Many people believe that bankruptcy is a rare occurence in Canada, but it may happen more than you think. In fact, bankruptcy happens to almost 120,000 Canadians every year. If that’s surprising to you, here are some myths about bankruptcy that might surprise you even more!
Myth #1 – Filing bankruptcy will affect my spouse
Many have the mistaken impression that because they are married, their spouse is automatically responsible for their debts. This is not the case. The good news is, in Canada, marriage alone does not make you responsible for your spouse’s debts. You can only be held responsible for a debt if you have signed a contract, loan agreement or credit card application.
Myth #2 – Government debts cannot be erased in a bankruptcy
Government debts including income tax, HST and payroll source deductions are no different than any other debts you may owe. Many people are surprised to learn that personal income tax debt can be discharged by making a consumer proposal or filing personal bankruptcy. Even if you have years of unfiled income tax returns, arbitrary assets, reassessments and penalties, we can help.
Canada Revenue Agency (CRA) can be an extremely difficult creditor to deal with on your own. The interest and penalties charged by CRA add up quickly, make it extremely difficult to dig yourself out of tax debt, on your own.
Myth #3 – You will never be able to own anything again
I see many people who are concerned that filing bankruptcy or making a consumer proposal will effect their credit rating and in turn, their ability to buy a house in the future. Although your credit rating is a key factor that mortgage lenders consider, it is ultimately just one piece of puzzle. Mortgage lenders also consider the size of the down payment and income consistency. For instance, someone with a good, dependable source of income may be approved for a mortgage even though they have a lower credit rating and a lower down payment than someone who doesn’t have a dependable income source.
I’ve seen many people buy a house two years after being discharged from bankruptcy. Those people made sure they immediately took steps to rebuild their credit rating and began saving money for a down payment as soon as they were able.
Myth #4 – Bankruptcy is expensive
Filing bankruptcy is the least expensive way for a person to get a fresh financial start. The payments a debtor makes during the nine months of bankruptcy are set by the government and the Trustee fees come out of this amount. In the most common situations, the monthly payments are less than $200 a month for nine months. That’s it.
Myth #5 – A Bankruptcy Trustee will talk me into filing bankruptcy
Trustees at Welker & Associates want what is best for you. Whether it be a bankruptcy, consumer proposal, debt management plan, consolidation loan, etc. together we will decide what is the best option for your unique situation. Bankruptcy might be the best option for one person, but not the next. We offer a free, no-obligation consultation in which we can answer any questions you may have so that you are educated to make the right decision for you.
If you’re in debt and need someone to talk to you about possible solutions, please contact us for a free, no-obligation consultation. We are here to help!
