Five Fears About Bankruptcy in Canada
Dispelling Common Fears About Bankruptcy in Canada
You’re not alone if you fear filing for bankruptcy. Whether you’re anxious about the repercussions, or aren’t sure how your life will continue on after, your fears may be getting in the way of you taking action on your finances. When fear gets in the way, it can be debilitating. If you’ve stopped answering phone calls since you fear it may be a creditor, or have started cutting off contact with loved ones because you don’t want to talk about your finances, your fears may be bigger than the actual problem itself. While bankruptcy has consequences, it may be a less scary choice for you than you think. Here are some of the five most common fears about filing bankruptcy in Canada.
All my assets will be taken.
One of the top fears is that if you file for bankruptcy, all of your assets – everything you own – will be taken away. It doesn’t help that movies and television shows often portray bankruptcy like this, leaving characters with the shoes on their back and nothing else. This is simply a myth. In Canada, there is a list of personal possession items that are exempt from being seized, based on each province.
In many scenarios, you’re able to keep many of your belongings; things like clothing and basic household furniture are usually not collected insofar as they do not exceed provincial limits. In some provinces, if you own your car outright, you may be able to keep it if is worth less than $5,600. Necessary medical and health items are not taken away, and you may be able to keep tools that are necessary for your job. In some rare cases, you may even be able to keep your house even after you file for bankruptcy.
The goal of bankruptcy is not to leave you high-and-dry. The objective is to pay back some of your debt and set you up to continue being able to work and have transportation and lead a moderately normal life with the belongings you keep.
My credit is damaged forever
Fear number two is that you’ll never be able to get a credit card, car loan, or mortgage again. Yes, your credit will be affected, but if you are at the point where you are needing to file bankruptcy, your credit has likely taken a substantial hit to begin with. You can build your credit back up, but it will take time. After you file for bankruptcy, your current debt is eliminated. This gives you a blank slate opportunity to begin saving again. While most lenders will be hesitant to loan in the first several years after a bankruptcy, once it comes off your credit history, you can begin rebuilding your credit. At this point, you’ll have gone through required credit counseling as well, so you’ll be in a better position in knowing how to deal with credit.
My family will be ruined
A lot of fear about bankruptcy stems from a point of embarrassment. It can be difficult to talk to your family members about the financial situation you find yourself in, but this does not mean you have ruined any individual. While talking about financial situations can feel humiliating short-term, filing for bankruptcy does not need to have an impact on the rest of your family long-term.
A key takeaway is that if you file for bankruptcy, this does not immediately affect your spouse. If the debts you are unable to repay are in your name alone, your spouse’s credit history and credit score should not be affected by the bankruptcy. The only time that they will be affected is when your spouse has co-signed a debt. It is a common myth that if you file for bankruptcy, your spouse will be forced to do so as well. Your spouse is not automatically responsible for any debt not in their name.
I’ll go to jail or won’t be able to travel
Again, there is a stigma that if you file for bankruptcy, you’ll end up in jail since you can’t repay your debts. This often stems from aggressive collection agents that put that idea in your mind. Since it is their job to try and obtain payment on your debts, they may mention repercussions that are simply untrue. The media also does nothing to quell this fear. However, in most cases, people borrow money with the full intention of paying it back, whether it be via a car loan, mortgage, or line of credit. Being in an unfortunate situation does not mean you intended on committing a crime, so you will not be put into jail.
If you fear bankruptcy in Canada because you need to leave the country for work or other reasons, rest assured this is also a myth. You’ll be able to travel as you had before; you can continue traveling as a free Canadian citizen. There is no travel restriction simply because you did not pay debts or have filed for bankruptcy. You should be able to continue traveling outside (and inside) of Canada with no problem.
I have to wait 7 years to return to normal
The fifth most common fear about bankruptcy in Canada is that once you file for bankruptcy, nothing will be particularly “normal” in your life for seven years. The reality is that people begin businesses, obtain mortgages, and even buy cars during the time that the bankruptcy notation is on their credit report. If you live within your means, you can rebuild your savings and your credit, and be in a solid spot long before the seven years have passed. Your life can feel normal almost immediately since you will no longer have the substantial debt you had before and can return to a less-stressful life.
Reach out today
If you are dealing with one or more of these fears, call Bankruptcy Canada today. Our debt experts are here to help you, and we can schedule a no-obligation free consultation to weigh your options. We’re a judgment-free zone and understand that filing for bankruptcy in Canada can be scary, but it doesn’t have to be. We’re here to help.