How to Avoid Bankruptcy

How to Avoid Bankruptcy

For most people filing bankruptcy in Canada should be a last resort, and to be used only if all other options won’t work for you. Here are three options to consider avoiding filing bankruptcy:

Stop using the credit cards

Cut the cards up, stop the bleeding, and don’t go and get more debt. Borrowing money to pay borrowed money only treats the symptoms, not the root cause.

Write out a budget

This is basic. Write your household income at the top, and then write out your expenses below that. When you see the score, i.e. income vs expenses, then you will how much trouble you are in. If you are heavily in the red, see what expenses can be trimmed. Cable TV? Car? Eating out?

Get a bigger shovel! Get more income

This may mean working one or two or extra jobs, delivering pizza, waiting tables, stacking shelves, whatever it takes to generate income to pay off your debts. Have a garage sale or sell stuff on eBay. Generate as much cash as you can.

For those already deep in debt, here are five tips on getting out of debt quicker:

  1. Prioritise your outgoings. Make sure you keep food on the table, and a roof over your head, and, of course, keep the lights on. The rest can wait.
  2. Keep a $1,000 emergency fund. These are unexpected events such as your tire blowing out on the freeway, the car breaking down etc., not birthdays and Christmas.
  3. List your debts from the smallest to the biggest.
  4. Start paying off the smallest. So this means paying extra on the smallest debt first while paying the minimum repayments on the other debts, until the smallest debt is 100% paid out. Then start on the next debt in your list. Rinse and repeat until you are debt free.
  5. Upgrade your emergency fund. Revisit your emergency fund. Raise it to cover 3-6 months’ expenses.

If you’re looking for a credit counsellor in Toronto, get a quick assessment with us today or call us at 416.900.2324.