Credit card debts can quickly become overwhelming, especially when minimum payments and interest accumulate. For some people, bankruptcy might seem like a solution to free themselves from these debts.
In this article, written by the Poupart Syndic team, we explain how credit card debt erasure works in case of bankruptcy in Canada, as well as other options to consider.
Understanding credit card debt and its consequences
Credit cards offer financial flexibility, but they can also lead to problems when spending beyond one’s means. Understanding how credit cards work and their effects on financial situations is essential before exploring available solutions.
Minimum payment and accumulated interest
The credit card minimum payment is the amount you must pay each month to avoid default. However, by only paying this minimum, the debt decreases very slowly due to high interest rates. Over time, the debt burden can become unsustainable.
Consequences of excessive debt on credit score
Having significant credit card debt can negatively affect your credit score. A balance that’s too high compared to the authorized limit, late payments, or defaults can reduce your chances of obtaining credit in the future.
Bankruptcy as a solution to erase credit card debt
Personal bankruptcy is an option for those who can no longer meet their financial obligations. However, it’s essential to understand how it works before making a decision.
Which debts are erased by bankruptcy?
Generally, bankruptcy can erase several types of debts, including:
- Credit card debts
- Personal loans
- Bank overdrafts
- Certain tax debts
However, some obligations like alimony, student loans under certain conditions, and court fines are not discharged by bankruptcy.
Impact of bankruptcy on credit score
Bankruptcy remains on your credit report for 6 to 7 years after discharge. This means that if you already had a bad credit credit card, your access to credit could be even more limited after bankruptcy.
Alternatives to bankruptcy for paying off credit card debt
Before opting for bankruptcy, it’s important to explore other solutions that could have less impact on your financial future.
Consumer proposal
A consumer proposal is an agreement with your creditors to reduce the total amount of your debt and establish a payment plan without interest. This solution allows you to avoid bankruptcy while restructuring your finances sustainably.
Debt consolidation
This option involves consolidating multiple debts into a single loan with a reduced interest rate, making repayment easier. Although this doesn’t erase the debt, it can make payments more manageable.
Voluntary deposit
In some Canadian provinces, it’s possible to opt for voluntary deposit, which allows you to repay your debts gradually under court supervision.
How can Poupart Syndic help you manage your debt?
At Poupart Syndic, we understand that each financial situation is unique. Our team assists you in analyzing your debt and identifying the best solution for you.
Benefit from personalized support
We offer free consultations to explore options such as bankruptcy, consumer proposal, or debt consolidation. Our goal is to help you regain control of your finances.
Regain control of your finances and avoid over-indebtedness
If you’re facing financial difficulties due to credit card debt, know that solutions exist. Bankruptcy can be an option, but it’s not the only one. It’s essential to consult a professional before making a decision.
To learn more about your options and discuss with an expert, contact Poupart Syndic today. We’re here to help you regain financial stability.
