On September 18, 2009, Canada’s bankruptcy rules changed, making it more expensive and more difficult to file bankruptcy for particular people, due to changes in the surplus income rules. Under these new rules, if you have surplus income, your bankruptcy will last longer. What’s more, each month that you are bankrupt you must send copies of your pay stubs and proof of other income to your trustee.
Fortunately, Industry Canada reports that consumer bankruptcies were down by 11.9% in January, compared with the same month in 2009. And business bankruptcies were down by 21% in January, compared with the same month last year. In fact, Canadians should be happy to know that there are steps you can take to avoid filing for bankruptcy altogether. Here’s how:
- Sell. Sell. Sell.
Don’t wait until it’s too late. If you’re struggling to make payments, consider selling whatever you can and use the money to pay off your debts. Furniture, electronics, appliances, jewelry, clothing items — sell whatever you can so that you don’t fall behind on payments. The good news is there’s no shortage of places to peddle your wares. From garage sales to online sites such as eBay and Craigslist, there are plenty of ways to part with your goods and pay off your debts. - Consolidate debt.
Pay off all your high interest debts (like credit cards) by consolidating your debt. Instead of making multiple payments at different interest rates, you can lump all your debt into one with a single, and hopefully lower, interest rate. You can either apply for a lower interest rate credit card and transfer the balances or get a personal loan from a financial institution and use that sum to pay off multiple debts at once. - Reach out to your creditors.
Rather than dodge their calls, reach out to your creditors and let them know that you’re having a tough time paying your bills. Letting bill collectors know that you want to avoid bankruptcy may prompt them to lower your monthly payments, decrease your interest rates or work out a manageable payback plan. After all, it never hurts to ask. - What are friends for.
As much as it might pain you to borrow money from a good friend or sibling, it’s often a last resort when it comes to avoiding bankruptcy. But before you approach family and friends for a loan, be sure you’ve come up with a reasonable payback plan. Arriving with an installment plan in place will show that you’re serious about paying them back — and getting your finances in order for once and for all. - Seek the assistance of a counselor.
If it all seems overwhelming, it might be time to seek the help of a credit counselor. Non-profit agencies across the country, such as the Ontario Association of Credit Counselors, offer debt management services that promise to help Canadians experiencing serious money problems. Many of these counselors will help you create a debt management plan that lets you make a monthly payment while the credit counselor distributes the money to your creditors.
Declaring bankruptcy is never easy, but new changes now make it more difficult than ever. However, by taking a few smart steps, you can avoid filing for bankruptcy and get your finances back on track.
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