licensed Insolvency Trustee to have much of your debt forgiven in exchange for repaying a portion of the debt that you currently owe.
Video: Bankruptcy Explained
Bankruptcy Vs. Consumer Proposal
Since a consumer proposal is meant to help alleviate a lot of your debt – much like bankruptcy – how does it differ from bankruptcy?
For starters, you won’t have to surrender your assets with a consumer proposal like you would with bankruptcy. Further, the cost associated with each differs.
With a consumer proposal, the cost you’re responsible for is based on the settlement that you negotiate with your creditors, and monthly payments will have to be paid until you’ve completed your consumer proposal. With bankruptcy, your payments are based on your income, which means you’ll have to pay more if you earn more.
Both bankruptcy and consumer proposals will have a negative effect on your credit score, through bankruptcy will be harsher on your credit.
Is Bankruptcy the Right Step For You?
If your debt is far too much for you to handle and you’ve exhausted all other efforts and options, then perhaps bankruptcy may be the next logical step to take. If you’re sure that filing for bankruptcy is right for you, call Loans Canada for help. We’ll put you in touch with a Licensed Insolvency Trustee to help you determine if this is indeed the appropriate step for you to finally relieve you of your mounting debt.
