Your debts are high and the struggle is keeping you up at night so much so that you know you need to do something. Yet you’ve been delaying filing for bankruptcy because you’re nervous about the process or are afraid about how filing bankruptcy will affect you or your family. But should you be?
When we speak to people for the first time it’s not uncommon to discover that they have be experiencing financial distress for a number of months (or even years) before reaching out to discuss their situation with us. During this time they are taking on more debt, and usually very expensive debt – especially payday loans. This means they pay more interest on their debt for longer. Sometimes this interest cost is so high it takes away from their ability to provide necessities for themselves and your family. It’s hard when you are choosing between paying the rent, buying groceries or making a debt payment.
If you only making minimum payments towards your debt then you are paying nothing but interest. Nothing in your payments is benefiting your ability to get out of debt.
Sometimes people delay looking a bankruptcy as a solution as long as possible in order to continue to maintain access to their credit cards. Yet what they are often doing is using new credit on one credit card to be able to have enough money to keep their other credit card afloat.
And the costs of delaying are not just financial. Avoiding the decision to talk with a Licensed Insolvency Trustee has a negative impact on the quality of life that many of our clients experience while they continue to try to tackle an insurmountable debt load with no particular plan.
So for many struggling to pay off their debts, delaying bankruptcy could mean:
- Money wasted in the form of interest because you were making minimum payments with no effect on the principal balance;
- Selling off or cashing in assets to keep up with credit card payments when these assets are protected in a bankruptcy (such as RRSPs) or could be preserved through a consumer proposal;
- Consolidating credit cards to a single loan with the same unmanageable interest rate thereby postponing the inevitable, all the while paying more in interest;
- Conversations with creditors on the phone explaining why payments have been missed or when the next payment will be made;
- Threats of litigation on behalf of creditors and perhaps even experiencing a loss of wages through a wage garnishment;
- Stress; and
- Sleepless nights.
Waiting longer to file bankruptcy itself does affect the fee for filing bankruptcy. Bankruptcy fees are guided by government household income standards and money received from assets that your creditors would expect your trustee to collect. And these payments will be much less than the debt payments your are struggling with today. That is why holding off on the decision to file is actually costing you money.
There is also the opportunity cost of postponing your ability to begin to rebuild your finances.
Yes, many people are afraid to file bankruptcy because it will appear on their credit report. However if bankruptcy is the right answer for your debt troubles, then the sooner you file the sooner you can begin to rebuild. Most first time bankrupts complete their bankruptcy in nine months. Once your bankruptcy is finished, your debts, and all their monthly payments, go away. All that money you were paying in interest can now go into savings. In addition, you can apply for a secured credit card after filing bankruptcy to use for convenience and to re-establish a new credit history. In other words, your financial life starts over right away, not when your bankruptcy is removed from your credit report.
If your debts have become too much to handle and you know you need to do something to get rid them, set up a free consultation with one of our local trustees sooner rather than later. If you’re having difficulty meeting your monthly financial obligations, simply having a conversation will give you the tools you need to make the best decision for yourself and your family. You will also find that we consider personal bankruptcy to be a final resort and that we will always explore alternatives to bankruptcy when we meet you.