16 Mar How Will My Personal Life Be Affected If I File for Bankruptcy?
Before reviewing the many ways that your personal life will be affected if you file Bankruptcy, it must be understood that you can only file Bankruptcy with a Licensed Insolvency Trustee (known as an “LIT” or Trustee). The same can be said for filing a Consumer Proposal in Ontario as well.
A Sense of Relief
There are several ways your personal life is affected when you file for Bankruptcy, but if I could only use one word, it would be: RELIEF. First of all, you will end up with a freeze on your unsecured creditors, which will feel like the weight of the world has been lifted from your shoulders. The unaffordable financial situation you felt trapped in will be gone.
Free of Harassing Creditors & Collectors
That also means that collection agencies and creditors will stop calling you and harassing you for payment. Furthermore, any wage garnishees and other legal actions will cease immediately as well. You will now feel better, and the rest of your family will realize the benefits of your new stress-free attitude as well. Just imagine the feeling of now being able to enjoy the simple things, like taking your children to the park, an activity that you could not fully enjoy previously because of the debt burden that overshadowed your life before filing the Bankruptcy process.
Can Filing for Bankruptcy Affect My Spouse?
We often get asked: “Is my spouse affected if I file for Bankruptcy?” The answer is no, unless your spouse co-signed some of your debts. Obviously, this can be an important family issue, whether it’s your spouse or parent that co-signs the debt. This issue, and many others will be discussed with you by your LIT or Trustee.
It is also important for the atmosphere at your work place, as no small business enjoys the extra responsibilities and risk related to garnishment proceedings on one of their employees either. This a good reminder to deal with debt issues before a wage garnishment or other legal proceeding takes place, as the less parties that know about your debt situation, the better you will feel.
Secondly, you need to know that, for many people, filing the Bankruptcy process still allows them to keep most, if not all of their assets. In Ontario, many assets are protected in the Bankruptcy process, including:
- your house, if equity less than $10,000;
- your car, so long as value is $6,600, after deducting any car loans;
- furniture & household furnishings up to $13,150 (cash value);
- tools of trade $11,300;
- necessary clothing, no limit.
Of course, for people with house equity greater than $10,000, then filing a Consumer Proposal is often a better option, as it allows you to keep the house, by making affordable monthly payments. Your Trustee or LIT will review these and other options with you when appropriate.
How Will Filing for Bankruptcy Affect My Credit Report?
Thirdly, the fact you file for Bankruptcy does have an impact on your credit report for 6 years after your discharge if it’s your first Bankruptcy. However, there is context here, as many people that engage in the Bankruptcy process already have a bad credit rating which affects them for four or five years anyway. Again, your Trustee or LIT will review the credit bureau rating with you; this is also done in the two counselling sessions that a Trustee is required to do whether you file for Bankruptcy or file a Consumer Proposal.
Finally, many people that have to undertake the Bankruptcy process do so for a variety of reasons. For some, the financial difficulties may be a result of: job loss, marital separation, less hours at work, or medical reasons that affect their employment. Nobody is immune to being affected by these unfortunate circumstances. As such, we should all try and extend compassion and understanding to those unfortunately in these predicaments. Similarly, those with budgeting problems or bad spending habits may be caused by other underlying issues that need to be recognized before corrective action can be taken. The good news is that the Trustee reviews these matters in the two counselling sessions with you, and the goal is to provide hope for a better financial future.
For more information about the bankruptcy process and dealing with debt consolidation, contact the professionals at McLennan & Company Ltd.