Bankruptcy & Insolvency Myths:
Myths are often fact based and there are exceptions to all rules, the following represent a number of general misconceptions about how the Bankruptcy & Insolvency Act is applied.
1. The trustee will control my bank account – ordinarily the trustee has no reason to take control of your bank account. In corporate insolvencies the trustee must take control of bank accounts.
2. If I go bankrupt I will have to sell my house – filing a bankruptcy is not a triggering event for the sale of your house.
3. People who go bankrupt can’t get credit again for seven years – first time bankruptcies will appear on a credit bureau report for a term of seven years but most people can re-establish credit with a year or two of being discharge.
4. The trustee always represents the creditors – the trustee is required by the Rules in the Bankruptcy & Insolvency Act to remain neutral in all is dealings.
5. I will not be able to renew my mortgage – we have never known anyone to have difficulty renewing their mortgage after filing for bankruptcy by reason alone they filed a bankruptcy.
6. A proposal is always better than a bankruptcy – proposals can be good options for dealing with debt but they do not fit everyone’s situation and they can be both more costly and stay on credit reports for longer than bankruptcies.
7. The trustee will take my wages – after filing a bankruptcy or a proposal you will control your own income and spend it as you see fit, the trustee will advise you about keeping a proper budget.
8. You can only go bankrupt once in your lifetime – while going bankrupt should never be a goal many people have filed multiple bankruptcies.
9. Canada Revenue Agency won’t accept proposals – the Canada Revenue Agency is very cooperative and involved with the proposal process.
10. A person must owe really big debts to qualify – while we certainly recommend it as a solution for such low obligations the minimum amount of debt to “qualify” for a bankruptcy is $1,000.
11. Creditors may not accept my bankruptcy – creditors have little choice in accepting or rejecting a bankruptcy, no one wants to see someone who owes them money go bankrupt.
12. I will have to give up my leased car – You may maintain your leased vehicle but you will have to keep up the lease payments in either a bankruptcy or a proposal.
13. If I go bankrupt I will have to go to court – if you do everything that is required of you I the vast majority of cases you will be able to qualify for an “automatic” discharge and no court attendance will be required.
14. I can’t go bankrupt on government debts – very few debts will survice a bankruptcy proceeding and the government is no exception, except under very specific circumstances.
It is important to remember that filing a bankruptcy or a proposal is a legal process with many variations because one person has a particular outcome does not necessarily mean that same thing will happen to another. People and their situations are different, meet with a licensed trustee in bankruptcy to discuss your options and possible outcomes.
Call us for a free consultation.