Filing for bankruptcy is stressful on an individual. There is a lot to know. However, if you have spoken to a Licensed Insolvency Trustee about your options, and have more unsecured debt that you can afford to pay on a monthly basis, chances are Bankruptcy is the best option to eliminate your debt and relieve your stress.
We have compiled a list of Advantages and Disadvantages of Filing for Bankruptcy in Canada:
Advantages of Bankruptcy:
- Wage Garnishments will stop. – When you claim bankruptcy, your Trustee will notify your employer, the court and creditors to stop any wage garnishment.
- Harassing collection calls will stop. – When you file for bankruptcy, you receive a Stay of Proceedings which is a legal order to give you creditor protection. They can no longer contact you for collection of debt or take legal action.
- Debt Free Future – Once you are discharged from Bankruptcy, your current state will be debt free. Although, keep in mind that some unsecured debts cannot be discharged (Student Loans less than 7 yrs, court fines, and child support)
- Knowing your discharge date is an advantage in itself because you can plan to start to rebuild your credit.
Disadvantages of Bankruptcy:
- Cost – You have to make payments based on your income and may have to pay administrative charge. Depending on your situation and salary, the more your bankruptcy may cost.
- Losing Assets – Although many people think you lose EVERYTHING in a bankruptcy, this is not true. However, there are non-exempt assets that you will lose, such as HST cheques, any tax refund for the year in which you file, or any prior years refunds that are outstanding.
- Your credit rating will drop – Filing for bankruptcy will remain on your credit report for 6 years for a first time bankruptcy, or 14 years for a second time.
- Fulfillment of Bankrupt duties. – There are bankrupt duties that you must perform if you declare bankruptcy – You need to complete all bankrupt actions in order to be discharged. Failure to do so, you may jeopardize being discharged and your debts will return. Duties such as reporting monthly income, payments, providing all income tax information and completing required documentation.
If you think Bankruptcy may be the right solution for you, the next step is to talk with a Licensed Insolvency Trustee. Contact us today.