Bankruptcy Alternatives Blog

How To File Bankruptcy in Canada

Before you decide to file bankruptcy in Canada, review your options.  Perhaps bankruptcy isn’t necessary.  You have other choices, such as:

• Pay off your debts on your own;
• Get a debt consolidation loan;
• Consider credit counseling, also known as a debt management plan;
• If you are American, consider a Chapter 13 Wage Earner Plan;
• If you are Canadian, consider a consumer proposal.

Only if all of these other bankruptcy alternatives are not possible should you consider filing bankruptcy in Canada.  Here are the steps required:

1. The first step is deciding you need help with your money problems;
2. Arrange for a free initial consultation with a bankruptcy Canada trustee;
3. After making your decision, the trustee will prepare the bankruptcy paperwork, and you sign the bankruptcy documents;
4. You then perform your duties;
5. Get your bankruptcy discharge, which eliminates your debts.

It is important that you understand the steps involved, and research your options, because only you can decide whether or not bankruptcy in Canada is the correct option for you.

Debt Consolidation Loan Calculator

For most people with debt problems, the first alternative to bankruptcy they consider is a debt consolidation loan.  That makes sense, because with a debt consolidation loan you can pay off all of your debts and only have to worry about one loan payment each month.  In most cases your new loan will have a lower interest rate than what you were paying on all of your high interest credit cards, so you save money.

But do you qualify for a loan?  That will depend on a number of factors, including your income, and the amount of your debt.  To find out if you qualify, use a debt consolidation loan calculator to calculate your loan payments.  You enter the amount you owe now, and the interest rate you are paying, and you enter the amount you will be borrowing, and the new interest rate you hope to get, and you can instantly see how much you will save.

It pays to be prepared before you go to the bank, because if you won’t qualify you need to take steps to increase your chances of qualifying for a loan.  You may need to pay off one or more of your credit cards first, or take steps to increase your income.

Either way, you want to know whether or not you can afford the loan before you apply, and that’s why it’s essential that you use a debt consolidation loan calculator to calculate your payments first.

How will new bankruptcy rules in Canada affect me?

Much has been written about the new bankruptcy rules in the United States that came into force in 2005. Less well known is the fact that new bankruptcy rules in Canada came into force in September, 2009. One of the impacts of the new rules in both Canada and the United States is that personal bankruptcy will cost more for many individuals.

In Canada, the new surplus income rules mean that if you earn over a set amount, you will be paying more while bankrupt, and your bankruptcy will last longer.

If you have good income, but also have high debts, it is important that you explore all bankruptcy alternatives to avoid paying a huge amount while bankrupt.

The two obvious alternatives to bankruptcy are a Chapter 13 Wage Earner Plan (if you live in the United States), or a consumer proposal (if you live in Canada).

There are pros and cons to both options, but in general it’s a good idea to avoid bankruptcy if possible. Consult an expert in the United States or Canada for more information.

Bankruptcy Alternatives: An Expert’s Advice

The editors of the Bankruptcy Alternatives Information web site are constantly researching ways to avoid bankruptcy. In the past we have discussed debt consolidation loans, credit counseling, Chapter 13 Wage Earner Plans, and Consumer Proposals.

Today we are pleased to report on a new research report from Dave Clark, a U.S. attorney with many years experience helping people in financial trouble. Here is his story:

I graduated with a BS degree in Economics and a minor in Finance. I worked as bank examiner for several years before going to law school. Once graduating law school with honors in 1984, I accepted a job as an associate in large metropolitan law firm and represented some of the largest and wealthiest corporations in the U.S. But it wasn’t satisfying. No, not at all.

I found my true calling and fell in love with practicing law again. I began working even harder, earning less at first, representing ordinary workaday consumers. I began thinking of large corporations as bloated whales, driven by arrogance and greed, as they systematically rolled over working moms and pops. I fell in love with the possibility of becoming the fastest barracuda in the ocean that could take a bite from whales anytime, anywhere and anyway I wished.

You see, I knew the attorneys representing large corporations. I had been one of them for 5 years. I knew their level of expertise and their tactics. I decided to up the ante and bring the fight to their front door. That was 20 years ago.

