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How To Avoid Filing For Bankruptcy

6 May 2012 by CreditCardsCo™

When you fall into financial difficulties finding a way out can be difficult. Often consumers bury their head in the sand until it is too late and they end up being forced to file for bankruptcy. However, there are steps you can take to avoid bankruptcy and get your finances back on track.

New bankruptcy rules in Canada have made it more expensive and more difficult to file for bankruptcy for certain groups of people thanks to surplus income rules. Under these new rulings, if you have any surplus income your bankruptcy will last for longer. In addition, for every month that you are bankrupt, you will be required to send proof of any income to your trustee. However, reports show that the number of consumer bankruptcies are falling across the country. Canadian consumers are avoiding filing for bankruptcy in the following five easy steps.

Time to Sell, Sell, Sell

It is very important not to wait until it is too late to take action. The first step towards avoiding bankruptcy when you are struggling to make payments is to sell valuable items to pay off debts. Items including furniture, electronics, appliances, jewelry, and designer clothing can all be sold to generate extra funds which can then be used towards paying off debts or catching up on missed payments.

There are plenty of places where you can sell items. You can consider everything from garage sales to online sites such as Amazon, eBay and Craigslist to sell your items depending on what type of things you have chosen to sell.

Consolidate Your Debts

If your debt is spread over various accounts, it is a good idea to consolidate your debts. That way, rather than making multiple payments with different interest rates, you could merge all your debts into a single payment with a lower interest rate. Debt consolidation can be carried out in various ways.

You might choose to apply for a credit card with a lower interest rate and transfers your balances, or you could look at applying for a personal loan from a bank and pay off all of your debts at once leaving you with only the loan repayments. The key to debt consolidation is to find an option which leaves you with smaller payments each month and less interest.

Talk To Your Creditors

When you are struggling to meet your repayments, rather than dodge contact with your creditors, make a point of talking to them and let them know you are struggling to repay your debts. The majority of creditors would prefer to help you reach some agreement and get their money back rather than allow you to become bankrupt and risk losing the money you owe them.

If you let creditors know that you are working to avoid filing for bankruptcy, it may prompt them to offer you lower monthly repayments, reduce the interest rate they are charging, or work with you to make a manageable repayment plan. If the creditor says no, then you will not be any worse off than you already are, so it pays to take the chance and ask.

Turn To Your Friends

Sometimes it can be difficult to admit financial difficulties to friends and family. However, borrowing from friends and relatives can often be a last resort in avoiding bankruptcy. If you do decide to approach your loved ones for a loan you should work out a manageable repayment plan.

If you go into the request with an installment plan already worked out, your friends or family will see that you are serious about paying the loan back and about sorting out your finances without filing for bankruptcy and will be much more open to discussing lending you money to cover your debts. When borrowing from friends there is also the chance that you will not need to pay any interest on your loan.

Find A Credit Counselor

Debt can be overwhelming. If you are struggling to cope, you may want to look into credit counseling. There are nonprofit agencies all over Canada who offer debt management services and credit counseling. A credit counselor can help you to develop a debt management plan and some will even work out an arrangement where you make monthly payments to your counselor who will then distribute it among your creditors. This can help you to keep on track and avoid going down the bankruptcy route.


In conclusion, declaring bankruptcy is never an easy thing to do and new changes have made it more difficult than ever. However, by following the five steps detailed above, you should be able to avoid bankruptcy altogether and get your finances back on an even keel.

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