When facing financial desolation, it’s hard to think straight, you are so gripped by worry. Bankruptcy plays into many people’s doomsday scenarios, imagining that it will be the end of them financially and personally, as family relationships are ripped apart under the strain.
The truth is, bankruptcy and consumer proposals are about getting control back over your life and feeling relief as you take steps towards recovery. As soon as bankruptcy is filed, the calls from creditors begin to stop and an immediate stay of proceedings means that none of your assets can be seized, other than those signed over in security in case of default.
The immediate emotional and financial relief can relieve the enormous burden on a family and actually repair the relationships of frazzled spouses.
Here are five myths that many people hold about the bankruptcy process:
1. Everyone is going to know that I am a deadbeat.
Though bankruptcy is a public proceeding it isn’t publicized. So even though there are sections in the newspaper devoted to bankruptcy notices aimed at alerting creditors, these only involve large or corporate bankruptcies. The only way your neighbours and friends would know that you are going bankrupt is if you tell them or they decide to go to Office of the Superintendent of Bankruptcy’s website, register as a user and pay an $8 search fee to find you. The chances of this happening are small to none at all.
2. I will never get credit again
Again, not true. A first-time bankruptcy is usually a nine month process. When the process is finished, you are free of previous debt and financial obligations, there are many companies eager to lend you money again. Some people can even get a loan or secured credit card while they are bankrupt. If you are like most people, you can start rebuilding your credit rating right away by getting, for example, that secured credit card. You may qualify for a mortgage or car loan in a few years. Here are five ways you can rebuild your credit.
3. I will lose everything I own.
Contrary to popular belief, you don’t lose all your assets when you go bankrupt. There may be some things you will have to give up, especially if you have a lot of assets, but you will probably get to keep your furniture and personal effects, your car and your business tools. You may not even lose your house. While a secured creditor has the right to repossess the security you gave them if you default on your contract, they can’t do this merely because you’ve gone bankrupt, as long as you have managed to keep up your payments. Another thing, if you are worried about being able to renew a mortgage don’t be. These things are usually done almost automatically and even if you are still in the bankruptcy when the renewal time comes people do not usually have a problem, especially with the banks.
4. I’ll take my spouse down with me.
Your spouse and their property should not be affected by your bankruptcy. Each person is responsible for their own debts. So if your spouse hasn’t co-signed a loan or guaranteed your debt, then they won’t be directly affected and their credit rating won’t be damaged. There may be indirect consequences, however. For example, your spouse may not qualify for a loan in future if your bankruptcy prevents you from being able to co-sign for it. But nowadays this is very, very rare. You can read more about the impact of bankruptcy on spouses here.
5. Bankruptcy will eliminate all my debts.
Hold on, cowboy. While bankruptcy will bring you considerable relief, no one can wave a magic wand and make everything go away (Although sometimes that’s what seems to happen.). Certain debts aren’t wiped out by your discharge from the bankruptcy. These include court fines, alimony, debts that were incurred fraudulently and any debts that you continued to pay after the bankruptcy started such as a mortgage, a car loans, etc. Then there are some student loans that you would be responsible for after your discharge.
All of these “myths” are misleading and can make a person shy away from seeing a trustee. Big mistake! Contact us and we will make sure you get correct information so you can determine what’s the right course for you; a bankruptcy, a proposal, or some other option. Only you can decide, so get the facts and then you’ll be able to make a good decision.