The pandemic has created much financial hardship for individuals and businesses. Although there are government relief programs such as CERB, those may not be sufficient to keep you above water during this tumultuous time depending on your monthly expenses. Being deep in debt can make you feel like you’re at the bottom of a big hole, with no way of escaping. Every time you look up, the exit looks further and further away. What can you do when there appears to be no way out? Filing for personal bankruptcy is a credible escape plan. Think of it as a rope that you can use to pull yourself out of the chasm.
Perhaps you are thinking that bankruptcy is bad? Before you consider filing for personal bankruptcy, you should read about the myths and the actual facts about this debt relief process.
Myth 1: There’s No Other Option
This myth would have you believe that you have two choices: staying in debt or filing for bankruptcy. The truth is that you have several options to consider. The right bankruptcy trustee in Ontario will assess your financial situation during a consultation before recommending what debt relief option to choose. If they think you can resolve your financial situation by buckling down, they will recommend credit counseling services and budgeting. If your financial situation is more serious, they will likely recommend that you file a consumer proposal to lower your debt total and appease your creditors.
Bankruptcy is often a last resort solution. A trustee will stop you from getting ahead of yourself and guide you through the other options.
Myth 2: You’ll Lose Everything
A popular myth about bankruptcy is that you will lose everything you own and be left penniless – you’ll end up with nothing but the clothes on your back. This is not only fearmongering, but also untrue.
During bankruptcy, a trustee will collect many of your assets, liquidate them and disperse the proceeds among your creditors to repay them a portion of what is owed. They do not, however, collect everything you own. There are many asset exemptions for bankruptcy that ensure you are left with your everyday essentials, including the following:
- Household goods
- Work equipment
- A vehicle with a net value of $6,600 or less
Bankruptcy also ensures that you have enough money to continue paying for groceries, toiletries, and monthly bills. The process is supposed to be an intense financial rehabilitation, not a personal punishment.
Myth 3: It Follows You Forever
Many people are afraid of filing for bankruptcy because they think that the decision will follow them for the rest of their lives. This is not true.
The bankruptcy process doesn’t take long. If it’s your first time filing, you will likely be discharged nine months after the filing date. There are certain circumstances that will extend your discharge date, such as how many times you have previously filed and whether your income has changed during the process.
The main way that bankruptcy “follows you” after filing is it appears on your credit report. After your discharge, a notice of personal bankruptcy sits on your credit report for seven years. If someone runs a credit check on you, they will see this information in your history. The good news is that after those seven years, your history is cleared.
There are lots of other questions and concerns that you may have about filing for bankruptcy. Your best bet is to talk to a trustee about them. They will clear up any misinformation for you so that you can approach your debt recovery with confidence.
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