How to Avoid Bankruptcy
The following article by Robert Powell CPA CA CIRP LIT was published in the June 2106 edition of the District News.
Simply said, you can’t go bankrupt if you have no debt. Bankruptcy is a relief valve for people and companies who find themselves unable to cope with overwhelming debts. Bankruptcy is not necessarily the only option for resolving debts but the availability of other options is dependent upon individual circumstances. Generally speaking, the sooner you identify and seek to address significant debts, the more options will be available to you.
So, the key to avoiding bankruptcy is avoiding being in the position of having overwhelming debts. This is easily said but not always within your control. Many people I deal with were managing their debts (at least staying current with payments) until they hit a speed bump. That speed bump can be the loss of a job and not being able to replace the same income in a short period of time, reduced or lost income from sickness or health issues, separation and divorce, significant medical expenses, business failure, having a guarantee called, helping family etc. Debt equals risk; the more you have, the higher your risk profile and the smaller the speed bump has to be to throw you off the road. If you are spending every nickel on living expenses and servicing debts, you have no financial flexibility if there are extraordinary expenses or reduced income. Unless, of course, you borrow more. But, that just continues to increase your risk profile.
No one can predict the future so you can’t anticipate the unknown. However, you can, by managing your debt levels, try to keep your risk profile low so that you can take a speed bump and recover from it without having to resort to bankruptcy or other debt settlement mechanisms. Managing your debt and saving will also help prepare you for retirement. Thankfully, the bankruptcy process is available for those who find themselves with an overwhelming amount of debt so that they can reset their financial world and start again.
There is no magic to managing debt and reducing the risk that you may have to resort to bankruptcy. It involves personal discipline, managing wants and needs, being realistic about what is affordable, actually making an effort to pay-down debts in a reasonable timeframe and not just make minimum payments, thinking about the consequences of taking on new debts (including guaranteeing or co-signing for someone else) and making good financial decisions. You can’t rely on third-parties to manage your finances, you have to do it.
Powell Associates Ltd. is a Licensed Insolvency Trustee (LIT) focused on providing debt settlement, proposal and bankruptcy solutions for individuals and businesses. We offer free consultations to review your personal financial situation and practical debt resolution options. Contact us to discuss your situation over the phone or book an appointment to meet us face-to-face in Saint John, Moncton, Fredericton, Charlottetown or Dartmouth - it's your choice