Published by Programme B
According to the Government of Canada, the final three months of 2019 saw 35,155 filings for insolvency. These are record numbers not seen since 2010.
With numbers this high, it’s no surprise that a number of people are choosing to file for bankruptcy. If you’re in debt, you might also be thinking about this option for yourself. While bankruptcy may be an ideal option for some people, it may not be the right one for you.
Credit Canada – Canada’s first credit counselling agency – provides five reasons why you may want to avoid filing for bankruptcy and consider your other options first.
1. Potentially Lose Assets
Depending on the province or territory you live in, certain exemptions apply for which assets can be seized during the bankruptcy process. That being said, any non-exempt assets will need to be surrendered to a trustee for the purpose of managing the bankruptcy process for you.
Non-exempt assets include investments, secondary properties, and vehicles, as well as windfall gains.
2. Bad for Employment
While a company cannot legally fire you for filing for bankruptcy, they can choose to not hire you if you have one on record. Many employers now do credit checks to screen candidates, and some industries like real estate, banking, and insurance, may be less likely to hire you if you have a bankruptcy on your record.
3. Negatively Affect Your Credit Rating
If you’re in debt, your credit is maxed out, and/or you’re behind on payments then you likely already have bad credit, but that doesn’t mean it’s irreparable. However, when you apply for bankruptcy it drops to the lowest rating there is (an R9 rating) for the duration of the bankruptcy period, plus an additional six years following bankruptcy discharge.
4. Difficult to Get Personal Loans
Your mortgage is a secured asset so you typically will be able to keep it during the bankruptcy process as long as you continue to make payments on it. But if you want to obtain personal loans like a mortgage while on an undischarged bankruptcy, you’ll likely not have much luck. Even after discharge, your options may be extremely limited until you are able to rebuild your credit, as you are considered a high-risk borrower until then.
5. Difficult to Get Business Loans
If you run your own business or are thinking of starting one up, you’re likely going to find it difficult to get a business loan after filing for bankruptcy. This can be problematic for a number of business owners who often need the additional funds to help start-up their company or even keep it afloat afterwards.
Alternatives to Bankruptcy
With all the negatives to consider when it comes to bankruptcy, you might want to know about the other options available to you. Consider contacting a Credit Counsellor from Credit Canada who can talk to you about alternatives, like a consumer proposal or debt consolidation loan. They may also recommend a debt consolidation program where they work with your creditors on your behalf to combine your debts into one single lower monthly payment, and work with you to help you live a debt-free life.