Bankruptcy Myths
There are several myths surrounding the bankruptcy process that might prevent you from seeking advice from a Licensed Insolvency Trustee.
The following are some common bankruptcy myths:
MYTH: YOU WILL LOSE EVERYTHING IF YOU DECLARE BANKRUPTCY
Fact: Each province has exemption allowances that allow you to retain certain assets that cannot be seized in bankruptcy. The following are the assets that are exempt from seizure in Northern BC
$4,000 – Household furnishings and appliances
$5,000 – Equity in one motor vehicle ($2,000 if you are subject to an order to pay maintenance)
$9,000 – Equity in a primary residence
$10,000 – Tools required to earn income from an occupation
Contributions to RRSPs made more than 12 months before filing
Locked-In Pensions.
*Equity is calculated by taking the re-sale value of the asset and deducting the amount owing on it
If an asset has been pledged as collateral and you are still making payments (ie vehicle loans and mortgages), in order to keep the asset you must continue making the payments. If you wish to give up the asset, you can do so and no further payments are required.
MYTH: BANKRUPTCY LASTS SEVEN (7) YEARS
Fact: A notation on your credit report will remain for 6 years after you have been discharged from your bankruptcy. The actual bankruptcy process can last between 9 and 21 months if you haven’t been bankrupt before and between 24 and 36 months if you have.
This doesn’t mean you can’t get credit for 6 years, it just means anyone looking at your credit report will see the notation. As part of the bankruptcy process, you are required to attend a credit rebuilding session with a qualified counselor where you will discuss how to successfully rebuild your credit.
MYTH: INCOME TAX DEBTS CANNOT BE ELIMINATED
Fact: Personal income tax debts can be eliminated by the bankruptcy process, however, if the debt is significant ($200,000+), the court will review your circumstances at the time of your discharge.
MYTH: EVERYONE WILL KNOW
Fact: Although bankruptcy filings are a matter of public record, someone would have to actually navigate to a government website, become a registered user and pay a fee to search the records. Newspaper notices are limited to larger bankruptcy filings.
Although bankruptcy is usually one of the last options to consider when it comes to debt alternatives, depending on your circumstances, it could be the best solution for your situation. The Licensed Insolvency Trustees at Beverley & Associates provide free consultations to review all of the options and consequences.
Start your journey to financial freedom. Book your free, no obligation consultation today to connect with one of our experienced BC/Yukon Licensed Insolvency Trustees (LITs).
