Victoria Bankruptcy Services - PDSC Trustee Site

2014-05-27 18:47:51

Dispelling Bankruptcy Myths

fact vs. myth

 

Bankruptcy myths dispelled

Getting into financial trouble still carries a large amount of shame and stigma.  People don’t talk about it openly and this lack of information leads to bankruptcy myths>  This post is aimed at dispelling some of the most commonly held beliefs about bankruptcy that are actually bankruptcy myths.

 

Bankruptcy myth # 1:I don't want to file for bankruptcy because I'll lose everything.

You won’t lose everything.  Each province has its own rules for which assets bankruptcy filers are allowed to hold onto.  The list of exemptions varies dependent on the jurisdiction and some assets, such as pensions and RRSPs, cannot be touched by creditors in any province. Generally you will be allowed to keep modest amounts of furniture, clothing, tools of the trade, and even a car if there's not much equity in it.  Whether or not you can keep your house depends on the equity in the property and the rules of the Province.  If you have a lot of assets you will lose a lot, after all your creditors have a right to receive some of their money, but you won’t lose everything.

Bankruptcy myth # 2My friends will all know that I've filed for bankruptcy.

The only bankruptcies that get posted in the local newspaper are genrally large corporate files with many creditors.  For smaller personal bankruptcies no notice needs to be posted.  While your bankruptcy is a matter of public record it is unlikely that anyone you know will go to the trouble of registering an information request and paying the fee to find out.

Bankruptcy myth # 3:mycredit rating will be ruined if I file for bankruptcy.

Your credit rating will be negatively affected. But if you are behind on your bills and have collection notices, your credit score is going to be pretty bad anyway. A bankruptcy stays on your credit report for 6 years from the date of the discharge (often only 9 months after filing for a first bankruptcy).  Consumer proposals stay on your report for 3 years. Once you have been discharged you can start to build up your credit again.  A secured credit card is often a great option for this (http://credit.about.com/od/sv/g/securedcredit.htm ).  As long as you are a responsible borrower and pay your bills on time your credit rating will be built up again, and 6 years later it will be as if the bankruptcy never happened.

Bankruptcy myth # 4 Bankruptcy erases all your debts.

Not true.  Filing for bankruptcy cannot discharge certain debts including secured debts, alimony, spousal and child support obligations, court fines, claims arising from an assault, or student debts, unless you're been out of school for at least seven years.

 

 

Bankruptcy Myth #5:  Filing for bankruptcy will destroy my spouse's credit rating.

A bankruptcy filing is personal to the person who files it.  It will include only debts in your name and will discharge only these debts.  As long as your spouse has not co-signed anything for you, they will not be affected.