We’re going into the worst financial season of the year… January. It’s after the holidays when everyone gets their credit card bills. We’re surprised by the amount that we spent on Christmas and a lot of workers find slow downs or shut downs at work. It’s a cycle and it happens every year. It seems around this time that the number of bankruptcies tends to increase.

If you find yourself in a position when you are unable to pay your creditors and are considering bankruptcy please consider the pros and cons of the bankruptcy process.

Pros of Bankruptcy:

• You are discharged from all or a significant part of the existing debts and are able to make a “fresh start”
• Creditors are not allowed to start new legal actions or to continue existing ones against the debtor or the third parties in possession of bankrupt’s property i.e. wage garnishment and liens
• Collection agencies are not allowed to enforce the debts, meaning the collection calls will stop
• Bankrupt is entitle to keep certain property exempted from distribution among the creditors (sometimes a house or car may be exempt)

Cons of Bankruptcy:

• You give  up the legal title and control of non-exempt property (TFSA, possibly a second car)
• Bankruptcy will be shown on your credit rating as long as seven years after discharge
• You lose some professional and civil privileges, i.e. capacity to hold money in trust, capacity to be elected to certain civil positions
• Bankruptcy still carries negative stigma, i.e. negatively influence your credibility in the community
• You lose part of any surplus income and all property received before the discharge is transferred to the trustee for distribution among creditors (you may have to pay additional fees into the bankruptcy)
• You are deprived of a part of the income and the property and as a consequence may have to lower his and his family’s standard of living
• Debts that are not dischargeable debts will still have to repay them after the discharge order is made (some debts may not be included in the bankruptcy and you are still responsible to pay them)
• You have duties to perform before the discharge (you will be required to submit paperwork)

A bankruptcy can have long lasting emotional effects that need to be considered very closely, especially if a house or other property has been surrendered. If you are facing a situation where bankruptcy might be an option, come in to see one of our unbiased counsellors. We can discuss your options and provide you with information on bankruptcy options.