Reasons for Filing Personal Bankruptcy in Toronto: Loss of Job
There are a number of reasons why people may find themselves in debt and filing for personal bankruptcy in Toronto, including an unexpected job loss, health problems resulting in medical bills or lost wages, marital breakdown and the cost of starting over, unpaid income tax, and financial mismanagement to name a few. In this blog post, we will explore job loss: what to do if it happens to you, and steps you can take to prevent unmanageable debt, before it’s too late.
The Data Behind Job Loss and Debt
According to recent studies, Canadians tend to take on unnecessary risk when it comes to their spending and debt load. Roughly half of all Canadians are only one paycheck away from defaulting on their debts. With little to no savings to fall back on, debts can quickly become unmanageable for the average Canadian, even from just the slightest change of income.
While losing your job (and the accompanying paychecks) is a hard pill to swallow, you may be eligible for severance pay from your former employer, or Employment Insurance from the government (up to 55% of your previous insurable earnings, to a maximum of $543/week). Neither of these, however, are a long-term solution, and should not be relied upon as your sole source of income going forward.
Plan Today to Avoid Debt and Bankruptcy Filing Tomorrow
To ensure that you’ll remain financially secure if you lose your job, the best time to start planning is while you’re still employed.
The most important piece of advice we can offer is to avoid high-interest debt whenever possible. Carrying a credit card balance will cost you considerably in interest fees, whether or not you’re employed. The accumulating debt can very easily overwhelm you if you find yourself without a steady paycheck.
Try to keep your debts at a minimum, in general. If you would be unable to keep up with your debt payments in the event that your pay check was halved, then you are carrying too much debt. Look for ways to reduce your expenses and increase your income, before your financial situation becomes precarious. A household budget is a great place to start.
It is always a good idea to have a ‘rainy day’ or emergency savings fund that you can tap into, should you be faced with job loss or large, unforeseen expenses such as auto repairs or unanticipated medical expenses. An emergency fund will provide you with a bit of wiggle room when you need it most.
If You Lose Your Job…
If you do find yourself unemployed, keep these tips in mind to minimize your financial difficulties:
- Never ‘live off your credit cards’. If you are struggling to pay your debts, creating more high-interest debt to compensate will cause your financial situation to quickly spin out of control.
- Make your cost-of-living adjustments immediately. Don’t wait until your accounts run dry to start budgeting. The earlier you scale back your lifestyle, the less drastically the adjustments will have to be, and the longer you will have to find another job before you start to encounter debt problems.
- Apply for Employment Insurance (EI), as soon as you’re eligible. EI is like any other insurance; you’ve been paying into it with every paycheck. Claim it when you need it!
- Consider Your Alternatives. If your debt becomes unmanageable, consult immediately with a Toronto Licensed Insolvency Trustee to explore your options, such as credit counselling, debt consolidation, Consumer Proposals, or Bankruptcy.
Need more information on managing your debt to avoid filing for bankruptcy in Toronto, or perhaps just an assurance that you are making wise decisions? Call today to schedule a free consultation with one of our Licensed Insolvency Trustees. We’re here to help you get a fresh start and lead a FULLER life.