Most Common Myths about bankruptcy in Canada and Why It Should Be Your Last Option
Do you know what Bankruptcy is? Do you think bankruptcy is the only solution for you? Have you heard too many myths about bankruptcy?
First, you need to know that when a business or a person are unable to repay outstanding debts or meet their financial obligations, they can file for bankruptcy. They need to file bankruptcy with an officer of the court (the Licensed Insolvency Trustee), they will measure and evaluate all the debtor’s assets. Then, the assets may be sold to repay a portion of the debt. The balance of what the debtor owes is eliminated after the bankruptcy is discharged. Nevertheless, you cannot file for bankruptcy for certain debts, such as alimony, child support, and in some cases student loans.
Should you file for bankruptcy? It all depends on your financial situation, bankruptcy might sound like a lifesaving opportunity, but you need to consider all the possible solutions and outcomes before thinking of bankruptcy. We are presenting the most common myths and the reality behind them that you have been afraid to ask.
Bankruptcy is the easiest way out
If you believe bankruptcy will solve your financial problems and you will get rid of your debts, this may be true but there are implications and all options should be understood. The reality is that bankruptcy will be on the credit bureau report for over 6 years. Even If you recover financially after applying for bankruptcy, your credit will be damaged. Bankruptcies are seen as negative information on your credit report, as a consequence the creditor may decline extending your credit. Furthermore, higher interest rates and/ or less benefits may be offered if they decide to give you credit at all. Plus, the emotional cost of bankruptcy can be very hard.
Anyone qualifies for bankruptcy.
TV shows, movies, and public perception make it seem like anyone qualifies for bankruptcy. However, this is far from reality, and if you are thinking of applying for bankruptcy you need to meet some basic requirements first. You need to owe at least $1,000, have debts that surpass the sale value of your assets, and you are unable to pay your bills or debts when they are due.
The requirements for bankruptcy may seem quite simple, but it is not the best solution for all cases. Your income level, the assets that you own, and the size of your debt are the main factors to determine if bankruptcy is going to be more expensive and risky than you expect.
Bankruptcy is the only solution to bad finances
No, bankruptcy is not your only option but it can be discussed as an alternative once you have considered all the pros and cons, with a clear and deep evaluation of your financial situation. At 4 Pillars we can explain all alternatives to bankruptcy. All of your options should be tailored to your financial situation and give you the best result.
I will lose all my belongings
Once again, our media environment (TV shows, movies) and public perception lead us to believe that filing for bankruptcy is synonymous with losing all of our possessions. Personal effects, furniture and household goods are great examples of assets that are exempt in bankruptcy. Even your home could be exempt, the creditors are interested in the net equity of your home and you can consider filing a Consumer Proposal as one alternative to bankruptcy. Our goal is that you are able to keep your assets and find the perfect solution for you, and even if bankruptcy looks tempting, we encourage you to consider other options. Take advantage of our FREE consultation and live debt free