5 Things you Didn’t Know About Bankruptcy
What You Don’t Know About Bankruptcy Laws Could Hurt You
If you’re investigating bankruptcy in BC, you will naturally have questions about how the process works.
After all, filing is a significant financial decision.
Unfortunately, there’s a lot of misinformation out there about bankruptcy.
People associate the process with stigma instead of seeing it as a sensible and straightforward way to clear unsustainable debts.
Here are some truths about bankruptcy in BC you need to know.
You Can Still Own Assets
Many people assume that bankruptcy denies them the ability to own assets in the future, such as a house or financial instruments.
This idea, however, is false.
The bankruptcy process does not strip you of everything you own or prevent you from accumulating wealth in the future.
In fact, it does the opposite by preventing creditors from seizing your property.
Furthermore, even if you can’t protect some of your assets, creditor trustees usually hold it in escrow, meaning that you can repurchase it at a later date.
Your Credit Score Will Recover
People assume that bankruptcy will crater their credit score forever, but this isn’t true either.
Rating agencies know that people’s priorities and behaviours can change dramatically over time.
In Canada, credit rating agencies can reflect bankruptcies in their reports for six years.
After that, they no longer factor a bankruptcy in deciding your rating.
Furthermore, even people who do complete a bankruptcy can still apply for the credit and loans that they need to continue with their lives.
Lenders will often open up lines of credit, mortgages and car loans over time.
There Is No Income Cap
Some people think that they earn too much to apply for bankruptcy.
They see the facility as a tool for the poor – not somebody with a high-flying career.
Everyone, though, even millionaires, can get into unsustainable debt.
It is all relative.
Thus, it doesn’t matter if you earn $100 or $10,000 a month; you can still use bankruptcy as a way to help you escape your debts.
Those earning large sums of money may be able to avoid full bankruptcy with a consumer proposal.
This mechanism allows you to agree with your creditors to repay some of the money you owe by siphoning surplus income.
It Covers All Your Outstanding Debts
There’s a pervasive belief that bankruptcy in BC does not cover some types of debt, like student loans, outstanding tax, and gambling debts.
You can, however, discharge the vast majority of these debts through bankruptcy, with only minor exceptions.
- Student loan debt accumulated in the last seven years;
- Alimony and maintenance payments;
- The money you owe for stolen property;
- The money you obtained through false pretence;
- Court-imposed fines.
Fundamentally, bankruptcy is a tool for the honest but unfortunate debtor.
It is for people like you who accidentally found themselves in an unsustainable financial situation.
You Only Need To Owe $1,000 To Qualify
People imagine that filing for bankruptcy requires that you owe tens of thousands of dollars, but, again, this isn’t true.
The minimum is just $1,000.
Even debts this low can become unmanageable for some people, although as it costs at least $1,800 to go bankrupt in BC, debtors should owe at the very least $2,000 to even consider bankruptcy.