If you are having financial trouble, declaring bankruptcy is a solution you may want to consider before walking this path. However, many common myths circulate about bankruptcy that are simply not true. Here are nine of them.
1.Everyone will know you declared bankruptcy
It is true that bankruptcies are public information, but you would generally need to do extensive research to obtain that information. Only major bankruptcies are subject to a legal notice published in the news. More often, it is only the creditors and trustees of the client that are informed of the situation. So, more likely than not, your privacy will be observed, and you don’t have to worry about the embarrassment and fall-out of everyone knowing that you declared bankruptcy.
2.Only the financially irresponsible file for bankruptcy
It is a myth that only the financially irresponsible file for bankruptcy—it can happen to anyone! Although financial responsibility may come into play for some individuals, unplanned life events can create the need to file for bankruptcy at any time. Many such individuals who decide to make this decision have dealt with an illness, divorce, job loss, or other financially devastating situations.
3.Your property will be taken away
Another myth associated with declaring bankruptcy is that you will not be allowed to keep your home or any other property you may own. The reality is that bankruptcy allows you to save some property. What you are allowed to keep is dependent on the province in which you reside. For instance, in Ontario, you can keep up to $13,150 worth of furniture and household goods. You can also keep one free and clear vehicle up to a $6,600.00 value. There are many ways in a bankruptcy to keep some of all of your assets in a bankruptcy and your trustee can walk you through the requirements and expectations before you make your final decision.
4.Bankruptcy clears your debt
The truth is that declaring bankruptcy will clear most of your debt. Some exceptions is that it will not clear child support payments or some student loans (i.e. if you last studied less than seven years ago). This also includes court-ordered fines (such as parking tickets), or debt contacted through fraud. Also, contrary to popular belief, bankruptcy can get rid of income tax debt.
5.Bankruptcy has a permanent impact on your credit
Perhaps one of the biggest myths of bankruptcy is that it will permanently impact your credit rating. The creditor bureaus do keep the information about your bankruptcy for a time but generally that is much less time then it would have taken you to get out of the unmanageable debt that was already affecting your credit. Also, having the information in your credit history does not mean you can’t get credit it just means you have to start slow and rebuild creditor confidence.
6.Bankruptcy is the only solution to your financial difficulties
There are many ways to resolve financial difficulties and bankruptcy is just one of them. In some cases, debt consolidation or a consumer proposal can be the best option for people. A consumer proposal is an offer you can make to your creditors to reimburse part or all of your debt (depending on your situation) with no interest for a fixed time period.
It is always best to talk to a seasoned professional about your issues to see if one of these alternative solutions could solve your financial issues. Bankruptcy is a last resort, and a Licensed Insolvency Trustee can help you navigate your best options.
7.You can’t get a loan after declaring bankruptcy
If you are at the point of declaring bankruptcy (or have already done so), odds are your credit has already been badly affected. Therefore, you would have had to wait the allotted amount of time anyway before being able to obtain credit or resolve bad credit. With time and by adopting good habits (like making your payments on time), you will be able to rebuild your credit successfully.
8.You should get help from a debt management advisor before declaring bankruptcy
It is a myth that you should get help from a debt management advisor before declaring bankruptcy. You may be wasting your money for nothing. Only a Licensed Insolvency Trustee is authorized to file an assignment in bankruptcy and it is in your best interest to deal with them directly as they can inform you of all of your options. At Kevin Thatcher & Associates the first consultation is always free; after that, if you choose one of the options the trustee can administer then you will pay a fee depending on the option you choose and/or the arrangement reached between you and your creditors.
9.You could lose your job due to bankruptcy
Your financial situation should not put your job at risk but it can’t hurt to find out about the potential consequences of personal bankruptcy on your career before going ahead with your decision. However, getting out of the debt you are in is generally always better than continuing with unmanageable debt for the foreseeable future.
If you are considering bankruptcy, a proposal, or a consolidation and would like to find out more information, please contact Kevin Thatcher & Associates today to talk to one of our professionals!