Filing for bankruptcy is never an easy decision. It often comes at a time when you are in dire circumstances that can include loss of a job, illness, unmanageable debt, and marriage breakups. All of these situations are stressful enough without having to file a bankruptcy proposal. If you have looked at all of your options, such as a consumer proposal or consolidation, bankruptcy could be your only option. However, there is life after bankruptcy once all of your duties have been fulfilled.

What happens when I declare bankruptcy?

Bankruptcy is a process and is handled with the assistance of a Licensed Insolvency Trustee, who will file your bankruptcy. You will be responsible for completing several duties during bankruptcy, including surrendering all of your credit cards and non-exempt assets. The day you file for bankruptcy you will have to provide your T-4 slips to your trustee and other paperwork required. Monthly financial reports will also be required to determine if you have any “surplus income”, which means any income beyond what is required to cover your monthly expenses based on government standards. Although your monthly reports can be a timely process, once you get the hang of it, you will be able to do it quite quickly each month and they will help you learn important budgeting skills.

Other duties following bankruptcy include:

• Reporting a move of residence to your trustee
• Providing all requested information in a timely manner to your trustee

Credit Counselling

When you declare bankruptcy, you will also be expected to take two credit counselling sessions in order to qualify for automatic nine-month discharge. The first session is to take place between 10 days to 60 days following your assignment. They are usually about an hour long and are intended to help educate you on wise credit management and looks at the causes of your financial difficulties.

Lifetime Implications

After your first bankruptcy if completed a record will remain with the credit bureaus for six to seven years. However, once discharged, you will have a free and clear credit record and you can begin to rebuild your credit. You do not have to wait six-years period to try applying for new credit. However, you will have to start slowly and make bill payments on time to build lender confidence.

Rebuilding Your Credit

You can request your free credit report from the credit bureaus and look for any discrepancies you might see on the report. This will ensure your report does not contain inaccurate information. You can fill out a form to let the credit bureau know where inaccuracies appear and they will be required to investigate and respond. When attempting to rebuild lender confidence there are items such as a secured credit card that will provide you with revolving credit and a spending limit that is refreshed as long as you pay your balance and maintain your payments. With a secured credit card, you also have to provide a deposit that the credit card company will hold onto in case you default on your payments. This can be worth the effort as it will help you start rebuilding your credit, and the deposit is usually a reasonably manageable amount.

If you successfully manage your credit you can usually request the lender returns your security deposit after about six months. You will also begin to reestablish your credit score, which will allow you to consider other credit options when or if necessary.

Why do I need credit?

For many, filing bankruptcy is a traumatic and embarrassing experience that might make the thought of applying for credit again a scary prospect and you should not be applying for and obtaining credit you don’t need or can’t afford. However, there are cases in which a loan might be needed including:

1. Vehicle loans

   There are special financial services that specialize in vehicle loans for those with bad credit reports who can assist you in getting an affordable rate you can manage. However, you must do alot of research as there are also many lender who are willing to take advantage of people in poor credit situations. Never consider a vehicle that is beyond your budget to avoid getting too far into debt again and also ways look as the overall cost of the financing and the cost breakdown as sometimes there can be additional fees you have not budgets for or that can be misleading.

2. Mortgage

   Mortgages lenders will consider your income, debt level and credit score. Bankruptcy affects your credit score so you have to show the lender that you are rebuilding your credit and that you are financially capable of supporting a mortgage. By doing so you will increase your chances of qualifying for a mortgage.

Lessons Learned

Recovering from debt issues can be very stressful. It can also cause feelings of failure, depression, and insecurity. But filing for bankruptcy can be a way to release you from the burden of debt, which can often is acquired through circumstances beyond your control.

There is life after bankruptcy, as long as you have the wherewithal to learn from your mistakes and focus on rebuilding your life and financial security. Most people feel relief once all is said and done and dealing with a Licensed Insolvency Trustee provides valuable lessons on financial management that you will keep for the rest of your life. The credit counselling provided will help you reach your financial goals and build a future that is more financially secure.

For more information about bankruptcy in Toronto, Scarborough, Mississauga, Hamilton, Kitchener, Cambridge, and Guelph, call Kevin Thatcher at 1-888-329-5198 or contact us here.