Is bankruptcy too easy a path to get out of debt?
Having lost much of its stigma, declaring personal bankruptcy is becoming an increasingly popular option for people sinking under the weight of unmanageable debt.
So much so that roughly 140,000 Canadians went broke last year, according to the most recent statistics. On average, people facing personal insolvency are in their mid-30s, with around $35,000 worth of debt.
But bankruptcy isn't necessarily an easy — or pleasant — fix for those who fall behind in their payments. It comes with substantial side effects and shouldn't be taken lightly, warns bankruptcy trustee Grant Bazian.
"Insolvency doesn’t always happen overnight. Often it’s a cyclical pattern of behaviour that leads people down the path of a financial crisis," Bazian notes, suggesting that people view bankruptcy as a last resort.
First off, you'll need to a hire someone like him to balance both yours and your creditors' rights. Something of a referee, the trustee is there to make certain you understand the rules and that they're applied fairly.
And that's not free. Trustee fees are set by the government and an average bankruptcy costs approximately $1,800 to $2,000.
Each month that you're bankrupt you're required to send copies of your pay stubs and proof of other income to your trustee who then determines what you must pay. And that number isn't fixed.
If your paycheque crosses a certain limit, for instance, you'll be required to offer up a portion of this surplus income depending on your earnings level and your family size.
Have you declared bankruptcy? Did the process go as you expected it to? Has the decision haunted you financially?
By Gordon Powers, MSN Money