Advantages
- Collection activity will eventually stop
- Nothing to lose if you have no assets
Disadvantages
- Can be a extremely intrusive and unpleasant experience
- Depending on your income, it can be a very expensive way out of debt
- All information about the filing is made available to the public
- Impacts your credit rating for 6 to 14 years
- All non-exempt assets are surrendered to the trustee to pay creditors
- Bankruptcy trustees essentially work for the creditors, not you
- Can impact your employment if you are in a bondable position
Only a trustee can administer a bankruptcy or consumer proposal and it can sometimes be your best way out of an overwhelming debt situation, but you should consider how the law forces a trustee to operate in Canada.
It is a long and painful process and the repercussions can last up to 14 years if you have been bankrupt more than once.
When considering filing for bankruptcy, always deal with a licensed trustee; that is, a trustee who has obtained a license from the Superintendent in Bankruptcy pursuant to the Bankruptcy and Insolvency Act (Canada).
What most people don’t know is that even though you pay a trustee for filing an assignment in bankruptcy or consumer proposal, they are working on behalf of the creditors that you owe. That means even though you pay the trustee to provide a fresh start for you, they are essentially an appointed agent for the creditors and looking after the best interest of the people that you owe. The trustee works towards returning the creditors money back through the assets you hand over during the bankruptcy process.
You will present all of your debts and most of your assets to the trustee. Very little of your assets are exempt from bankruptcy. In Ontario (2007 rules) )for example, you may keep your car if it is worth less than $5,650, necessary and ordinary wearing apparel up to $5,650, certain tools up to $11,300 if required by your trade, up to $11,300 of furnishings and certain types of life insurance (you can find more information here). Most of your other assets are available for seizure and may be lost including your home, and your investments (except RRSP’s and pension plans in certain cases). As a result, always consider doing everything you possibly can do to avoid going bankrupt.
Total Debt Freedom on the other hand only works for you to save you as much as money as possible. Our team is compensated in part based on the success of the settlements they achieve for you. Debt settlement services are private and do not affect your credit report the same way as going bankrupt. Bankruptcy is public. Many people also don’t realize that once you file for bankruptcy you cannot obtain work in certain areas such as in real estate, or handle money like in bondable positions.
Filing for bankruptcy or a consumer proposal is not an easy or quick fix; it really is a serious decision with significant consequences.
To learn more on consumer proposals, please read this blog titled: What is a consumer proposal
