Thursday, December 10, 2009

Truths About Bankruptcy

For some individuals, there is no alternative. Financial debt can eventually lead to personal bankruptcy. Although the prospect of absolving one's self of debt by this method is a frightening thought, the truth is that there are many misconceptions surrounding the bankruptcy process that serve to make a difficult situation even worse.

Many people believe the misconception that filing for bankruptcy requires hiring an expensive lawyer. Truth be told, Canadian law states that lawyers cannot serve as bankruptcy trustees. In fact, small bankruptcies are filed by a trustee and do not appear before a judge. Moreover, if you're worried about protecting your privacy during this difficult time, fear not. Since 1997, personal bankruptcies are no longer advertised in the newspaper so your privacy in this delicate matter is assured.

Some have an image of the bankrupt individual sitting penniless in the street, hat in hand. That's a fine cartoon image but not reality. Declaring bankruptcy requires committing to a modest lifestyle for at least nine months. Different provinces have different rules regarding the amount of money you may retain as well as which possessions are protected.

A common untruth is that all debts are erased upon declaring bankruptcy. In fact, some debts are not. Child support and alimony are not changed. In many cases, student loans are also not erased.

Fearful that you will remain bankrupt for life? Fear not. Once your obligations have been fulfilled, you can be discharged from your bankruptcy. In a majority of cases, this occurs after nine months (but it can be extended if there is reasonable opposition from interested parties). Also, believe it or not, many people can re-establish their credit within one to two years after declaring bankruptcy.

No two cases are the same. But, before making a decision about declaring bankruptcy, do not merely visit the local rumour mill. Do the appropriate research carefully.

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