Why File For Bankruptcy: 9 Reasons It Makes Sense to Go Bankrupt

Hundreds of thousands of Canadians file for bankruptcy every year. It is never a decision you can make lightly. Is it something you should consider doing? It really depends on your situation and how you became indebted in the first place. There isn’t a one-size-fits-all answer, but there are factors that can help you decide if you should declare bankruptcy or try to move full steam ahead by paying down your obligations.

If you are asking yourself: “Why file for bankruptcy?”, here are nine reasons why it makes sense to go bankrupt:

1. A Life-Altering Medical Expense

Although health care costs do not destroy households in Canada as they do south of the border, many Canadians do endure plenty of out-of-pocket expenses. It is estimated that patients pay about $60 billion in medical care not covered by provinces’ health insurance. That is a lot of money, especially for low-income groups.

When you factor in a whole host of health problems, in addition to pharmaceuticals, it can set you back. Not to mention lost wages, transportation costs, and missed bill payments. When all this is factored in, Canadian will spend an enormous sum on health care.

The expenses might be so bad that it will destroy a household’s finances. While this is not one of the fortunate reasons to go bankrupt, it does answer the question of “why file for bankruptcy” for many people.

2. Long-Term Unemployment

Plenty of people are perpetually jobless. Despite searching for employment opportunities, nothing seems to be working. This is a devastating predicament. As nothing is coming in, you are turning to your savings and investments. Once those are exhausted, you will need to turn to credit to pay the rent, keep the lights on, or put groceries on the table.

Several months go by or a year or two and you are drowning in red ink. There is no way out.

Insolvency might be the route to take.

3. Using Credit Cards for Basic Necessities

Do you find yourself turning to your pieces of plastic more and more to cover just the basic necessities?

If the answer is yes, then you might be up to your neck in debt. From tapping your Visa to pay for gasoline to using your MasterCard to make mortgage payments, your credit cards are your primary spending tools. This is scary to even conceive, but this is what happens in life when you lose track of your earnings and refrain from establishing a budget.

4. Your Debt is Too Much to Bear

Your debt keeps going up. You put $750 on your credit card to replace the refrigerator. Then, you decided to take the family out for dinner on a Friday night, which set you back $120. Then, you wanted that new big-screen television, so you spent $1,250 on one with your credit card.

Before you know it, you have too much debt that cannot even be serviced. Suffice it to say, your debt has become too much to bear. What’s the solution? Bankruptcy might be something to consider.

5. Facing a Crippling Divorce

Divorce can ruin lives – the husband and the wife. If a mediator or a judge rules that you will be forced to hand over a significant percentage of your income every month, then it might ruin you. Unfortunately, if you are forced to go into debt to keep up with alimony, then bankruptcy could be your only way out.

6. You Are Getting Sued

The question of why file for bankruptcy can often be found in the legal courtroom. That’s because a lawsuit can imbibe anyone and anything in its path.

After an enormous amount of loonies and toonies spent on attorneys, you lost the case and now you’re on the hook for an incredible sum of money. It is so large that your personal finances will take a significant hit. You cannot sustain your lifestyle anymore, or you will need to work overtime just to breathe some air.

You might still be required to pay the plaintiff, but bankruptcy can relieve some of that stress.

7. Unsure How Much You Owe

Indeed, if your debt has snowballed so much that you are unsure how much you owe creditors, lenders, companies, and everyone else you’re indebted to, then you know you’re in trouble. Chances are, once you discover the final tally, it will be a lot higher than you estimated in your head.

This is when you need to speak with a bankruptcy specialist who can provide important advice.

8. A Barrage of Bill Collectors

A day or evening doesn’t go by where you don’t receive a telephone call from a bill collector. Or, every time you open your mailbox, you find letters from bill collectors. It is an enormous strain on you and every point of contact serves as a reminder of unpaid debts.

By engaging with a credit counselor, a bankruptcy expert, or a money manager, you can determine what you can do: consolidate, file for bankruptcy, or try to pay every nickel back.

9. A Five-Alarm Fire

Life. Enough said.

For many of us, there is always a fire to put out. Your relationships, your career, your finances, your health – there is always something to contend with. When these happen, it can also affect your money.

It will eventually snowball and then you are stuck with a hefty bill.


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