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The Basics of Bankruptcy in Saskatchewan
People who find themselves under an avalanche of debt often think of bankruptcy as the first option. For many debtors, it is the right choice, but it is important to understand how the process works, because it brings significant consequences to your financial profile and your family’s immediate future.
Did you know that bankruptcy doesn’t eliminate all of your debts?
It does get rid of most of them, but it doesn’t get rid of secured debts (like a mortgage or a car loan), student loans (if they aren’t seven years old yet) and any alimony or child support payments that have fallen into arrears. You still have to pay all those. Also, if the majority of your debt comes from credit card bills, your creditors may try to get you to pay more before they allow you to enter bankruptcy – and the bankruptcy judge might side with them.
How does the bankruptcy process work in Saskatchewan?
Well, filing is just the beginning. The whole process takes nine months, and you have to pay your Trustee a fee each month to administer your case. You have to go through two counseling sessions. If you have to give your creditors more money, the process can take more time. If you have more assets than what Saskatchewan law allows, then the Trustee sells them and gives the proceeds to your creditors.
At the end of the nine months, anyone can oppose your discharge as well – your creditors, your Trustee, the bankruptcy court, or the Superintendent of Bankruptcy. This can cause you to have to go to a deposition or a hearing and then jump through additional hoops to get your discharge.
What happens to your credit rating when you declare bankruptcy in Canada?
Bankruptcy has a serious effect on your credit score. It is not easy to get credit once that bankruptcy goes on your credit report, and it stays there for six years after discharge if it’s your first bankruptcy, and 14 years if it’s your second. It will be just about impossible to renew your mortgage, take out new loans or get a credit card with a reasonable interest rate.
What are the alternatives to bankruptcy in Saskatchewan?
If you are now thinking twice about filing for bankruptcy, take a look at some of the alternative that exist for people who have significant debts in Saskatchewan. While no one solution might be perfect for you, bear in mind that some people have put together hybrid plans involving more than one solution – every client has an individual situation, and we work with people to find the best answer for their needs. Here are four options that have worked well for many of our clients.
- Debt Repayment Plan – This involves sitting down with a credit counselor and having your creditors agree to lower your interest rates and perhaps even waive some charges. You put together a plan to make payments each month on the basis of what you can afford – and you’re not taking out a new loan.
- Debt Consolidation Plan – This is similar to the repayment plan but can also include taking out a new loan that consolidates all of your existing debt at a better interest rate.
- Debt Settlement – In this case, an intermediary goes to your creditors and offers a settlement to your creditors in which you pay back a portion of what you owe, and they agree to consider the debt paid.
- Consumer Proposal – This is the only alternative on the list that involves the legal system. A bankruptcy Trustee puts this together, and you make monthly payments that satisfy enough of your debts to make your creditors happy – after all, they’re getting more than they would have gotten if you’d gone into bankruptcy.
How do you choose which solution to pursue?
The best option is to sit down with a certified credit counselor to put together a plan, or a bankruptcy Trustee. This conversation can extend from your current situation to the principles of budgeting effectively so that you can not only meet your expenses and obligations but also begin to salt away some money for the lean months.
When you visit with a bankruptcy Trustee, make sure you talk about all of the options available to you. Bankruptcy is the right solution for many debtors, but for others, a consumer proposal gets you out of debt with a much shorter-term effect on your credit. If creditors accept your proposal and you can get through it in a timely manner, you don’t have to wait for six (or 14) years for your credit report to get cleaned up.
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