In today’s economic climate, filing for bankruptcy is an unfortunate reality. However, before taking this drastic measure, it’s important to understand the ins and outs of bankruptcy, your options and the long-term consequences.

What is bankruptcy?
According to Canadian law, bankruptcy is the act of legally declaring that you are unable to pay your creditors. When someone declares bankruptcy, a trustee appointed by the court oversees the bankruptcy process. This trustee acts as a negotiator on behalf of the person declaring bankruptcy and the creditor to try and ensure that both interests are looked after.

How does filing bankruptcy affect my credit score?
Depending on your circumstance and debt, a declaration of bankruptcy can remain on your credit history anywhere from six to 10 years. This means that you will most likely not be able to, on your own, obtain credit in any form; credit cards or lines of credit, car loans, mortgages, cell phones — you name it. A bank account is the extent of what you will most likely qualify for.

What are my options?
If you’ve exhausted all other options, it’s a good idea to speak with a credit counsellor. Credit Counselling Canada ( is a non-profit agency that offers free and confidential counselling. With a counsellor you will be able to review your current financial situation, explore options and find the best solution to your situation.

How can I work my way back from bankruptcy?
The first step is to change your spending habits. It’s time for a complete overhaul to your financial life. You need to start living within your means, paying off that debt and putting money away for an emergency savings. And keep your eyes on the prize: Create a plan and make a vision board to map out where you need to go and how you are going to get there.

How can I avoid bankruptcy altogether?
To avoid having to go down the bankruptcy road you want to avoid the vicious cycle of debt. Pay all your bills in full or at least make more then the minimum payment, stay on top of your loans if you have any, start living within your means and begin to follow a spending plan. If you start to fall behind on bill payments, call your creditors and make a plan.

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