To date we have discussed the need of creating a budget and how you can use the budget as a tool to pay off debt. For some of you once you have finished creating your budget you will realize how challenging your financial situation is. In one of our post we talked about making sure you do whatever possible to get your debts paid in full, and one of the strategies you should never use or at the very least put your effort forward to avoid is bankruptcy. Sometimes your financial health has deteriorated to the point where you have no choice but to throw in the towel. It doesn’t mean you are a bad person, so make sure you go easy on yourself as it is not the end of the world. The biggest thing is to learn from your mistakes and make sure take the positive out of your experience. At this point you ask a friend, family, a lawyer or even yourself, Should I go bankrupt? Well let’s see…
The idea of filing for bankruptcy is very scary but sometimes it is the only real solution left. Let’s take a look at the basics of bankruptcy so you can get a better understanding and ease your mind. Though this process is not easy, having the right information can make it a little less stressful.
In the United States the Federal Court Systems deal with all bankruptcy information and set the laws regarding the process. This does not mean that an individual needs to go to Washington D.C. to file, as each state will deal with individuals and businesses during the proceedings.
In Canada bankruptcy is a Federal law and except for Exemptions, which are set by the provinces and territories, is applicable to all provinces and territories. When you apply for protection the province or territory in which you live deals with the proceedings.
One of the most important pieces of information to know is that the courts don’t come to the individual or business to file, the individual or business need to go to the courts. In the United States you file a petition called a Statement of Intention or in Canada it is called an assignment in bankruptcy, this is where the debtor lets the courts know that they are applying for bankruptcy. Just because you file for bankruptcy protection doesn’t mean you will go all the way through the legal system. The courts or agents of the courts will need to gather important information through forms which need to be filled out by you.
By filling out all the applicable forms you are allowing the courts to review your credit history as you disclose current creditors, the balance of your debts, current and past work history. This information is reviewed by the courts and gives them sufficient information so they can make a determination as to whether or not you can proceed. Keep in mind in the United States you don’t have to hire an attorney to represent your case although they can be a great source of knowledge especially when you are not familiar with the proceedings and the definition of the laws. Most will not hire attorneys as they are scared of additional charges which they can’t afford, however most legal counsel are reasonably priced due to the circumstances.
In Canada you would be represented by a Trustee. The trustee will take you through the entire process step by step. During an initial consultation you will rarely be charged any fee as you are in the research stage. Once you have decided what action to take only then will you be required to pay a fee to the Trustee.
Most of the general public doesn’t have an understanding of the bankruptcy process and this causes misconceptions regarding bankruptcy proceedings and of course that is where the fear comes from. One common misconception is that all of your possessions will be taken by the courts. This is not true at all as you are allowed certain exemptions and items necessary for everyday living.
In part 2 we will discuss more about credit protection and what to expect which will help you get some answers to the question – Should I go bankrupt. See you in Part 2.
