Financial stability is what most of us strive for, but unexpected events or bad money choices can lead to serious debt problems. Bankruptcy is often seen as a last resort. While it can actually be a chance to start fresh, the fear of Bankruptcy is common.
Like many, you might be fearing the unknown, judgment from others, losing what you’ve worked hard for, or the difficulty of the process. But these fears are often exaggerated. Financial stuckness can be a problem that leaves you in a debt rut.
Filing for Bankruptcy can give you the opportunity for a fresh start, as many Canadians have experienced. Here are the most common myths that our Licensed Insolvency Trustees (LITs) often hear.
I Will Lose Everything
The fear of losing your assets if you file for Bankruptcy. What you may not know is that some things are protected by law and cannot be taken to pay debts. This lack of information can make you delay filing for Bankruptcy, making your money problems worse.
In Bankruptcy, you can often keep your home and car if you can keep making payments on them. It can even reduce what you owe to unsecured creditors, making it easier to manage other debts.
Every province has specific asset exemptions
Bankruptcy laws protect many assets, like RRSPs, pensions, household goods, and some of the value in cars and homes. You only give up assets that are worth more than what the rules allow (see Bankruptcy exemptions by province).
A Licensed Insolvency Trustee can help provide clarity
A Licensed Insolvency Trustee can check if you have more assets than what’s allowed and help you understand other options, like a Consumer Proposal. This plan lets you pay off a portion of your debt over an extended period while still keeping your belongings.
Amanda Sherwood, a Licensed Insolvency Trustee with for Allan Marshall and Associates, shared this in an episode of the DebtMatters Podcast:
It’s if you have debt that is causing you stress, and have trouble paying what’s due, then you need to go speak to a Trustee because a Licensed Insolvency Trustee is qualified to go over all options. Even if you’re coming in to just figure out about the process, you’re not starting anything, you’re actually just getting options.
I’ll Never Get Credit Again or Be Able to Buy a House
Another fear is that Bankruptcy will ruin your credit forever, making it hard to get loans. While Bankruptcy does hurt credit scores, it’s not forever. Bankruptcy remains on a credit report for six to seven years after you have been discharged for a first time filing. However, its impact lessens over time. Responsible financial habits can quickly improve a credit score.
With time and smart money choices, you can rebuild your credit and qualify for mortgages within a few years by completing required duties, using secured credit cards responsibly, and saving for a down payment.
I Might Lose my Job
Employers typically don’t routinely check Bankruptcy records, so it’s unlikely they’ll find out unless you tell them. However, certain circumstances, like job roles involving financial matters or fiduciary duties, may require disclosure. Jobs with government security clearances or financial roles may lead to discovery through background checks.
A Licensed Insolvency Trustee can advise you on the implications for your job before filing. In most cases, your employer won’t know about your Bankruptcy unless you owe them money or have a wage garnishment. Bankruptcy can actually reduce stress and improve job performance.
My Family and Friends Will Find Out
Bankruptcy records are public. However, like your employer, it’s unlikely that your friends and family will find out about your Bankruptcy unless you tell them. Usually, creditors and credit bureaus are the ones who look at these records. Newspapers only publish notices for significant asset cases.
The Office of the Superintendent of Bankruptcy handles Bankruptcy records. Keep in mind, it can be costly and time-consuming to search for this information.
I Will Be Judged
One of the big reasons fear of Bankruptcy is so common is the shame many think comes with it. You may worry it shows you failed, or can’t manage money. This fear can stop you from getting help and fixing your finances.
It’s important to remember that many people from all walks of life have financial trouble during their lifetime. Bankruptcy doesn’t mean you failed. It’s a tool to help you get your finances in order and move toward a better financial future.
You are often your own harshest critic. Sharing your struggles can lead to understanding and support. Bankruptcy is an opportunity to start fresh and not a source of shame.
I Worry Bankruptcy Will Prevent Me From Reaching Goals
Not knowing what will happen during Bankruptcy might also scare you. You may worry about how it will affect your lives and what the consequences will be. This uncertainty can make you put off dealing with your money issues.
If you dream of owning a car or home, you might be afraid Bankruptcy will get in the way. However, Bankruptcy can actually help you reach your goals by giving you relief and a chance to build a new financial future.
Don’t Let Fear Hold You Back
Life is unpredictable, and debt can happen to anyone. Bankruptcy is a legal process to help honest debtors start anew. Fear of Bankruptcy shouldn’t stop you from getting the help you need. It’s worth considering if you’re struggling with debt.
By understanding the process and seeking financial advice, you can take control of your finances and work towards a brighter future.
Schedule a free consultation with a Licensed Insolvency Trustee to explore your options and find the best solution for you. They can assist you in managing your personal finances, regardless of the severity of your situation. Speaking with a Licensed Insolvency Trustee gives you a clear understanding of your situation. LITs are here to inform you of your rights and options, and then you can decide how to proceed.
It’s crucial to ensure you’re speaking with a Licensed Insolvency Trustee. There are individuals who may offer help, but it’s important to verify that they are indeed qualified and not just a debt consultant. If you’re considering Bankruptcy, you are required to go through a LIT. They are the only debt experts regulated by law to help you file for Bankruptcy.
To learn more or book a free consultation with Allan Marshall & Associates Licensed Insolvency Trustee, visit our website at wecanhelp.ca.