Today, there is no better reward for me than bringing in a verdict against arrogant bullies, unethical corporations, and wealthy despots. You and I together will see FOREVER from the top of a pristine mountain. My love for the law and this pure purpose still drive me. I smile often, daily, proudly, and remain more committed than ever before.

My life has purpose. I have destiny. There is nothing I would rather do.

I want to share it with you.

Everyone coping with a financial problem has extraordinary options. Your options are almost unlimited. The best results do require a solution designed with the end game in mind. You may want to compromise in one area to maximize another, to achieve the best overall outcome. With one strategy supported by many complementary tactics, your best results can be virtually guaranteed.

The best way to see your potential end results, in advance, is use a common measure. You may even want to mix and match the most profitable benefits and advantages of the following alternatives:

• Consumer Credit Counseling – the free course required as a condition of filing bankruptcy (certificate of completion required). They will try to create a monthly budget that pays all of your debts and bills.
• Debt Management Plans – a low cost service for renegotiating interest rates and penalties owed on unsecured debts.
• Debt Settlement Plans – a more aggressive service for settling unsecured debts for a percentage of the principal due, with payment spread out over several years.
• Debt Consolidation Loans – new loans requiring new approval to combine debts (Many dangers here).
• Home Equity Loans – new loans using your home as collateral to pay off other debts (Many dangers here).
• Chapter 7 – the complete discharge of most debts without payment of any kind. You can eliminate judgments, debts and contractual liability easily.
• Chapter 13 – the discharge of most debts after making partial payment over 3 to 5 years.
• Chapter 11 – both discharge and reorganization of debts in a plan of 5 years or more.
• Private Debt Negotiation – The individual settlement of debts yourself or with the assistance of an attorney.
• Litigation of Select Debts – Invalidating or settling debts through the legal system (without filing), with rights of discovery, deposition and jury trial to resolve disputes.

In my Bankruptcy Strategies manual, I explain the advantages and disadvantages of each of these alternatives. In some cases, using 4 or 5 of these alternatives creatively will maximize your end result. I have included a series of worksheets and instructions intentionally designed to help you find your ultimate solution.

You will see, in dollars and cents, how each of these alternatives could help you. You will complete worksheets in the privacy of your home to reveal your best option and potential savings. No more guessing. No more excuses. You will know how each option will change your life.

You will create a side by side comparison of your expected results over 5 years. This should be your common measure when comparing your costs, benefits, advantages and disadvantages. Once you know what to do (using included instructions and examples) completing my worksheets is easy by design.

There is no reason why most people cannot use all of these alternatives as they see fit. We are free to combine options and alternatives to design your beautiful solution.

Timing is Critical

Simply knowing that you have alternatives is not enough. You must use them at the proper time and in the proper sequence. Unfortunately, many people procrastinate with the best intentions. But as time slips away and they lose the ability to keep all of their exempt assets and discharge all debts.

Start early. A few weeks or a few months can make all the difference.

The best time to compare your options is when you first have problems paying your monthly bills. At this point, you may be able to avoid filing altogether, but also maintain all legal rights and benefits if filing later becomes necessary. Safe play. Highly profitable. You keep all property and assets and remain in control.

If creditors and collection agents are calling, you have less time to plan and fewer options. If you need to bankruptcy to stop foreclosure, eviction or repossession, your options are needlessly limited. But you still have many powerful and highly valuable options.

Success using an optimized bankruptcy strategy is not an accident. It takes planning. You must have time to first discover what you want, what makes the most sense for you, and have time to act. Then, your beautiful solution will unfold with uncanny precision and a full discharge of all debts will be quick and easy.

Think of it as a game. First you have an idea and decide on a plan. Then you line up all of the dominoes. Then you file. Then with the slightest flick of a a finger, everything falls in place, at the proper time, in the proper sequence, with automatic precision. Your competition will be dumbfounded. No problems. You were first to act. You win.

It is hard to find reputable information on your bankruptcy alternatives. For a credible review of your options, consult Mr. Clark’s book, Bankruptcy Strategies: Claiming Maximum Benefits Under Chapter 7 & 13. Find Out How The Pros Use Their Options Wisely And Beat Creditors At Their Own Game.

