Heard all the myths about debt and bankruptcy? Here are the facts from Newfoundland & Labrador's personal debt experts, JANES & NOSEWORTHY, Trustee in Bankruptcy.
MYTH 1: You lose everything in bankruptcy.
FACT: Many personal assets, pensions and, to a certain extent, items like tools of trade, a vehicle and home are exempt from seizure.
MYTH 2: Bankruptcy is only for businesses or if you owe a lot of money.
FACT: Personal bankruptcy is for any individual who owes more than $1,000 and cannot make the required payments on their debt. It is not the amount that you owe but what it does to your life that matters.
MYTH 3: Income tax and Government debt cannot be included in bankruptcy.
FACT: Income tax and most other Government debts are discharged in bankruptcy.
MYTH 4: Student loan debt is not covered by bankruptcy.
FACT: If a person has been out of school for more than seven years prior to bankruptcy, student loan debt is erased, the same as any other debt.
MYTH 5: I will never be able to get credit if I go bankrupt.
FACT: The person declaring bankruptcy will have such a bad credit rating it cannot get any worse. Most people will be a better credit risk after bankruptcy and will be in a position to rebuild their credit.
MYTH 6: Everybody will know I filed bankruptcy.
FACT: In most cases the only people who will know about your
bankruptcy will be your creditors and whomever you choose to tell.
MYTH 7: Only deadbeats go bankrupt.
FACT: Most people who go bankrupt are good, honest, hard-working, educated and responsible people who do so as a last resort after months, and sometimes years, trying to pay high interest debts that got behind as a result of a significant life event. The common life events are; relationship breakdown, loss of job, serious illness, death of a spouse or a family emergency.
MYTH 8: Bankruptcy will affect my spouse and family.
FACT: Bankruptcy will have no effect on your spouse or his/her
career if your spouse is not co-signed on your debt. It will also
not affect family members who may apply for a student loan.
MYTH 9: Filing bankruptcy may cause marital and family troubles.
FACT: The opposite is usually true. Most people have a desire to pay their debts and not being able to do so is the cause of stress and resulting family problems. Bankruptcy relieves the stress because there is an immediate end to payments to creditors and collection activities.
MYTH 10: If you file bankruptcy you will never be able to own anything.
FACT: When you have been discharged from bankruptcy, usually in nine
months, there are no restrictions on what you can buy or own.
MYTH 11: Trustees only administer bankruptcies.
FACT: Trustees help people in financial crisis in a number of ways. Some of these include credit counselling, refinancing, settlement offers, Consumer Proposals, and public education.
Trustees are the only debt professionals, who have a full range of debt relief options. Also, Trustees are the only debt professionals who can guarantee protection from your creditors.
