Hi there and welcome back to Understanding
Personal Bankruptcy in Canada, the fourth of a five video introduction series. Today
we will discuss about the deciding point of whether you should declare bankruptcy, comparing
consumer proposals with bankruptcy and lastly the effects of personal bankruptcy on a job. Let us consider some factors in bankruptcy
and effects it will have on you. Bankruptcy and marriage failure go hand-in-hand.
Stress from debt is a leading cause of marital problems. As a matter of fact in the financial
world there is a maxim that says the number one reason for divorce is financial difficulties,
and the number one cause of bankruptcy is divorce.
A significant number of people after divorce will file for bankruptcy as they are unable
to afoot all of the debt by themselves that was obtained during marriage Business and Bankruptcy. If your income is
through a business, ask yourself if the business is not profitable? Sometimes it is better
to just let go and restart. In many cases the owner’s investments cannot
be recovered. Several questions will need to be asked. Can
you afford to pay the bills as it is and still live in a decent way? Can you afford to live
the way you are right now? Can you cope with the stress of all of the debts that have been
incurred? Is that debt worth your marriage? Note that no one will tell you to go bankrupt.
That decision is solely yours as you will have to live with its consequences.
The most other people can do is to offer their advice and what the process is and what are
its consequences. You will have to make the final decision. There is an alternative to bankruptcy and
this is called a consumer proposal. Officially, it is suitable for those who may
have too much equity in their assets and do not want to lose it.
To file a consumer proposal you cannot owe more than $250,000.
This may be suitable if a job depends on a no bankruptcy filing record. Some CGA associations
require that their members notify them of any such filings.
A corporate director can file a consumer proposal and remain director of a corporation.
Also a credit card with zero balance can be kept in a proposal. All credit cards must
be surrendered in a full bankruptcy. Officially all of your debts will be significantly
reduced and as an example, a $30,000 debt can be reduced down to approximately $10,000
to be repaid within 3 to 5 years. If any time during this three to five years
the payments cannot be made then a full bankruptcy can be initiated. Okay that’s officially what the consumer proposal
is. Let’s get some real advice from those who
have declared personally bankrupt. In reality an R7 rating, which is a consumer
proposal rating for your credits, is not treated any much different from the R9 rating for
the full bankruptcy. If the debts are paid off in 3 years, the
record will be off of your credit in another 3 years and therefore in 6 years the credit
rating will be restored. This is the same as a full bankruptcy except
that money has been paid for 3 years. The other scenario if the debts are paid off
in 5 years for a consumer proposal, then takes another 3 years to be off of the credit report,
this is a total of 8 years and will be on the credit report for an additional 2 years
beyond the bankruptcy timeframe. Let’s look at bankruptcy and a job.
The first question to ask is that does your job require a periodic credit check?
This varies from employer to employer and therefore the employer ‘s policy should be
checked to see if a periodic credit check is done.
The best way to do so is to check your credit report to see if the employer has pulled a
soft credit check on you. In many instances the credit check is just
for employment purposes and will not be checked after hiring. For CGAs who wish to file personal bankruptcy,
the association must be notified. The file will be monitored during the session
however they will be looking for issues of financial fraud and not just the fact that
a person has filed for bankruptcy. That file will be closed when the person has
been discharged. Certain accounting jobs will require a credit
check and a bankruptcy will prevent such a job from being acquired.
Banks and some financial institutions will also require a positive credit check for employment
purposes. If a person is already employed, the human
resource policies of that organization will need to be checked to see if a bankruptcy
voids a person’s contract. And in summary, your marriage may be affected
with extreme debts and could lead to divorce and then to bankruptcy.
Deciding to go bankrupt is a personal choice, and a consumer proposal is an option if conditions
are met. New job applications may have problems qualifying
if a credit check is necessary. For those already employed the HR policies
of the employer must be checked. If you’ve enjoyed this video and found it
informative please look at the fifth and final video out of the five video series which will
be sent.