Is Bankruptcy a Bad Thing?
Many Canadians today are feeling the ‘economic crunch’. Our current economic environment seems unstable and heading in an even bleaker direction. Even full-time employment is not giving anyone much comfort in knowing they will be able to stay afloat month to month. Increasing interest rates, mortgage rates, high rental rates, and ever-increasing prices on items needed just for survival are rising so high that modest wages are almost not enough anymore.
If you find yourself in financial strain or at a point where you don’t know what you can do, it is nice to know that there are options available when you find yourself needing assistance with your finances. Options to help get you moving forward instead of being stuck or even going further and further into financial crises. Options to relieve not just financial stress, but stress that affects our mental and physical health as well.
So, Is Bankruptcy a Bad Thing? No, we do not believe that it is. Bankruptcy is not inherently bad or good. It is an important protection for honest consumers who find themselves in dire straights with their debt.
Bankruptcy is a legal process by which you can receive protection from your debts. A Licensed Insolvency Trustee (that is us!), also known as a LIT, will review your assets and liabilities (what you own and what you owe) and also your income. Once the Bankruptcy starts, we will advise your creditors to stop collecting. After a period of time, usually ranging from 9 months to 21 months depending on your average income, you will be eligible to be discharged from Bankruptcy. At this point, most unsecured debts, including income tax, are legally extinguished!
A large part of the reason why people say Bankruptcy is bad is because they don’t understand the process. No two Bankruptcy cases are alike, and consumers are forced into Bankruptcy for a whole host of different reasons, many of which are beyond their control.
We believe that most people will repay their debts whenever possible. However, what if it becomes impossible? Consider some of the following:
- You, or a family member, have gotten sick resulting in the inability to work
- You are making payments but the debt is only getting bigger
- Your pay cheque is getting garnished by Canada Revenue Agency and as a result you can’t pay your rent
- You have just separated from your spouse, or your spouse has passed away, and the resulting monthly household income is not enough to live on.
These are but a few examples of the many, many different situations we have seen over the years. Are these folks bad people? No they are not. They are mostly honest but unfortunate people.
Thankfully, the Federal Government has recognized that people can get into a debt situation that becomes impossible to get out of. As a result, Parliament has created laws that provide you with the opportunity for a fresh start.
By creating the Bankruptcy and Insolvency Act, the Canadian Government created a framework for financial relief and a reset that is available from coast to coast.
Common Myths When Considering Bankruptcy
There are many myths surrounding Bankruptcy. Some of the most common myths are as follows:
- Everyone will know if you file for Bankruptcy;
This is simply not true. The vast majority of Bankruptcies are very private. The only people that know about it are your LIT, your creditors, and the Federal Government.
- Bankruptcy ruins your credit forever;
In fact, Bankruptcy debt relief will improve your credit over the long-term because it eliminates your debts. While it is true that you’ll have to rebuild your credit after Bankruptcy, a fresh start and a clean financial slate will make it much easier. There are two mandatory financial counselling sessions where we provide information about future credit and money management.
- You cannot have any life savings if you can file for Bankruptcy;
This myth is completely false. The Bankruptcy and Insolvency Act exempts certain assets from seizure. You do not have to needlessly spend your life savings, or wait till you have nothing to your name, before asking for assistance. For instance, most RSPs are exempt from creditors. In addition, each province sets certain exemptions which allow you to shield assets from your creditors
- If a spouse files for Bankruptcy or a Consumer Proposal, their life partner automatically has to file;
Again, this is not true. A personal Bankruptcy is just that, personal.
You Can Feel Relief
Bankruptcy is designed to give debtors a fresh start and provide relief from creditors.
With filing, you can expect certain benefits. The following outlines some of those benefits:
- No more harassing phone calls from creditors;
- Bankruptcy will freeze interest payments;
- Most legal action against you will be stopped;
- Bankruptcy will end wage garnishments; and
- It will be easier to get a good sleep at night
We Are Here To Help
Here at Chase & Associates LTD., we have helped many debtors gain control of their financial lives with confidence and dignity. A small minority of filers try to abuse the Bankruptcy process to hide assets and cheat creditors. Yet these stories are overshadowed by the stories of honest people who have suffered through tough times and turned to Bankruptcy because they couldn’t see another way out.
“During my past medical issues, Mr. Chase and his team have provided professional and effective assistance for me. They provided solutions to my financial situation which in time alleviated my anxiety and offered nonjudgmental effective results. I am grateful for the assistance.”
“I am overwhelmed with gratitude for Chase and associates. You’re all changing peoples’ lives, not only in overall financial health aspects but also in mental and physical health as well.”
Contact us today for a consultation and take control of your financial life once again.