When you see your debts mounting and there is no way to get rid of them, bankruptcy may seem like the only option. However, it is important to understand how this will affect your life.
With that knowledge in hand, you may consider another option and will be prepared better to face the consequences if you do go through with bankruptcy.
What is the Positive Affect of Bankruptcy?
Bankruptcy is obviously a not a thing to celebrate. However, as they say, we should always look at the bright side of things, and then bankruptcy has a positive side as well. When you file for bankruptcy, most of the debts will be cleared. In most cases, the important personal belongings stay intact as well. This may include your house and car. In addition, your job will not to be affected so your income will not be disrupted.
This is the perfect time to get your life back on track. With most of your debts cleared, you will definitely feel the relief you have waited for so long. It will clear your head so making smart decisions about your finances will be easier now.
The important thing to understand is how you can continue this feeling of relief. To answer that question, you should be aware of the negative impact of bankruptcy.
What is the Negative Impact of Bankruptcy?
There are two major negative consequences of filing a bankruptcy. Firstly, your credit history will be erased, which puts you in the difficult situation of building it back up. Secondly, many people will fall victim to stress and anxiety.
In Canada, the bankruptcy will be mentioned on your credit report for 6 years after you have been discharged. This is a difficult and depressive thing to accept. On the positive side, it is still just 6 years; meaning it is temporary. However, if you are ever asked about being bankrupt in your life, you should answer in an affirmative. This is the right protocol to follow if you do not want to be held accountable for lying and face any legal consequences.
In conclusion, as far as your personal life history is concerned, the bankruptcy is a permanent mark. However, on your credit reports, it will be removed after several years.
Building credit is not easy but not impossible either. Do not wait 6 years to do something about it. As soon as you are discharged, begin investing hard efforts into developing a good credit score. For this purpose, you can opt for many methods. You can start paying your bills on time, get a secured credit card, take a loan for RRSP, and start living responsibly.
Feelings of Guilt and Shame
Bankruptcy is not always the result of poor financial choices. There could be hundreds of factors when a person fails to pay their debts. Therefore, it is not always true that a person should be ashamed for filing bankruptcy. We are all humans and mistakes are made.
You can tone down these feelings by treating this situation as a second chance. You might have mixed feelings between shame and relief but you can invest these emotions to build a better future.
When you file for bankruptcy, you are required to fulfill certain duties before you can be discharged. These duties also include attending financial counseling sessions. Take them seriously and make the most out of them. Whatever you learn, apply it in the new life you are about to begin.
Facing the Consequences
Now that you know the effects of bankruptcy, you can prepare yourself accordingly to face them. It is possible that your bankruptcy was not a result of personal choices. For example, people often get under the burden of mounting debts because of excessive medical expenses, divorce, loss of jobs, and more. If this is the case, the first thing you need to understand is that life is unpredictable but perhaps the habit of saving money can help you in tough times.
On the other hand, if you think your personal choices led you to bankruptcy, then it is time to adjust your lifestyle. Cut down unnecessary expenses and luxuries. Start planning on how to manage within your means.