Even though there are many resources and much information available, myths and outright incorrect information about bankruptcy in Canada continue to circulate. As Licensed Insolvency Trustees, Sands & Associates is comprised of professionals empowered by the Federal Government to provide debt solutions, including personal bankruptcy, and we’ve put together our ‘Top Four Common Bankruptcy Myths’ to help separate the fact from fiction:
Myth: Declaring bankruptcy in Canada lasts for seven years (or longer)
Fact: The vast majority of personal bankruptcies (~80%) last only nine months, and cost around $200 per month for the nine-month bankruptcy term (these are the minimum fees set by the Federal Government). Most individuals starting bankruptcy proceedings are eligible for an automatic discharge (release from bankruptcy) after nine months.
Myth: Filing bankruptcy is permanently on your credit history
Fact: A first-time bankruptcy will be reflected on a credit history report for six years following the person’s discharge (exit) from bankruptcy. The notion that either bankruptcy, credit counselling or a Consumer Proposal prevents a person from obtaining future credit forever is completely false. Oftentimes credit is re-established within two to three years following a bankruptcy, and resources to rebuild credit are provided as part of the bankruptcy services.
Myth: Bankruptcy can’t eliminate income tax debt
Fact: Filing a bankruptcy or a Consumer Proposal are in fact the only methods available to eliminate or reduce government debts and the accompanying interest and penalties. Income taxes, GST, student loans, MSP and even ICBC debts can all be dealt with via a Licensed Insolvency Trustee.
Myth: All assets must be surrendered in a personal bankruptcy
Fact: Contrary to conventional wisdom which says that you lose everything if you go bankrupt, most people keep all of their assets when filing bankruptcy in Canada. BC legislation sets out a base level of assets that are considered “exempt” (meaning you do not have to surrender them if you start bankruptcy). Provincial exemption allowances are in place for many assets, including: RRSPs, home equity, household goods, a vehicle, and tools of the trade.
Debt management solutions often feel overwhelming, and navigating the available information can seem like a daunting task. If you’re considering personal bankruptcy as a debt solution, contact a Licensed Insolvency Trustee to discuss your situation and all your options. They will meet with you at no cost or obligation, and no referral is required. Find out the facts!