What Happens When you File for Bankruptcy?
There are many myths associated with filing for bankruptcy. Many people are familiar with the concept of bankruptcy, but they are unsure of what filing bankruptcy does for them. In addition, many people incorrectly assume that filing for bankruptcy is the only possible option. Thanks to many of the myths, a lot of people who are in financial difficulty do not fully understand their debt relief options. Speaking with a licensed insolvency trustee can help you understand what filing for bankruptcy does for you, as well as provide you with information on the other available options.
Most trustees offer a free consultation where they can sit with you and review your financial situation. They will then provide you with details about the possible options that are available to you. Most people assume that bankruptcy is the only option for those who are struggling with debt, however this is not true.
There are other myths associated with the bankruptcy process. Here are some myths and the truth. The more you know about bankruptcy and what bankruptcy can do for you, the more likely you will be to make a wise decision for your financial future.
Bankruptcy is the Only Option: Myth
As mentioned, bankruptcy is not the only option available to most people. In fact, in most cases, bankruptcy is the last option considered. A licensed insolvency trustee is required to provide you with information on all possible options, not just bankruptcy and not just those options that the trustee provides. Once you have this information, you can use it to choose the option that is right for you.
Each financial situation is different and one size does not fit all. Your trustee will never pressure you to choose a particular option. It is always your decision.
I Will Lose Everything I Own: Myth
This is a common myth. In many cases, this myth has been perpetuated by creditors who want to scare people away from filing for bankruptcy. The point of the bankruptcy process is not to punish you and leave you with nothing. Doing so would not be productive or beneficial to anyone. Instead, the goal of bankruptcy is to provide honest yet unfortunate debtors with a process that allows them to eliminate most (if not all) of their debts and start fresh.
Each province determines which items are required to live a basic lifestyle. These assets are considered exempt. You trustee will ensure that you are able to keep all exempt assets. Most people do not lose many assets (if any at all) unless they own a great deal of assets.
My Credit Rating will be Destroyed Forever: Myth
This is another myth that is often repeated by creditors and collection agencies. Filing for bankruptcy does not mean that your credit rating will be destroyed forever. It does not mean that you will never be able to get a loan again. When you file for bankruptcy, a note is placed on your credit report. This note remains for six years after you have been discharged, assuming that this is the first time you have filed for bankruptcy.
While this note can make it more difficult to get a loan, it is important that you consider the alternative. If you are in a position where filing for bankruptcy makes sense for you, you have likely already missed some debt payments or made payments late. This damages your credit rating. If you continue down this path, you could cause serious damage your credit rating and your debts will still not be eliminated. This is obviously not a good financial situation to be in.
Once you are discharged from bankruptcy, you are able to start rebuilding your credit. Bankruptcy provides you with an opportunity to rebuild your financial life.
These are just a few of the bankruptcy myths that exist. Meeting with a licensed insolvency trustee can help you understand more about the bankruptcy process and other ways available to you to get out of debt. Most trustees offer the initial consultation at no charge. This allows you to speak with an insolvency trustee about your specific situation and see what filing bankruptcy would do for you.
- Filing for Personal Bankruptcy in Ontario