One of the hardest and most unfortunate events that could happen to people in businesses is insolvency. Filing for bankruptcy should be the last resort when managing your finances has become impossible. When individuals and businesses stop being able to physically pay their debts or spend money for payroll and normal operations, then it’s time to declare it publicly to get the help you need and get a clean slate with a new beginning. However, it’s not as easy as it may sound.
Let’s find out what you should expect after filing for bankruptcy.
What Happens to My Assets and Properties?
There isn’t a definitive answer to that question about your assets and properties because there are several bankruptcy routes that you can take. Some people might file for chapters 7, 11, 12 or 13 depending on their situation and they all have their differences. This is the norm anywhere worldwide, even the agencies in Canada have been advising people to take the right chapter for their situation
The licensed trustees and insolvency specialists at BankruptcyCanada.com believe that filing for bankruptcy will solve your money issues with a consumer proposal if you have assets, property, and income that you want to protect. So, it’s important to consult with the trustees and do some research to understand what your best option is in this unfortunate circumstance. Sometimes you won’t have to worry about liquidating assets, but there might be situations where it could be needed.
The Different Chapters You Could File For
This chapter is known to be the liquidation type of insolvency, meaning that you will need to sell off your assets and properties to make up for the portions of debt you can’t afford to pay. However, some laws protect specific assets from liquidation, and they are fully exempted in this case. These assets can be your car, house, or retirement accounts.
This is the business-based chapter where you have to reorganize and restructure your company to handle the portions you owe if liquidating your assets isn’t an appealing option. This is an attractive option for a lot of businesses because they can continue their operations and stay on the good side of their creditors. Your trustees or lawyers can advise you on how to pay off some of the remaining debt or how to get forgiven for it.
This chapter is reserved for agriculture; fishermen and farmers only. It helps them restructure their finances accordingly without any fear of foreclosure or liquidation. There will be extra benefits for the people in debt, making this option very appealing. However, you need to check if you’re eligible for this chapter because it’s limited to very specific applications and situations. You will gain the protection of paying off what you owe, but on your own time through your operations as a farmer or fisherman.
This chapter is quite similar to chapter 11 but it’s mainly filed by individuals and not businesses or corporations. You will need to comply with the set plan of reorganizing your debt to pay off a partial portion or the full amount of what you owe within three to five years.
The State of Your Credit
Your credit will take a major hit after going public, but it’s something that you must go through to survive. Your credit history will be slightly ruined with insolvency and your credit score will decrease. Depending on which chapter you choose, the insolvency will stick to your credit report and history for approximately seven to ten years. Over time, you might find it difficult to apply for specific loans or credit cards because they won’t approve your credit, but you can do business with lenders who are specifically there to assist people who filed for bankruptcy.
The State of Your Employment
Employers will always do background and criminal checks, bankruptcy never shows up. If it does, they might not consider you for a job that involves handling money. Also, if you’re currently working and not planning on changing careers, then you shouldn’t worry too much about your employment status.
When you’ve exerted your last effort in managing your debt and financing your daily routine and it’s still impossible to live a normal and hassle-free life, then your last option for getting free of this burden is going public with it and filing for bankruptcy. It might be scary, embarrassing, and too difficult, but it’s necessary to avoid total financial ruin that can make your life unbearable. There might be drawbacks along the way, but it’s better and much more convenient than your current situation before going public with your insolvency.
Interesting related article: “What is Bankruptcy?”