You have options, but only you can take action to deal with your debt.

Bankruptcy Alternatives During an Economic Crisis

The “credit crunch” of 2008 has lead to more government bailouts and a deeper recession in 2009; many experts are now even predicting a depression. What impact does this have on your bankruptcy alternatives?

Lots.

If your home equity continues to increase, and if you are getting lots of hours at work, you probably qualify for a debt consolidation loan. However, during a recession when your house is declining in value and foreclosures are on the rise, and when your income is going down, a debt consolidation loan is probably neither affordable or something you can qualify for until the economy bounces back.

If you have a good job and good income, Americans could file a Chapter 13 Wage Earner Plan, and Canadians could file a consumer proposal. Under these legal arrangements you repay a portion of your debts, and avoid having to file bankruptcy. However, to repay a portion of your debts you need an income, and if you are unemployed or working reduced hours, you may not have the income to do a Chapter 13 filing or a consumer proposal.

In other words, the recession has made it more difficult to take advantage of the bankruptcy alternatives that worked so well in the past.

What can you do? Cut your expenses, make a budget, find a part time job, sell any assets you have to raise cash, and ride out the storm. The economy will eventually improve; the trick is to keep your head above water long enough to allow you to benefit when the better times return.

What are my bankruptcy alternatives?

As the North American economy continues to weaken, and every day we read news of bailouts, we get even more worried about our own personal financial situation. What can we do? If you are experiencing money problems and you think that personal bankruptcy is your only alternative, start with our five step program to avoid bankruptcy.

First, make a family budget. If you don’t know where your money is going, you can’t decide what spending to cut to free up cash to repay your debts on your own. Read our special report on budgeting for more information, and for some free tools to help you budget.

If your budget shows that you can afford it, your next step may be to try to get a debt consolidation loan. With a debt consolidation loan you consolidate your debts and make one monthly payment, at a lower interest rate than you are paying now. You need good credit to qualify.

If you don’t have good credit, your next option would be to consider credit counseling through a non-profit credit counsellor about a debt management plan. They may be able to work out a plan where you repay your debts over a longer period of time, at a reduced or zero interest rate.

If that isn’t affordable, a legal procedure may be necessary. In the United States you could file a Chapter 13 Wage Earner Plan. In Canada you could consider a consumer proposal. Either way, it may be possible to negotiate a legal settlement where you pay less than the full amount owing.

If even that is not affordable then, and only then, should you consider personal bankruptcy. Bankruptcy is a last resort, only to be considered if all other bankruptcy alternatives have been considered. You have options, so consider them wisely, do your research, and then make the decision that is best for you and your family.

What are my bankruptcy alternatives if I own a house?

In 2008 in North America the real estate market has fallen significantly. Over 1 million homes in the United States are currently under foreclosure, and the numbers are falling in Canada as well. What can you do if you own a house, but can’t afford to pay the mortgage an all of your other debts?

First, you could sell your house. If you can sell it and get enough money to repay the mortgage, that might be your best bankruptcy alternative. Sell now, before your house falls even more.

Second, you could attempt to negotiate with your mortgage lender. They do not want to foreclose on your house, so they may be willing to extend your mortgage or give you more flexible payment options. You will not know unless you ask.

Third, you could attempt to get a debt consolidation loan to deal with all of your other debts, which may give you enough free cash to stay up to date with your mortgage payments. It may even be possible to get a mortgage debt consolidation loan to reduce the interest you are paying on your mortgage.

Fourth, you could file a consumer proposal or Chapter 13 Wage Earner Plan. Again, this deals with your other debts, not your mortgage, but it may give you enough financial flexibility to keep up with your mortgage payments.

Finally, if all else fails, it may be necessary to file personal bankruptcy. Every situation is different, so you will need to research to determine if you will lose your house if you file bankruptcy; the answer will depend on the value of your house, and the amount you owe on the mortgage, and where you live.

