Is Bankruptcy a Good Solution for a Person’s Debt Problems

Being in serious debt for a long period can put a heavy toll on one’s psyche. In fact, there is a risk that one could be tempted to just simply go bankrupt and end all of this financial trouble. But is that the case? Would going bankrupt truly help someone in dire straits? What are the other options? Continue reading to have these questions answered.

Why One Is in Debt

Before one can think about bankruptcy, consider first how it got to this point. Was there a budget created? Did one set aside money for emergencies? Is one relying too much on credit to achieve goals or make ends meet? Are there any non-financial issues contributing to the person’s current situation? 

By answering these questions honestly, the person will get a clearer picture of why they’re in this situation to begin with. Knowing why one is in serious debt problems will help determine if bankruptcy is good or bad for one’s self.

The Consequences of Bankruptcy

Going bankrupt may seem like a ‘get out of jail free card,’ but it truly isn’t. For 6 years after someone files for bankruptcy, it is noted in their credit bureau report that they did so. Should they become bankrupt again, it will take 14 years for it to go away. While it is noted, it is very difficult for a person to get loans of any kind and may also cause potential landlords to reject them.

There is also a huge emotional cost to bankruptcy. A person who files for bankruptcy could feel a lot of shame and regret. This is partially because when they file for bankruptcy, that occurrence is permanently put on public record. It also requires a person to declare that they have gone bankrupt before to anyone who asks.

Bankruptcy Is Not a Universal Solution

Most people think that the moment a person goes bankrupt, all their debts are wiped clean. However, this isn’t the case. Secured debts like mortgages or car loans are not included in bankruptcy. If a person has taken out student loans within 7 years of declaring bankruptcy, it will also be excluded. There are other debts that may not be covered, either.

Bankruptcy Doesn’t Mean One Loses Everything

Another common misconception around bankruptcy is that a person will lose literally everything they own when they become bankrupt. While it is true that a person does lose a lot of assets, they do not lose everything. 

Should a person have any money in a Registered Retirement Savings Plan or RRSP, only contributions from the last 12 months are taken. A person’s personal items and basic household furnishings are generally not taken as well in most provinces in Canada. Of course, if said person has any necessary medical equipment, this isn’t taken away as well.

Alternative Solutions

A short-term cash deficit or problem isn’t what bankruptcy is meant to solve. It’s meant to be a last resort, and there are other alternatives. For example, one could go to debt consultants in Canada and ask for their help to choose from debt consolidation loans, debt repayment programs, debt settlements, etc.

Conclusion

In order to find personal debt solutions in Canada, it is best to go to the professionals. These people can help anyone with issues find the perfect solution, whether this be bankruptcy or not. While it will cost some money, they have the potential to save a lot of money and reputation.
Looking for professional debt help? DebtHelpers.ca offers a range of consulting services and debt solutions designed to help people stay on top of their finances. Reach out today!