By Jillian Taylor-Mancusi
Bankruptcy can be an effective way to get debt help. For some residents of Winnipeg in financial trouble bankruptcy is the best option. However, some people do not think of bankruptcy as a solution to their plight until they have no other choice. One reason is fear. Unfortunately that fear is often of the unknown. People don’t always understand what bankruptcy is and have little idea of how bankruptcy could help them. There is much misinformation out there about bankruptcy and some things you hear are pure fiction. A few are more like half-truths.
Of the many untruths, here are 3 Winnipeg bankruptcy myths that are the most common.
The first myth is that you will lose your home in bankruptcy.
All across Canada, some people do lose their homes but many do not. The truth is it depends on the Province in which you live and the equity you have built up in your home. Federal bankruptcy law guarantees no one loses all they own in bankruptcy. However, there are equity allowance limits established by the government that determine which possessions you may keep during bankruptcy. There are equity allowance limits for cars, furniture, personal possessions, and business related tools. Each Province sets it own exemptions. In Manitoba there is a $2,500 allowance for home equity, but in Ontario there is none. In Manitoba you may keep your home if you have $2,500 or less in equity. If you have more than that, you may be able to keep your home by contributing the difference. A Manitoba licensed insolvency trustee can tell you how to do this.
The second most common bankruptcy myth is about credit.
Many believe bankruptcy destroys a credit rating forever. This is a trick debt collectors like to use on debtors. It is true bankruptcy destroys your credit while in bankruptcy. The debt collectors never tell you it only lasts until you get a discharge from bankruptcy. At that point you can begin to rebuild your credit rating immediately and there are specific things you can do to help. Experts say you can rebuild a credit rating in anywhere from 12 to 18 months. You should also know those debt solutions you hear advertised also destroy your ability to get credit while you are enrolled in the program.
The third myth is that your spouse will be liable for your debts.
This is another trick debt collectors like to use. The full truth is you alone are responsible for the debts under your name. The half-truth is some people have joint credit accounts. In a joint account both you and your spouse sign for the account. This means both are responsible. If you declare bankruptcy it is true your spouse would be liable for joint account debts. It is not true for accounts opened under your name alone.
These 3 Winnipeg bankruptcy myths are not the only ones out there. You might read you can go to jail if you file for bankruptcy – not true. Others believe you will lose your passport. Again, not true. Bankruptcy laws were created to help honest debtors with overwhelming amounts of debt. If you want the full truth about bankruptcy, see a Winnipeg licensed insolvency trustee. An initial consultation is free of charge.