Many individuals are looking forward to retirement. They have spent the majority of their adult years working hard, raising a family and saving for retirement, and they see that next chapter of their life as a time when they can slow down and enjoy life. Unfortunately, some individuals at the pre-retirement age (45 to 64) are experiencing financial difficulties and worry that they will not be able to meet their financial obligations in retirement. They are already struggling to meet their obligations. For these people, saving for retirement is not possible. They need to resolve their financial problems and for some, the only solution available may be bankruptcy.
There are many factors that can contribute to bankruptcy. Having a high debt level can certainly be one of them. Other factors could also include health problems, job loss, low paying jobs, divorce or a sudden expense which can tip the scale making it difficult for some to keep their finance on track. Most individuals will struggle through as long as they can; living paycheque to paycheque and using bankruptcy when they have ran out of options.
To file for bankruptcy you must be insolvent which means you owe at least $ 1,000.00, you have more liabilities (debts) than assets and you can not maintain payments on the debt as it falls due. Bankruptcy is a legal formal process where you assign your assets to a Trustee in order to be relieved of the unsecured debt. The bankruptcy must be filed by a licensed Trustee and the fees are regulated by the government.
Let’s take a look at the myths and the facts about bankruptcy:
|My car will be seized
||If value is below $ 5,650.00 the asset is exempt from seizure by the Trustee
|My household goods will be seized
||If value is below $ 11,300.00, the assets are exempt from seizure by the Trustee
|My RRSP’s will be seized
||Trustee can take the funds that were contributed over a 12 month period
|The bankruptcy process is 7 years
||First time bankrupt may qualify for a discharge at 9 months or 21 months
Second time bankrupt may qualify for a discharge at 24 months or 36 months
|I will never get credit again
||This will be dependent on the policies of the credit card grantors. Many bankrupts do obtain credit cards once the bankruptcy has been completed successfully.
|I cannot include debt owed to Canada Revenue Agency
||They are included
|My spouse will be affected
||If your spouse is a co-signor or co-applicant on a credit card, they are still liable on the debt
Studies completed by Statistics Canada have confirmed there is a trend of increasing debt per Canadian household. Consumers must become more credit savvy if they are to avoid the pitfalls of credit.
For additional information regarding bankruptcy visit our Bankruptcy FAQ or request a free consultation.