To the uninitiated, bankruptcy can be a daunting term that brings up feelings of uncertainty. There is a stigma that is attached to bankruptcy that makes it seem more mysterious than it is.
Simply put, under the Bankruptcy and Insolvency Act (the “BIA”), bankruptcy can help give financial relief to those people, trusts or organizations that are overwhelmed by the burden of their debt.
With that in mind, let’s take a moment to dispel the three most common myths about bankruptcy in Canada.
Bankruptcy is Easy!
There is a common, false view that filing for bankruptcy is taking the “easy way” way out of debt. Bankruptcy is a procedure that requires the involvement of a trustee in bankruptcy, and it remains a part of the credit record, thus making it difficult to obtain credit, for six years after discharge. There are alternatives to bankruptcy that are usually tried first.
Bankruptcy is the Result of Careless Spending
We’re pretty sure this myth came from TV, giving the impression that people can go on a wild shopping spree and then file for bankruptcy. While it’s true that there are probably some people who have ended up in serious financial trouble because of careless spending, it’s certainly not the majority. Many of the people we encounter in our offices have run into difficulty making ends meet because of a significant life-changing event, like a job loss, a serious illness, or the death of a spouse.
All Assets are Lost in Bankruptcy
Again, this one probably came from TV. In Canada, the rules surrounding bankruptcy are different than in other countries. In most provinces, you will keep your personal effects like clothes and furniture, though it is sometimes only within specified provincial limits. If you need your vehicle and/or tools to work, you will usually be able to keep those too. If you own your home, your principal residence is also generally exempted from bankruptcy proceedings.
It’s hard to say whether or not bankruptcy is the right choice for you because every case is unique. We can tell you that, if you’re having trouble meeting your financial obligations, we can help. Contact us today to start working on a plan for a more financially secure tomorrow.