If your financial situation is so dire that you are considering seeing a lawyer about your debt problems, you should first make a thorough assessment of your finances. You may be able to solve your financial problem yourself, but if not you need to know where to go for help. In Canada, bankruptcy trustees are experts in bankruptcy law, and will help you understand your options. Trustees often offer free consultations and will recommend that you also talk to a lawyer if they believe your situation requires. For this reason, trustees are often a good first step when you know you need help but are not sure where to start.

Analyze your finances

You have already taken the important first step by acknowledging there is a problem. Now carefully analyze your finances. Make a list of all your expenses: rent or mortgage, car loans, food, utility bills, clothing – include any monthly expense like insurance payments. Subtract your total expenses from your income. This is the amount with which you must pay your debts. Is it feasible?

If you can reduce your expenses, or increase your income (perhaps by taking a second, part time job), then you may not need help to solve your debt problem.

But if your debts are getting bigger, and you can only afford to pay the interest on your mounting credit card bills, you need to take action.

Get advice from a bankruptcy trustee or credit counselling service

If you decide you need to take action, you have several options. You can apply for a consolidation loan, negotiate a settlement, make a proposal, or file for bankruptcy. Before deciding anything, you should consult a bankruptcy trustee or credit counselling service who will advise you on your best options.

Consolidation loans

Many finance companies offer consolidation loans, where all your debts are consolidated and you make just one payment each month. These companies charge a fee, of course. If your credit history is bad, you may not be granted a consolidation loan.

Negotiating

If you cannot get a consolidation loan you, or a lawyer acting on your behalf, could negotiate with your creditors for a suspension of payments if you know your financial situation will improve in the near future.

Consumer proposal

You need a bankruptcy trustee if you decide to file a consumer proposal. This formal proposal to make certain payments to your creditors, if accepted, results in an immediate “stay of proceedings” for any actions that may have been started against you. Your creditors can, however, decide not to accept your proposal however the trustee will assess you situation so you can make them the best possible offer.

Bankruptcy

If your creditors will not accept a consumer proposal or if your situation does not allow this option, declaring personal bankruptcy is your alternative and is often a last resort. You need a bankruptcy trustee if you decide to file for personal bankruptcy as they are the only ones who can file and administrate a bankruptcy. Your trustee will explain all of your duties and requirements prior to filing so that you know what to expect and how to ensure the process proceeds as smoothly as possible.