A first-time bankruptcy will take from nine to 21 months to complete – if your creditors don't dispute your claim. The length of time depends largely on the percentage of your income that must be paid to the trustee.
While Dana is grateful for her fresh start, she admits she still feels like a failure at times. To avoid landing in a financial crisis like Dana's, Powell advises people to take control of any financial problems early on. "It requires discipline and time, but most people can work their way through debt," he says. * Name has been changed.
6 bankruptcy myths debunked
Myth: You have to owe a ton of money.
Fact: If you owe more than $1,000 and are unable to pay your debt payments, you can declare bankruptcy.
Myth: I can walk away from all debt.
Fact: Not so fast. You have to pay a certain amount of your debt to your trustee each month. That money is then distributed to your creditors. If you get a raise or win the lottery, your payments will be reassessed. In addition, certain debts (court fines, alimony, some student loans) are not exempt.
Myth: I'll ruin my spouse's credit rating.
Fact: You and your spouse have separate credit ratings and as long as you continue to make the payments on your cosigned loans for assets such as your house and car, your spouse's rating will remain intact.
Myth: I'll never be able to borrow money again.
Fact: You will. With a first-time bankruptcy there is a nine- to 21-month process during which a small fraction of the money you owe is given back to your creditors. The amount you pay depends on the amount of "surplus income" you have – any household income that exceeds income levels already established by the government. When the process is finished you are free of previous debt and financial obligations. You can start rebuilding your credit rating right away. You may qualify for a mortgage or car loan in a few years.
Myth: My bankruptcy trustee will have to call my employer.
Fact: Filing for personal bankruptcy is between you, your trustee and your creditors. Unless a family member cosigned on a loan, your extended family never has to know. Your employers – present and future – are not notified about your bankruptcy.
Myth: If I go bankrupt, I have to give the trustee most of my earnings.
Fact: Bankruptcy payments are based on government guidelines. The larger your household income, the more you will pay. These guidelines take into consideration your earnings, the size of your family and nondiscretionary expenses such as your mortgage, child-care and support payments.
Online help
• Credit Counselling Canada, www.creditcounsellingcanada.ca
• Financial Consumer Agency of Canada, www.fcac-acfc.gc.ca
• Office of the Superintendent of Bankruptcy Canada, www.osb.ic.gc.ca
Page 3 of 3 -- Find out how one woman's finances took a disastrous turn on page 1.
