Debunking Bankruptcy: It’s Not As Intimidating As You Think
Bankruptcy. The term alone can be a cause for anxiety for many individuals grappling with insurmountable debt. However, the reality is that Bankruptcy Isn’t As Daunting As It Sounds. This article aims to demystify the concept of bankruptcy, providing you with the right information and guiding you in examining it as a viable option for financial recovery.
1. Breaking Through The Bankruptcy Barrier
Often, the biggest hurdle individuals face when considering bankruptcy is the fear of the unknown. They are likely to encounter several obstacles in their journey to financial liberation.
a. The Fear Factor
The fear of bankruptcy is often fueled by misconceptions and misinformation. While it may not be a suitable solution for everyone, bankruptcy can be a lifeline for many drowning in debt. The key is to engage in a detailed discussion with a certified professional who can explain your options and guide you through the process.
b. The First Step
The initial step towards bankruptcy can be challenging, but often it is also the most liberating. Engaging a Licensed Insolvency Trustee (LIT) for a free, confidential consultation can be a game-changer. They can assess your financial situation, understand your goals, and guide you towards a suitable solution.
2. The Power of Knowledge
Fear of the unknown and the long-term implications can deter individuals from exploring bankruptcy as an option. Often, these fears are overstated or even baseless.
a. Responsibilities of a Bankrupt Individual
The obligations of a bankrupt individual are straightforward and manageable:
- Attend two debt counselling sessions
- Provide a monthly income and expense report
- Furnish necessary information to your LIT for tax return filing in the bankruptcy year
b. Duration of Bankruptcy
Contrary to popular belief, the bankruptcy period for a first-time filer is relatively short. If you fulfill your obligations promptly, your debts may be absolved within nine months from the date of filing bankruptcy. This period may extend to 21 months depending on your income level and household size.
c. Non-Eligible Debts
Certain debts cannot be included in a bankruptcy claim, such as:
- Backdated alimony and child support
- Student loans (if you completed your education less than seven years ago)
- Fines and penalties
- Debts resulting from fraudulent activities
d. Impact on Credit Report
A first-time bankruptcy stays on your credit report for approximately six years, while subsequent instances linger for 14 years.
e. Rights of Secured Creditors
Bankruptcy does not infringe on the rights of secured creditors. You can continue to make payments for vehicle loans and mortgages during the bankruptcy process.
f. Asset Protection
Certain assets may be exempt from seizure during bankruptcy. These exemptions vary by province and may include household goods, RRSPs and pension plans, tools of trade, and motor vehicles, among others.
3. Considering Alternatives To Bankruptcy
Bankruptcy and Consumer Proposals are significant decisions that require careful deliberation. Both options can be less daunting than dealing with unmanageable debt.
If you are unsure about your best course of action, reach out to a LIT for a free consultation. They can provide valuable insights and recommendations to help you overcome your debt and regain financial stability.
Remember, Bankruptcy Isn’t As Daunting As It Sounds. The fear of the unknown should never deter you from exploring all possible solutions to your financial woes. Get the right information, seek professional advice, and make informed decisions to regain control of your financial future.
