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Ontario|Debt and BankruptcyDebt and Personal Bankruptcy 247 What is bankruptcy? Filing for personal bankruptcy is a legal process that allows a person facing overwhelming financial difficulties to clear their debts and make a fresh start. Bankruptcy is not intended for people who intentionally or recklessly set out to defeat their creditors. Rather, it is intended for persons who have unexpectedly become unable to repay their debts. For example, they may have genuinely made some poor spending or borrowing choices, or they may have suddenly lost their job or encountered health or marital problems. To be eligible to file for bankruptcy, you must owe at least $1000, and you must not be able to pay your debts as they become due, and you must be unable to pay off your debts even if most of your assets were to be sold. In law, this means that you are insolvent.
- Advantages and disadvantages of bankruptcy
The benefits of declaring bankruptcy are that you are no longer responsible for your current debts, you will not receive any harassing phone calls from your creditors, and you can make a clean financial start. However, the main disadvantage of bankruptcy is that your bankruptcy stays on your credit record for seven years, and of course, it means that your creditors will not be able to collect the money that you owe them. As a result, you will have difficulty getting a credit card or a loan after you have filed for bankruptcy. It will take a while before people trust you enough to lend you money again. This may not be a bad thing. If bankruptcy is due to misbudgeting or poor credit choices, this will force you to learn to live within your budget.
If you have a steady income and you discover that your credit rating is satisfactory, you may be in a manageable financial position. Rather than filing for bankruptcy, you may choose to manage your debts, perhaps by consolidating them and making monthly payments on time. In this case, you may want to consider some alternatives to bankruptcy. See other sections of Legal Line for information about alternatives.
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