5 Simple Guidelines to Understand Bankruptcy

Although bankruptcy might not be the most pleasant of subjects, the truth is that it exists to offer a solution to a tough problem. It is designed to assist individuals and businesses to get rid of all or a portion of their debt, or to help them repay part of what they owe.

If this sounds too good to be true, it is important to remember that bankruptcy does have very real long-term consequences on your credit score and could potentially come back to haunt you down the road. That being said, it is sometimes the best resolution to a situation. If you’re considering moving forward with a bankruptcy claim, here are some considerations to keep in mind.

1. The basics

First things first, understand that bankruptcy is a very complex process that really demands the help of a professional. This isn’t something that the average person is equipped to understand, and it certainly isn’t an area that you want to be making any mistakes in.

Working with a bankruptcy attorney frees your mind from additional stress and worries, while ensuring that your paperwork is in step with all the applicable rules and regulations. You will avoid amateur mistakes and will be able to resolve the situation much more quickly.

2. Requirements before you can file

Two of the primary conditions that you’ll have to meet before you’ll be considered eligible for bankruptcy are: proving that you can’t repay your debts and that you are willing to complete credit counselling with a government-approved credit counselor.

This counselor will be the person who helps you come up with a plan for the future so you can avoid problems later on. They will also assess your finances to make sure that bankruptcy is really the best possible choice, and that all other alternatives have been eliminated for good reasons, in addition to helping you create a personal budget plan.

3. You won’t necessarily lose everything, but be prepared to lose a lot

There is no point dancing around the issue, if you have a lot of assets, chances are that you will lose most of them if you file for bankruptcy. This is a natural outcome of the fact that creditors do have the right to recover at least part of their loss. That being said, the system is not designed to rob you of absolutely everything. Some assets are protected from liquidation in the bankruptcy process.

4. Where you live matters a lot

Each province and territory has its own list of assets that bankruptcy filers are allowed to hang on to. Here it is important to note that exemptions can vary dramatically, so you need to consult with a professional. In some provinces, a portion of home equity is exempt, whereas in others in must be included in the available asset pot to be divided among the creditors.

It is important to remember that some debts cannot be absolved by filing for bankruptcy. They include secured debts like mortgages or car loans, 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 (this can be reduced to five years in cases of hardship).

5. Know that you are not alone

Admitting that you need to file for bankruptcy is a tough thing for a lot of people to admit. We place a lot of value on managing finances on our society, and it is easy to feel that you are being judged by those around you. Regardless of what contributed to your situation, kepe in mind that unforeseen circumstances do arise and that many people have been in your position before. There is always a way forward and there are train professionals who are there to be on your side and help you navigate the process.