Bankruptcy vs. Credit Counselling – Which is the Better Option?

Debt disrupts more than your lifestyle. It affects your health, your relationships, and your future financial growth. The last thing you want is to deal with is a bankruptcy when your debt gets out of hand. This is a difficult situation to deal with. 

There are three reasons that can lead to bankruptcy in Canada:

• Job Loss: Reduced income or job loss is one of the prime reasons behind a bankruptcy. It becomes very difficult to pay back the debt when income has been substantially lowered, or worse case, income has been reduced to zero. The first thing you need to do in such a situation is to reduce expenses to free up cash and pay off debt.
• Divorce or Separation: Bankruptcy Canada says that one third of Canadians who file a personal bankruptcy is either divorced or separated. Going from a dual income to a single income can be a sharp drop in finances for many people. Suddenly, someone finds themselves paying bills – phone, hydro expenses, rent, car payments – that was once a shared expense. When income stays the same, but expenses double, it’s easy to fall into debt. This leads to some people to take on new loans that are hard to pay off. 
• Sickness: Long term sickness and accidents that lead to disability can lead to serious financial problems. Although medical care is covered in Canada, the lack of income or reduced income can make it tough to pay off debt. 

Declaring bankruptcy will not solve your problems. In fact, it can lead to a whole new set of financial issues. Firstly, the fees associated with bankruptcy can range from $1,500 to $1,800. When you’re already dealing with financial hardship, finding the extra money to pay for the fees is added stress. What may work better is to opt for credit counselling instead. With proper counselling, you may not need to declare bankruptcy at all. 

Let us help you do your homework on the subject so you avoid declaring bankruptcy, plan your finances better and look for the right credit counselling agency to help you pay off debt and avoid scams. 

Consumer Credit Counselling to Clear Debt

When you declare bankruptcy, the debts are cleared, your creditors are notified, and all lawsuits will grind to a halt. It may sound like a solution, but the repercussions can be long lasting. Previous bankruptcies will limit your chances of securing loans in the future, such as personal loans and mortgages. Your credit will take a hit once you declare bankruptcy. 

Of course, when there is no other alternative, bankruptcy can be considered. However, it is best to avoid it if possible. Consultation with a credit counselling agency may open up new avenues to resolve the matter better. 

There are many credit counselling agencies that are non-profit organizations. There is no fee for consultation; matters remain confidential and you clear all debt without resorting to bankruptcy. 

• The process starts by putting you on a monthly budget after reviewing your net income, debt and monthly expenses to assess your finances. 
• You will be presented with the best debt relief plan that works for your situation and advice about which ones to avoid.
• There is no one-size-fits-all formula to resolve the debt. There are several debt relief options: Debt Management Program (DMP); Credit Counselling/Debt Settlement; Bankruptcy/Consumer Proposal or managing debt yourself.

For-Profit vs Non-Profit Credit Counsellors 

Not all consumer credit counselling options are non-profit. There are for-profit companies who charge for their services too. Any fees associated credit counseling far outweighed by the benefit of the services they provide. Talk to a few agencies before you make up your mind. 

Lending Experts, B.C. 

If you are unsure about how to get out of debt, contemplating bankruptcy or looking for a reliable, professional consumer credit counsellors, call us at Lending Experts. We help you clear debt and secure loans through our team of dynamic and experienced mortgage professionals. We are dedicated to helping you through it.