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Declaring Personal Bankruptcy In Ontario May Benefit You Greatly In Spite Of Your Fears

Declaring personal bankruptcy can conjure a lot of unpleasant thoughts and feelings -- the fear of losing your home, the embarrassment of what people think of you, the dread that you might lose everything, the uncertainty that you might not be able to rebuild your credit.  No doubt that living out this financial nightmare can be downright scary for those who are in serious monetary crisis.

As an Ontario licensed insolvency trustee firm helping individuals eliminate debt since 1992, we at Richard Killen & Associates have seen thousands of people in financial distress and breaking down in despair that their situation is beyond help.

We’ll be very honest, there are both positive and negative effects in filing for personal bankruptcy in Ontario (or anywhere else in Canada for that matter). Although it may be the best way for some people to deal with debt problems and to start over financially, it does carry with it certain consequences.

We believe you need to be clear about how bankruptcy can impact your life, what will happen as a result of the process, and that you should carefully consider the actual costs and benefits before filing.

 The Emotional and Social Impact

Worry over what family and friends will think as well as dealing with personal feelings of insecurity about reduced wealth and diminished social status, are some major reasons that people hesitate to file for bankruptcy, even if it would benefit them greatly.

Yes, the social stigma may matter a great deal particularly if you are the type of person who is overly concerned about what people think of you. However, you have to understand that although declaring bankruptcy is a matter of public record, your creditors and some government agencies are the only ones who are notified by mail of your filing. Unless you have substantial assets and your case warrants a public announcement in the legal notice section of newspapers, it is very likely that the only time other people will learn about your bankruptcy is when you inform them directly yourself or they find out about it through a background check or a credit check. No one with no apparent reason will deliberately go out of their way to register online at the website of the Office of the Superintendent of Bankruptcy(OSB) and pay an $8 fee just to search if you have filed for bankruptcy.

Relationships with family, friends, business colleagues, and acquaintances might change. However, you may be very surprised how understanding other people can be when they find out about your situation, especially because we are in a rough economy.

Nowadays, perception towards bankruptcy have shifted. With the change in economic conditions in our country, bankruptcy filings have increased steadily. According to Statistics Canada over one million people have filed for bankruptcy in the last ten years,  that’s one out of every twenty adults affected in Canada.  More people understand now more than ever what a struggle it can be to make ends meet in uncertain economic times. So if declaring bankruptcy is a necessary step for you to take, then take that step knowing that you are not alone.

The Mental Struggle

For many people, the struggle is a mental thing. Some of those who file for bankruptcy feel that they have failed and beat themselves up in guilt that they have made wrong choices about money matters. Others feel very ashamed that not being able to pay their bills makes them a burden to the economy.

You have to be aware that these are very common feelings associated with common thoughts in people who file for bankruptcy and are an indication that you are a highly responsible person. You only want to do the right thing, that is you want to pay your debts, but you are forced by circumstances well beyond your control to file for bankruptcy.

Here is the truth, in declaring personal bankruptcy, you are actually doing the responsible thing. You can choose to run away and not pay your debts, instead you admit that you need help.

You should keep in mind that the bankruptcy system is in place to work for you as well as your creditors, and that its most important goal is to restore you to a normal and useful life so that you can  stop living in the downward spiral of a crushing debt burden and become a responsible and productive member of society.

The Financial Consequences

You may have to sell some of your assets,in order to raise enough money to pay off debts to satisfy creditors, but filing for bankruptcy has the greatest negative effect on your credit score if anything. It will bring your credit rating to an R9, and it will remain in your credit report for 6 years after your discharge which can take place in as little as nine months after filing. This will basically affect your ability to borrow money and will make it harder for you to get a loan in the future.

However, you have to be aware that having a bankruptcy on record is not the only thing that can give your credit rating a black mark. If you're many months overdue in paying your bills, collection agencies are calling and you're not able to make sufficient payments, that gets noted down on your credit report too. Any special arrangement you undertake to settle your debts, like entering into a debt management program, will put an R7 rating on your record and is not what creditors want to see either. When you go into a consumer proposal in Ontario that too stays on your credit record for three years after it is completed.

Being regarded by creditors as a poor credit risk is not a good thing, but it isn’t the end of the world either. Sure, you will probably find it difficult to get any type of credit at first but many lenders nowadays will look at other factors such as your income and your ability to get a guarantor or co-borrower aside from your credit rating, and will readily let you take out a loan to finance a vehicle or purchase real estate to help you rebuild your credit. As time goes by and you work hard to improve your credit worthiness, you will find that your situation will get easier.

Rebuilding credit is challenging and will force you to make adjustments in your financial life. In the course of the bankruptcy process you will be taught how to pay your bills on time, how to manage your money and how to save and build good credit smartly. Take it as a period of learning. In the end, you get your debts discharged, you acquire money management skills, and you have some money saved up in your bank account.  

Ontario Personal Bankruptcy - A Fresh Start

The one good thing about the bankruptcy process is that it gives you a chance to start over. Maybe it will not eliminate all your debts, but definitely it will get your debts under control.

It is important to recognize that filing for bankruptcy can bring instant relief. As soon as you file:

●     You receive immediate protection from your creditors

●     The pressure of paying your debts is put on hold  

●     Collection agencies will stop calling

●     Creditors cannot collect a judgment against you

●     Your wages cannot be garnished or withheld

●     Other legal actions, such as foreclosing your home, are discontinued

●     The process of eliminating your debts can begin without delay

 Most people today view bankruptcy as a release from excessive pressure, and in many cases their last line of defence from crushing debt and feelings of stress and tension that are at dangerous levels. Believe it or not, the enormous relief will override all the other negative consequences.

Many of those who declare personal bankruptcy in Ontario are able to overcome their feelings of doubt, guilt and shame once they commit to the process and agree to undertake certain responsibilities and duties. They find healing, in simply being relieved of the financial pressures that drove them into bankruptcy. They feel empowered, because for the first time in a long time they can address their situation in a constructive manner.

A Personal Message

The honest truth is that in over 22 years serving Toronto & the GTA we have seen a lot of good, responsible people go bankrupt. It can happen to anyone. When life happens and your economic circumstances change -- you lose your job, you get divorced or separated, you rack up medical bills to save your live or the life of a loved one -- you may suddenly face the reality that you are unable to repay your debts.

Personal bankruptcy is a perfectly legal procedure made available by our government to any person who is qualified to take it as an option to deal with debt. There is nothing to dread. It is not something to be ashamed of. It can greatly benefit you. You will lose some of your assets in the process, so expect it to be painful. However, if you do everything right, in just a few short months of declaring personal bankruptcy, your personal finances are all sorted out, your life is in order and you can finally move forward and decide what direction your life should take next.