In Ontario, you’re protected by the Ontario Collection and Debt Settlement Services Act (the “Act”). The Act sets out strict laws on what a debt collection agency can - and cannot - do. Among other things, it attempts to curb collection agencies from using harassing or intimidating tactics to get you to repay the debt you owe. Here's what this law covers.
Most Canadians know that bankruptcy should be avoided whenever possible. But for those of us overwhelmed by crushing debt – at some point – we face it head on and ask, “Is bankruptcy the best solution?”
Before we get into whether you should file for bankruptcy, let’s first review what bankruptcy is – and what it isn’t.
What is bankruptcy?
Bankruptcy is the legal process that helps take the pressure off of those debtors who can’t repay their debts in full. It’s a way to finally get rid of those unsecured debts that hold hard-working, honest Canadians back from achieving financial freedom.
So what is bankruptcy not?
Bankruptcy is not something to be embarrassed about or ashamed of.
Think about it like this. If you’re not feeling physically well and you have been struggling with a cold that just won’t go away, instead of suffering in silence and risking it getting worse, you’d probably go to the doctor, right?
Well, bankruptcy is the solution to those money troubles that show no signs of going away on their own – and that just keep getting bigger and bigger. Sometimes we need help from professionals to get us back on the path to physical – or financial – wellness.
What are the advantages of bankruptcy?
Bankruptcy does come with its fair share of positive benefits. These include:
- A way to finally get rid of your unsecured debt (such as credit card debt and unpaid utility bills). On completion of your bankruptcy, the unsecured debts included are discharged, which means they are eliminated.
- Legal protection from your unsecured creditors. Because bankruptcy is a legal process, once you file, your creditors are stopped from all collection activity. This means an end to the collection calls, wage garnishments, start or continuation of any legal action to recover on your debt, and frozen bank accounts.
- A chance to start over fresh with a clean financial slate.
- Relief from the anxiety and pressure of financial overwhelm.
What are the disadvantages of bankruptcy?
The biggest negative to filing bankruptcy is the effect it has on your credit – and your ability to obtain future financing as a result.
If you’re looking to buy a home or a car, you should be aware your bankruptcy will show up on your credit report for up to 7 years after filing.
That said, chances are that your credit has already taken a hit if you’re defaulting on your bills. What’s more, bankruptcy will give you a way to finally get rid of that unsecured debt once and for all so you can start slowly rebuilding your credit.
How do I determine if bankruptcy is the best solution for me?
While the rule of thumb is that bankruptcy is a last resort, you should reach out for help immediately if…
You can no longer afford life’s necessities – such as gas, groceries, utilities, etc. – without relying on credit cards or without withdrawing from your retirement savings.
Still not certain if bankruptcy is right for you? It is, after all, a huge step to take.
The good news is…
You don’t have to make the determination about whether to file for bankruptcy on your own.
What can I do to immediately improve my financial situation?
If you are considering bankruptcy, the best next step you can take today is to contact a Licensed Insolvency Trustee (LIT).
LITs are the only individuals authorized by the Canadian government to assist debtors like you with filing a bankruptcy or Consumer Proposal.
There are rules for eligibility when it comes to bankruptcy, including being a Canadian resident, being unable to pay your debts as they come due, and owing more than $1,000. Your LIT will review these requirements and help you determine whether you are even eligible.
Your LIT will also help you prepare the paperwork for the filing and ensure that your rights under the Canadian bankruptcy law – as well as those of your creditors – are protected.
What’s more, these federally licensed and regulated professionals have the education, credentials, experience, and skills to assist you with the full range of debt relief options.
This means that if your money problems can be fixed with budgeting assistance, a loan consolidation, or a debt management plan, your LIT can help with those processes as well.
You might be thinking, “What’s the catch?”
Well, there isn’t one. It is an LIT’s mission to get you to better financial health.
LITs are, in fact, governed by strict ethical rules and regulations in the provision of their debt services – unlike any other debt relief specialist in the nation. This means the advice you get will be in your best financial interest.
Plus, your initial consultation with an LIT is free.
At this consultation, your LIT will get a comprehensive overview of your financial circumstances and advise you on every debt relief option that is available to you. You’ll even get their opinion on the best one for you and your family.
So, is bankruptcy right for me?
The best person to answer this question is an LIT – after the LIT reviews your unique financial circumstances. No two people have the same exact situation. You need financial advice that is tailored to you.
A final note on all this:
It is not in your best interest to simply watch as you plummet further into debt. Nor is it in your best interest to waste time feeling guilty about the effect bankruptcy might have on your credit report.
If you’re struggling financially, take a moment to reframe things. Your LIT will not only help you achieve relief from the debt that is holding you back, he or she will also help you figure out how you landed in this situation – and how you can avoid it in the future.
Contact A Licensed Insolvency Trustee Today
It’s time to take control of your financial well-being. Let us help you on your journey. The sooner you reach out, the more options you may have available. Bankruptcy may not be your only option. We look forward to hearing from you.