In Canada, bankruptcy laws are designed to offer legal protection for people in severe financial distress, and to give them an opportunity for a brand new start. Bankruptcy should mostly be viewed as a solution of last resort, though, as it does come with costs and challenges of its own. Read on to find out more.
#1. Bankruptcy is not the easiest way out
Declaring bankruptcy is not an easy way out of any financial predicament or to help fix your credit. When an individual files for bankruptcy it is recorded, and it is usually very difficult to get credit during this period and over the next 6 years.
#2. Bankruptcy is not a good option for everyone
Legally anyone can go bankrupt but although it may seem like a practical option sometimes, it actually involves a few costs and fees, and is certainly not the right solution for everybody. It is also usually expensive depending on your assets.
#3. It’s not the only resort when your finances get bad
There are substitutes to bankruptcy and the right solution to the problem will usually depend on the affected individual’s current situation. If you are interested in finding out other alternatives, you should talk to a properly accredited credit counselor.
#4. Not all debts are encompassed in a bankruptcy
Not all debts are included in bankruptcy as there are a few that are secured like a mortgage or a car and student loans.
#5. You won’t lose everything
When you go bankrupt you don’t literally lose everything. Sometimes you are allowed to keep your clothing and basic household furniture, medical and health related equipment, and sometimes your vehicles, as long as they do not exceed a certain value.
#6.You shouldn’t run up your debt before you go bankrupt
Maxing out your credit cards right before you file for bankruptcy will only create problems with your bankruptcy application, and ruin your relationship with the creditors. They can oppose your bankruptcy application and you’d be in an even bigger mess. Note, trustees are vital for securing discharge from financial obligations.