As you can see, you have bankruptcy alternatives when you own a home. To find out more, if you live in Canada, contact a bankruptcy trustee, or if you live in the United States, contact a bankruptcy attorney.

What if I Just Stop Paying My Debts? Is Not Paying a Good Bankruptcy Alternative?

At some point in almost everyone’s life we get to the point where we just through up our hands and say “Enough: My debts are too high, so I’m just going to stop paying!”

For some people that may be the correct option, but it does have one significant danger: If you stop paying, it is possible that your creditors will take you to court, sue you, and attempt to garnishee your wages. If you own property, like a car or a house, they could attempt to put a lien on your property, seize it, and sell it to repay your debt.

If you currently own no property or have no wages, you are “creditor proof”, so doing nothing may be an option. If you get a pension or welfare, it is unlikely that those payments can be garnisheed, so there may be little risk of a garnishment. You could open a new bank account at a new bank that is not known to your creditors, and continue on until your situation changes.

However, if you do have a job, doing nothing is probably not the correct option for you. You need to take action. Try contacting your creditors and working out a repayment plan. If you need help, a credit counselor can meet with to determine if a debt management plan is the correct solution for you. If you still have good credit, a debt consolidation loan is another possible option.

If you live in the United States, a Chapter 13 Wage Earner Plan is a good personal bankruptcy alternative. In Canada, a consumer proposal is an excellent solution in many cases.

The point to remember is that doing nothing may be an option, but there are many other bankruptcy alternatives, so research your options and decide on the option that’s best for you.

Chapter 13 Wage Earner Plans: A Great Bankruptcy Alternative, or a Trap?

A Chapter 13 Wage Earner Plan is a great alternative to Chapter 7 bankruptcy, but only for certain people.

First, you must be a resident of the United States to file under Chapter 13. Canadian residents should consider a consumer proposal.

Next, you must determine if you qualify for Chapter 13. (Because a Chapter 13 bankruptcy is paid for out of the wages you earn each month, Chapter 13 is also known as a Wage Earner Plan).

Since new federal bankruptcy rules became law in October, 2005, anyone who has gross income higher than the median income for their state is required to file bankruptcy under Chapter 13, instead of under Chapter 7. Do not fall into the trap of thinking you can file under Chapter 7; Chapter 13 may be your only option.

Before deciding on a Chapter 13 Wage Earner Plan, consider your other options.

Since a Chapter 13 plan will typically last for five years, you should explore any options that can be completed in less than five years. For example, if you can get a debt consolidation loan and repay it in three years, a debt consolidation loan is probably a better option for you than a five year Chapter 13 Wage Earner Plan.

If you don’t qualify for a debt consolidation loan, but you want to avoid the court process, and can afford to pay your debts in full over a three to five year period, credit counseling credit counseling may also be an option.

Finally, you may be able to cut your expenses and pay off your debts on your own.

A Chapter 13 Wage Earner Plan is designed to give you a fresh start, but remember, it’s a five year plan, and that can be a trap. Only agree to a five year repayment plan if you are confident that you can afford to make the payments.

I am behind on my mortgage. Do I have any alternatives to bankruptcy?

If you get behind on your mortgage payments, your mortgage company will eventually want to seize your home and sell it to recover their money. If there is a shortfall when they do this, you will be responsible for the shortfall.

For example, if you owe $200,000, and they sell the house and get $190,000, they will pursue you for the $10,000 shortfall. If that happens, is it necessary to declare personal bankruptcy, or do you have other bankruptcy alternatives?

First, you should take all reasonable actions to stay current with your mortgage, and to prevent the bank from taking your house. This would include negotiating with the bank to defer mortgage payments until you can get back to paying regularly.

Second, you could attempt to switch to a different mortgage lender, perhaps through a mortgage loan debt consolidation or other type of mortgage refinancing.

Third, you could attempt to borrow from family or friends until you are back on track.

If those alternatives don’t work, and the bank does seize your house, you can still negotiate with the bank to repay the shortfall. Ask them to convert the shortfall to a loan that you can repay over time.

Only if these bankruptcy alternatives are not successful should you consider personal bankruptcy as a way to deal with a shortfall on a mortgage