Overcoming Bankruptcy Phobia: Don’t Let Your Fears Hold You Back
Many people cringe at the thought of bankruptcy, associating it with failure, humiliation, and the end of financial freedom. But what if we told you that bankruptcy could potentially be the start of a brighter financial future? A fresh slate, a chance to rebuild, and an opportunity to regain control of your financial life, just like what happened to Walt Disney, Elton John, and Larry King after they filed for bankruptcy. It’s time to address the fears surrounding bankruptcy and debunk the misconceptions that often paralyze people from making a decision that could change their lives for the better.
The Fear of Losing Everything
One of the biggest fears surrounding bankruptcy is the loss of assets. But is this fear justified?
Bankruptcy does not equate to losing everything. In many cases, individuals who file for bankruptcy can retain their home and/or car, provided they continue to meet their payments to secured creditors. One of the salient features of bankruptcy is that it can even enhance your chances of preserving specific assets as it prevents unsecured creditors from forcing their sale or garnishing your wages.
Laws Protect Certain Assets
Every province in Canada provides certain asset exemptions in a bankruptcy scenario. These exemptions, which vary from province to province, ensure that individuals filing for bankruptcy are not left destitute and can maintain a basic standard of living.
For instance, in Alberta, homeowners can retain equity up to $40,000 in their primary residence and up to $5,000 in one motor vehicle. It is important to note that you are only required to surrender assets in a bankruptcy if the equity value (the item’s sale price minus any outstanding loans) exceeds the provincial exemption amount.
A Licensed Insolvency Trustee Can Guide You
Seeking professional advice from a Licensed Insolvency Trustee can clear many doubts and misconceptions about bankruptcy. In many cases, individuals struggling with debt are surprised to learn that they don’t have equity in assets over the exemption limit and thus, have nothing to surrender, making bankruptcy a feasible option.
The Fear of Ruining Your Credit
Another common fear is that bankruptcy will ruin your credit score forever, making it impossible to secure credit or a mortgage in the future. While it’s true that a bankruptcy will impact your credit score, it’s not the end of the road. In fact, many individuals have successfully rebuilt their credit post-bankruptcy.
Steps to Rebuilding Your Credit Post-Bankruptcy
- Obtain a discharge from your bankruptcy as early as possible by completing all required duties.
- Secure a credit card and use it responsibly, ensuring to pay off the balance in full each month.
- Regularly review your credit report and promptly correct any inaccuracies.
- Start saving for a down payment and budget as if you were already making mortgage payments.
- Borrow only what you can afford, not what lenders are willing to offer you.
Remember, bankruptcy has a temporary impact on your credit rating, which typically disappears within six to eight years. On the other hand, consistently missing payments or making late payments will also affect your credit rating and take longer to recover.
Fear of Losing Your Job
In most cases, your employer will not be informed about your bankruptcy unless there are specific circumstances, such as wage garnishments or if you owe money to your employer. However, certain professions may require you to disclose your bankruptcy.
Dealing with the Fear
It’s important to consider the alternative: what is the risk of losing your job if you don’t address your debt problems? Unmanageable debt can negatively impact your physical and mental health, relationships, and job performance. By eliminating the stress associated with unmanageable debt, you may find that you’re able to perform better at work.
Fear of Social Stigma
Many fear that their friends or family will learn about their bankruptcy. However, in most cases, your loved ones will only find out if you choose to tell them. Although bankruptcy records are public, it’s unlikely that someone you know would search for this information.
Overcoming the Fear of Judgment
Remember, you are likely your own harshest critic. If a friend or family member were in your shoes, wouldn’t you empathize and support them? It’s time to change the narrative around bankruptcy and view it as a chance for a fresh start, rather than a mark of failure.
Conclusion
Life happens. Debt happens. Don’t let fear drive you away from bankruptcy if it’s the right solution for your financial troubles. Consult with a Licensed Insolvency Trustee today to discuss your options and put your fears to rest.
