Everything You Need To Know Before Filing Bankruptcy

Posted by on Apr 6, 2016 in Uncategorized | Comments Off on Everything You Need To Know Before Filing Bankruptcy

If you’re looking for debt relief and considering filing bankruptcy, you aren’t alone. Determining whether or not to file bankruptcy is a huge decision. Before proceeding, you need to make sure it’s the right option for you. In order to do this, you need to know if you qualify for filing bankruptcy, if your bankruptcy will benefit you in the future, and what other debt relief options are available. So, before you contact a bankruptcy attorney, learn more about your options so that you can make the right decision for your family.

Do You Qualify for Bankruptcy?

If you want to file bankruptcy, you will need to talk to a bankruptcy trustee and complete a solvency test. The bankruptcy trustee uses your financial information to make sure you meet the three requirements needed to be deemed insolvent. If you’re deemed insolvent, you are eligible to file bankruptcy, and in order to be considered insolvent you need to:

  • Have at least $1,000 of debt.
  • Have more debt than the value of your assets.
  • Be unable to pay the debts that you’ve accumulated when they are due.

Do You Lose Everything You Own When You File Bankruptcy?

Some people assume that by filing bankruptcy, they will lose everything that they own. While it’s true that your assets are reviewed during the bankruptcy procedure, the process is there to determine what you’re allowed to keep. There is a chance that some of your assets will be sold in order to repay some of your debt. However, in most provinces, you are allowed to keep:

  • Household furniture and clothing, as long as the value of the items don’t exceed the value limits for your province.
  • Your house, unless you have a lot of equity in your home.
  • Health- or medical-related equipment.
  • Tools that you use in order to earn a living, as long as the value of the tools doesn’t exceed the value limits for your province.
  • A modestly priced vehicle

How Does Bankruptcy Affect Your Future?

Filing bankruptcy is something that affects your life in numerous ways for years. This is why bankruptcy shouldn’t be used as an easy way to relieve your debt, but instead as a last resort. You can expect your bankruptcy to show up on your credit report for six years following the date your bankruptcy was discharged. Also, there are rules that you need to follow until your bankruptcy is discharged — which can take anywhere from nine to 21 months.

  • Give your bankruptcy trustee complete control of your finances
  • Submit a detailed monthly report that outlines your living expenses
  • Submit your monthly paycheck stubs
  • Surrender all of your credit cards
  • Complete two mandatory credit counseling sessions
  • Reveal that you have an undischarged bankruptcy to creditors when trying to borrow any amount of money exceeding $1,000

What Are Your Other Options?

Bankruptcy isn’t your only debt relief option. There are several things that you can do in order to pay down your debt and gain control of your financial situation, including:

  • Refinancing your house
  • Participating in a debt management program
  • Consolidating your debt
  • Submitting either an informal or formal consumer settlement proposal

Additionally, if you reside in either Nova Scotia or Alberta, you may qualify for the Orderly Payment of Debt program. This program allows you to consolidate any unsecured debt, allowing you to pay it off within a three-year period at a 5 percent interest rate.

Dealing with debt isn’t easy. However, there are several ways that you can get some debt relief. If you’re unsure of what to do, talk to a bankruptcy attorney to determine which debt relief option is right for you.

For debt relief, contact a business such as debt counselling by Beth Maynard & Associates Inc.