Once upon a time, filing a Chapter 7 or Chapter 13 bankruptcy petition was associated with a significant social stigma. However, as a result of recent economic hardships in which debt resolution has not been an option for unemployed citizens without sufficient income, the stigma associated with filing for bankruptcy has diminished.
Canadian law differs from that of the United States, where a Chapter 13 bankruptcy filing permits the debtor to repay a portion of the debt prior to discharge. In Canada, the debtor can submit a Consumer proposal, which functions similarly.
Even though the large number of individuals filing court petitions has diminished the social stigma associated with such a financial proceeding, the financial outcomes remain unchanged. The document is part of the public record for up to ten years, so it can affect a person's ability to obtain financing to purchase a vehicle or a house. Before filing a petition, a person may wish to consider potential future repercussions.
The filing of the petition has multiple advantages. It can suspend debt collection actions. This includes wage garnishment and most phone calls requesting money. The action does not, however, discharge tax liens or student loans. In many instances, the action will free up substantial cash flow, making it simpler to pay off these debts.
In cases where a debt is secured, the creditor may still repossess the collateral if the debt is not reaffirmed. This means that it is possible to file a petition and still lose a protected residence or vehicle. Again, the reduction of unsecured debt may make it possible to fulfill the obligations of the reaffirmed secured debt.
After the petition has been submitted, the petitioner may wish to rebuild credit. Many individuals who are leaving a bankruptcy will commence by purchasing a used vehicle. By making timely payments, the individual can rebuild credit. In addition, time does help to improve one's credit score, and after a few years, the filing becomes a simple black mark that may have less of an impact than all the negative credit reports one would have been subjected to if the petition had not been filed.
In some instances, a court may seize and sell a debtor's property, with the proceeds going to the debtor's creditors. In other instances, the petitioner may have few assets, all of which could be safeguarded by the petition. In the latter scenario, since the debtor has no assets, the petition merely dismisses all of the debts. The trustee in bankruptcy makes the majority of these decisions.""
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