The answer to the question in the headline, perhaps frustratingly, is maybe. Filing for bankruptcy can provide incredible relief to some consumers struggling with debt, but it is not the right solution for everyone. If you are wondering whether you should file for bankruptcy, consider the following questions.
What else have you tried?
Bankruptcy is one way to deal with debt, but it is not the only option. In fact, for most people, bankruptcy becomes their best route only after exhausting all other avenues. Before pursuing bankruptcy, you might also consider the following:
- Filing a consumer proposal, which allows you to repay a portion of your debt and keep your assets
- Reaching debt settlement plans with creditors
- Working with credit counsellors
- Making changes to lifestyle and budget
These few options can be effective at helping you get debt under control without filing for bankruptcy. That said, these alternatives may not help you get the fresh financial start you need, in which case, discharge through bankruptcy can be effective.
What are your sources of debt?
Bankruptcy clears many types of debt, but not all of them. Even after filing for bankruptcy, you will likely still be dealing with repaying:
- Payments for child or spousal support
- Court fines and penalties
- Debt related to fraudulent actions
- Recent student loans
- Secured debts
So, if most or all your debt stems from these sources, bankruptcy may not have a meaningful impact on them. It can be more effective if your debt comes from:
- Credit cards
- Personal loans
- Bank loans
- Past due bills
- Judgement debts from lawsuits
Under these circumstances, filing for bankruptcy can be far more helpful in clearing debt.
Are you getting help?
If you are struggling with debt, you may feel embarrassed and overwhelmed. These emotions can make it difficult to get help from professionals experienced in helping people manage debt. However, staying silent will not help you move forward or assess your options.
Talking to a lawyer, financial advisor or credit counsellor can help you get an accurate picture of your finances and remedies that could help you get back on your feet. These parties can also advise you on whether bankruptcy or other debt-relief options are right for you.