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Things to consider before declaring bankruptcy or filing a consumer proposal

As emotions run high during the pandemic, your state of mind may be telling you that it's time to consider personal bankruptcy or the consumer proposal. It's easy to rush into these decisions when you don't understand the entire financial landscape and aren't fully aware of all the solutions available to you.

However, it's best to slow down and take stock of your situation. Taking the time to consider all your options will help you get out of your state of panic and help you make an informed decision about the next step.

Here are some of the most important things to consider before declaring bankruptcy or filing a consumer proposal:

1. Setting the record straight

It's extremely important to have carefully evaluated and analyzed all the facts before considering bankruptcy. Your decision depends on your financial situation and needs. Many people don't even know they can file a consumer proposal.

An analysis of your debts can help you avoid bankruptcy. A consumer proposal is considered appropriate if you have less than $250,000 (excluding mortgage), and allows you to retain many of the rights you lose if you declare bankruptcy.

Be sure to consult a trustee in bankruptcy to make sure you choose the best solution.

2. Opt for deferral programs

If you find yourself in a situation of insolvency, i.e. you don't have sufficient assets or funds to repay your debt, deferment programs can help.

Deferred payments give you the option of delaying the repayment of your payments. Deferred payments can be negotiated with your original creditor, or you may need to go through one of the major Canadian banks for a deferred payment on a mortgage or line of credit.

It's important to know that you'll have to repay this money at some point. So it's a short-term solution that gives you more time to get the money you need, and alleviates some of the financial pressure you may be feeling.

3. Obtain financial support from the Government of Canada

The Canadian government has recognized the financial pressures faced by a large segment of the population, so the financial support available to Canadians has increased during the Covid-19 pandemic.

We encourage you to consider this assistance to help you repay your debts and avoid bankruptcy. As previously mentioned, the Canada Emergency Benefit was set up to help those affected by the pandemic by providing $2,000 for up to 4 months.

Accepting this additional financing will hopefully give you some financial freedom, as it will allow you to redirect funds towards paying off your debts.

Canada's economic response plan to COVID-19

What the COVID-19 pandemic has taught us about personal finance

Covid-19 has created a volatile landscape around personal finance. As individuals find themselves in unprecedented territory, it's an ideal time for reflection. The pandemic has forced us to re-evaluate the way we manage our money, as adaptability has become a necessity.

The most important aspect highlighted by covid-19 is the importance of planning and flexibility when it comes to your finances. The pandemic has highlighted how preparation and sacrifice are sometimes essential for families to keep their heads above water.

This is where the need to save comes in. From an early age, we are encouraged to save, a practice that proved indispensable for many during the pandemic.

It's a good idea to open a savings account so you're not caught unprepared by unexpected expenses. Simply putting aside $100 a month could really help you in the future.

In addition to planning, the covid-19 pandemic has highlighted the importance of flexibility when it comes to finances. It's important to establish a budget in order to control your finances. The pandemic highlighted the importance of budgeting, but also the need to be flexible in your budgeting.

A budgeting book is a good way of keeping track of your cash inflows and outflows. It will help you easily identify where you spend your money and where you can save money. The flexibility of your budget will enable you to better adapt to changes in your financial situation.

How has COVID-19 influenced bankruptcies and consumer proposals in Canada?

While the COVID-19 pandemic has had devastating effects on personal finances, it has also had a profound effect on the bankruptcy filing and consumer proposal processes. It's important to be aware of the changes introduced by the Office of the Superintendent of Bankruptcy, as they will affect you if you decide to move forward with either of these processes.

Increase in possible defaults

This is a key allowance provided for consumer proposals. Before the pandemic, an individual was allowed to defer three monthly payments before his or her consumer proposal was cancelled.

However, between March 13 and December 31, 2020, debtors benefited from three deferrals, and were then able to benefit from three further deferrals to allow flexibility in payments.

Credit counseling sessions

Face-to-face credit counseling sessions are not possible during the pandemic due to social distancing measures, so they are now done online. You must attend two credit counseling sessions in order to successfully complete your consumer proposal or discharge your bankruptcy.

How to manage your debts during COVID-19

In times of financial crisis, the ultimate goal is to avoid bankruptcy. However, over-indebtedness can be stressful. Here are some useful tips for managing your debts:

• Set priorities. If you owe more than one creditor, decide which debt to pay off first. Paying off high-interest debts, such as credit card debt, will reduce the amount you have to spend in the long term.
• Create a payment plan. To keep on top of your debt and avoid extra charges, a payment plan is the ideal tool to ensure that your repayments are made on time and that you don't fall behind on other payments, such as your weekly bills.
• Boost your savings. Saving small amounts of money on your day-to-day expenses can make a big difference. A small change, like switching to a cheaper insurance or energy provider, can save you money that can be used to pay off your debts.

How a licensed insolvency trustee can help you during COVID-19

The most important thing to remember when faced with debt is that you're not alone. Even if it feels like the end of the world, there are always people to accompany you through the process, offering advice and support.

Bankruptcy trustees are among the people who can help you. They are extremely knowledgeable about all legal issues relating to insolvency, even if the situation is changing rapidly as a result of COVID-19.

These are the people to consult if you are considering bankruptcy or a consumer proposal, as they are the only ones who can legally administer an insolvency procedure and discharge your debts.  

Consulting with a trustee will ensure that you have explored all possible solutions. If you decide that bankruptcy or a consumer proposal is the best solution, they can guide you through the process.