By Jasmin Brown

Debt Solutions

3 Bankruptcy Myths You Should Ignore

Feb 5, 2019 | 4:32 PM

Canadians with debt received some good news and some not-so-good news earlier this month. The good news: Stephen Poloz, the head of the Bank of Canada, announced that there would not be an increase in the benchmark interest rate in January. The not-so-good news: additional interest rate increases could happen later this year, and those rate hikes will likely result in more bankruptcy filings across Canada.

Knowing your debt options and dispelling bankruptcy myths can help you take control of your financial situation. Although bankruptcy is a last resort, now is a good time to get the facts so you can manage your finances strategically.

Myth 1: Bankruptcy is my only option

Fact: You may have more options than you think. Bankruptcy is only considered after ruling out all other debt solutions. A formal solution called a consumer proposal is often chosen as an alternative to bankruptcy. A Licensed Insolvency Trustee (LIT) can review your finances and explain all debt relief options, helping your choose the one that will work best for your situation.

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Myth 2: I will lose everything I own

Fact: You will not have all of your possessions taken from you when you file for bankruptcy. Many of the items you own, like clothing, furniture and tools of your trade are protected. There are also provincial exemptions that protect equity in your home and vehicle. Each province has its own list of exemptions. An LIT can tell you more about what possessions are exempt in Saskatchewan.

Myth 3: My bankruptcy will be on my credit record forever

Fact: A first-time bankruptcy takes either nine or twenty-one months depending on your income level, and results in a credit rating of R9. That rating stays on your credit report for six years after your discharge. A bankruptcy proceeding is meant to give you a fresh start.

Here’s another fact: you aren’t in it alone. An LIT must necessarily file the paperwork on your behalf for a bankruptcy or consumer proposal, and will support you throughout either process. If you do choose to file for bankruptcy or consumer proposal, you will receive mandatory credit counselling, which can arm you with strategies to manage your finances and debt in the future.

Even if bankruptcy is not right for you, an initial meeting with a Licensed Insolvency Trustee can help you find a solution for your debt, and debunk myths that might be negatively affecting your finances.