What to Think About before Filing for Bankruptcy
If you are considering filing for bankruptcy, there are a few things that you should think about before making this decision. Personal bankruptcy is a legal process that can help you eliminate most (and, in many cases, all) of your debts and start fresh. It is administered by a trustee in bankruptcy. If you are having trouble paying your debts and are unable to make your debt payments as they become due, filing for bankruptcy may be an option for you. However, it may not be the only option.
Here are five things that you should keep in mind before you make the decision to file for bankruptcy.
Know Which Debts can be Included in Bankruptcy
You can’t include every debt you have in a bankruptcy. This means that, depending on your financial situation, you may still have debts to pay even after filing for bankruptcy. You can only include unsecured debts. These are debts such as credit cards, personal loans, unsecured lines of credit, department store cards and other such debts. Student loans can only be included if you have been out of school completely for at least seven years.
Secured debts, such as mortgages and vehicle loans, cannot be included in a bankruptcy. If you have difficulty paying these debts, you will need to approach these lenders individually.
In addition, child support payments, spousal support payments, court ordered fines and debts resulting from fraudulent activities cannot be included in a bankruptcy.
Understand what Happens to your Assets
Contrary to popular belief, you don’t lose everything you own when filing for bankruptcy. Each province sets limits for items that are considered necessary to live a basic lifestyle. In many regions of the country, you are able to keep certain items (such as tools of the trade, home furnishings, personal items and even automobiles) up to a certain dollar value. Your trustee can help you understand these exemptions and ensure that you are able to keep all exempt assets.
Consider the Joint Debts you Have
If you have any joint debts (debts that are shared, such as a joint bank account or a joint line of credit) or debts where your partner has co-signed the application, these debts are considered shared debts. If one spouse files for bankruptcy, the other spouse will be 100% responsible for the outstanding debt. Separate debts are your own personal responsibility and will not impact your spouse if you file for bankruptcy,
Think About your Credit Report
Many people believe that filing for bankruptcy causes permanent and irreversible damage to your credit report. This isn’t true. A note is placed on your credit report when you file for bankruptcy. This note remains for six years after you have been discharged from bankruptcy, assuming that this is your first bankruptcy. If you have filed for bankruptcy in the past, this note remains for 14 years.
While a bankruptcy can make it more difficult to get a loan in the future, it’s important to consider the alternative and to remember that if you are in a position where filing for bankruptcy makes sense for you, your credit report has likely already been damaged. Filing for bankruptcy can put you in a position where you can rebuild your credit rating and improve your financial life over time.
Investigate the Alternatives
For many people, filing for bankruptcy isn’t the only available option. In most cases, bankruptcy is actually the last option that is investigated, only after all other options have been exhausted. If you want to find out more information about the alternatives, meet with a trustee in bankruptcy. In addition to being licensed to administer the bankruptcy process, a trustee can also review your financial situation and provide you with details on all options that are available to you.
Once you fully understand all of the options that are available to you, you can make an informed decision as to how you would like to proceed. You may still feel that filing for bankruptcy makes sense for you, but it is certainly a good idea to investigate all options before making a choice.&