In Canada, filing personal bankruptcy allows borrowers who are knee deep in debt to get a fresh start by eliminating most of their debts. Once you have filed bankruptcy, wage garnishments and collection calls will stop, and you will be able to plan for your financial future. Given that bankruptcy represents a legal process, legal action against you is not allowed.
How to declare bankruptcy and live with it? The first part pertains to a procedure while the second requires some effort and learning on your part. To declare bankruptcy, debtors basically surrender or assign what they own to a so called trustee in bankruptcy as to have their debts eliminated. In order to be eligible to declare bankruptcy, the debtor should do business or live in the country. The second requirement is that this person is insolvent, meaning that they owe $1,000 or more and are unable to pay back their debts.
An automatic discharge may occur in nine months, which is the minimum timeframe established by the court. The debtor is bankrupt over this period and not longer, but only if they have never been bankrupt in the past and have completed different responsibilities and duties.
While the process is relatively straightforward, how do you live with the consequences of bankruptcy? For one thing, bankruptcy stays on your credit report for a period of several years, and you are unlikely to obtain credit from traditional financial institutions. Moreover, not all debts are erased by filing bankruptcy, meaning that only unsecured debts will be. These include overdrafts, income taxes, personal loans and personal credit cards, and the like. After declaring bankruptcy, the borrower is allowed to keep exempt items, which would include personal items, which are up to a certain value, their automobile, furniture, etc. There are certain non-exempt items, which include certificates of deposit, cash, and other liquid assets that have to be turned over to a trustee, appointed by the court.
While your financial situation is not one to envy, there are a couple of things you can do to put it under control – maintain a job, keep a bank balance, and pay your bills on time. For obvious reasons, you have to pay your bills regularly and on time so that your credit record stays clean post-bankruptcy. Another important condition is to get a job as soon as you can, in case you are unemployed. To that, you have to find a good place for you and your family to live. Having a stable employment and residential history is important because it proves to potential lenders that you are (have become) a reliable person. Finally, it is important that you keep a bank balance. Open and maintain a savings or checking account and keep a positive balance. This will show potential employers and lenders that you are responsible, now that you have a reliable cash flow. After you do all this, you can start rebuilding credit by obtaining a credit card and using it responsibly.