Filing Bankruptcy for Credit Card Debt

In the first quarter of 2022, the average Canadian had a non-mortgage debt of $20,744. At the same time, also due to the rising cost of living in Canada, the volume of new credit cards soared over 32% from 2021, and credit card issues are increasing credit limits by $5,500 on average. 

But, while a credit card is a powerful tool to deal with daily and unexpected expenses, it can also be a dangerous double-edged sword. And, as credit card debt piles up, you might start to feel like you are no longer in control of your finances. 

In this case, filing for personal bankruptcy for credit card debt might be your way out – and a smart strategy to start rebuilding your financial stability. Learn all you need to know about this financial move in this guide by Fox-Miles and Associates.

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woman stressed from credit card debt

What Is Bankruptcy?

While insolvencies have decreased significantly over the past years, nearly 31,000 Canadians filed for personal bankruptcy in 2021. But what is bankruptcy, and what are the benefits of this financial move?

Bankruptcy refers to the legal process of surrendering all or some of your assets to get discharged from your debts. When declared “insolvent,” you owe more than what you own, and your assets are used to repay your creditors. The process is overseen by a Licensed Insolvency Trustee (LIT).

Filing Bankruptcy for Credit Card Debt

Credit cards are a powerful tool to achieve economic stability and build up your credit score. However, improper use can lead to the accumulation of debt. This is especially true if you tend to use your credit card for everyday expenses such as grocery shopping or if you only repay the minimum amount each month, which is only enough to cover the interest. 

Suppose your credit card debt starts to pile up and you are unable to repay your creditors. In that case, you can file for bankruptcy, which can wipe out your personal liability and discharge you of unsecured debts (which include credit card balances). 

When filing bankruptcy for credit card debt, you can enjoy benefits like:

  • Eliminating overwhelming unsecured debts
  • Preventing wage garnishments
  • Preventing creditors from carrying out collection actions
  • A fresh start
  • Getting credit counselling to promote recovery

It is important to notice that filing bankruptcy for credit card debt might not be the best option for all debtors. Indeed, bankruptcies can stain your credit report and history for 7-10 years and prevent you from getting a loan or another credit card. 

What You Need To Know When Filing For Bankruptcy

When filing bankruptcy for credit card debt, you should always do so by partnering with an experienced legal advisor at Fox-Miles and Associates. An expert can help you avoid common mistakes and guide you in the process of filing for bankruptcy, thus making the journey more stress-free. Even more importantly, an expert can help you protect your assets. 

Here is an overview of the process of filing bankruptcy:

  1. Get in touch with a reliable Licensed Insolvency Trustee (LIT)
  2. Gather your documents and compile your paperwork
  3. Learn about your options by working with a trustee
  4. If possible, work and communicate with your creditors
  5. Follow up with the post-bankruptcy steps

After you file for bankruptcy, you will be required to attend at least two in-person counselling sessions and file regular reports of your finances.  

Before filing for bankruptcy, a few factors must be kept in mind. These include:

  • Credit cards and lines of credit can cause you to enter a debt spiral, which is difficult to manage – especially if you cannot repay more than the minimum each month. Working with a specialized advisor can help you understand the best course of action to heal your finances or, if you can’t, to start fresh. 
  • Consider making a proposal if your total debt does not exceed $250,000. A consumer proposal allows you to make an offer to reimburse your creditors while also suspending the proceedings that have started against you. 
  • Take personal finance classes and counselling sessions, and start rebuilding your credit score over time. Improving your credit reputation can give you access to better rates and financial products such as mortgages, as well as gaining the trust of creditors. 

Partner With Fox-Miles and Associates To Wipe Your Slate Clean and Start Fresh

Filing personal bankruptcy for credit card debt does not have to be complicated or stressful if you are working in partnership with an expert at Fox-Miles and Associates

Our expert LITs allow you to navigate the bankruptcy journey with the peace of mind you deserve and can help you regain control of your personal finances. Ready to start fresh and rebuild your financial stability? Contact our team at 780-444-3939 or use our toll-free contact number at 1-877-535-5355.