Bankruptcy. How does this word make you feel? For most people, the mere whisper of “bankruptcy” can inspire sensations of fear, dread, panic and shame. To put it bluntly, it has a reputation for being a big mood killer. But the truth is that bankruptcy is simply one financial tool designed to help people from all walks of life get back on track. It’s a helpful thing. For many, it’s the first step towards overcoming immense and stressful challenges. The “scary” and negative feelings associated with it are products of misinformation and half-truths about the bankruptcy process and its outcomes.
Now that it’s 2021, we’re working hard to end the stigma associated with financial struggles, normalize asking for help, and empower people to make the best decisions for their futures. How are we going to do this? Our first step is to shed some light on frequently asked bankruptcy questions and debunk some common misconceptions.
- What happens when I declare bankruptcy?
While you might be inclined to think the filing process is cumbersome and complicated, personal bankruptcy is often the quickest debt restructuring plan to complete. Did we mention it’s often the least expensive, too?
Here’s how it works: Our experts will meet with you to explain the personal bankruptcy process, your rights, and the protection you’ll receive from creditors. From there, we’ll gather your financial information and prepare all of the necessary forms and reports for you to sign. Then, we’ll file your personal bankruptcy and send notice to all of your creditors. If you want more details on these steps, click here. The important thing to note: personal bankruptcy provides you with immediate protection against any further collection or legal action by your unsecured creditors.
- How long will it take to complete my bankruptcy?
Most people are surprised to learn bankruptcy could take as little as nine months to complete. Here’s the breakdown:
- If you’re filing bankruptcy for the first time and have no surplus income, the length of the bankruptcy is nine months.
- If you have surplus income, the length of the bankruptcy is 21 months.
- If you’re filing bankruptcy for a second time and have no surplus income, the length of the bankruptcy is 24 months.
- If you have surplus income, the length of the bankruptcy is 36 months.
- Will I lose my car or home if I declare bankruptcy?
Filing for bankruptcy does not mean you automatically lose everything. Typically, all the assets you own—including your house and car—will be retained by you, as they qualify as exempt assets under federal and/or provincial legislation. Of course, every financial situation is unique. That’s why our Licensed Insolvency Trustees will review your circumstances and options to help establish the best course of action.
- Can I purchase a home after I have declared bankruptcy?
The good news is that it is possible to get a mortgage after bankruptcy! If you’ve filed for personal bankruptcy, the Canadian Mortgage and Housing Corporation will review your application as early as 18 months to two years after filing. Having a steady source of income, making a larger down payment and working to rebuild your credit are all important steps to help ensure your mortgage is approved at an optimal rate.
- Will my credit rating be destroyed?
It’s likely your credit rating may already be compromised due to late or missed payments, collection action or legal action prior to bankruptcy. Once you do declare bankruptcy, you will be assigned an R9 credit rating, which will remain on your credit report for six years from the date of your discharge from bankruptcy. Want some positive news? You can immediately begin to re-establish your credit rating following this discharge.
- Is bankruptcy right for me?
Personal bankruptcy is one just option available to help Canadians achieve a fresh financial start, but it is not the right solution for everyone. Our Licensed Insolvency Trustees will work with you to review the advantages and disadvantages of bankruptcy and how they apply to you.
We hope this helps to answer your frequently asked bankruptcy questions and to dispel common myths and misconceptions. While people often feel a loss of control when it comes to the circumstances that lead to bankruptcy, there is power in knowing what options are available. Experts are waiting to walk you through it all. If you have more questions, or want to talk to a Licensed Insolvency Trustee to discuss your personal situation, contact us for a free consultation. We can help.