Bankruptcy Myths and Facts

Posted on 15 January 2015

Some of the most frequently asked questions we receive at Spergel is around bankruptcy myths and facts. These questions are typically around the bankruptcy or consumer proposal process and how it will affect your future. Therefore, in this article, we’d like to debunk three of the most common consumer proposal and bankruptcy myths that are often shared online.

You will lose all your assets during bankruptcy

This is the biggest bankruptcy myth and a real misconception. There are exemptions under bankruptcy law, which protect many of your assets. Learn more about your assets and bankruptcy, and discover Ontario bankruptcy exemptions. Beyond these exemptions, there are assets that may need to be considered. This includes the equity in your home. Your equity may be reacquired by making additional contributions during your bankruptcy (over and above the calculated amount to be paid to the Licensed Insolvency Trustee as surplus income). These payments can be continued if necessary after your discharge in order to fulfil the entire commitment. Your RRSP is entirely exempt from seizure other than contributions made in the year prior to bankruptcy. If this option doesn’t appeal to you, there is always a consumer proposal. A consumer proposal offers much more flexibility around you assets, enabling you to keep whatever you can. Learn more about your assets and consumer proposal.

The length of your bankruptcy is on your credit report

This is another key bankruptcy myth. A first time bankruptcy will remain on your record for just 7 years following your discharge with both TransUnion and Equifax, the two largest credit reporting agencies in Ontario. Learn more about life after bankruptcy. By comparison, a consumer proposal will be on your credit record for just 3 years after its successful completion. If you were able to complete your proposal immediately (perhaps by borrowing the entire amount due from a friend, family member, or lender to successfully complete it), your proposal will remain on your credit record for 3 years from the date the proposal is paid in full. Learn more about life after consumer proposal. It is important to consider how quickly you want either a bankruptcy or a consumer proposal to be removed from your credit report.

You cannot rebuild your credit during a consumer proposal

This is one of the top myths surrounding consumer proposals. The truth is, after you have filed a consumer proposal, you are able to immediately start rebuilding your credit. Simple ways to do so include using a secured credit card. These work by paying an amount to the credit card company to secure the payment. This way, by repaying your credit card in full, you can begin to begin building trust with your lender and rebuilding your credit. You can do so as soon as you have filed a consumer proposal, and you do not have to wait until you have completed it to do so. Find out more in our tips for rebuilding your credit after a consumer proposal.

If you any questions around consumer proposal or bankruptcy myths and facts, it is a good idea to speak to a Licensed Insolvency Trustee. You can call Spergel at 310-4321, visit our nearest location for a free consultation, or complete our free assessment form online. We will explain all your debt relief options so you are fully informed when making the best choice for you.

Helpful starting information:

What to Bring to an Appointment

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Your Information

We’ll walk you through our application process. But, if you want to prepare for your debt free assessment consultation in advance, download our information form and fill in what you can.

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If you’re ready to be debt free, it’s time to meet with one of our knowledgeable Licensed Insolvency Trustees at your convenience and get started

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