Personal bankruptcy is a legal process designed to eliminate your debts.

The editors of Canada's most informative personal bankruptcy site, Personal Bankruptcy Canada, explain the process as follows:

Bankruptcy is caused by having more debts than you can realistically repay. For some people this is a result of poor money management, such as spending more money than they have, and buying items they don't need on credit. For most people, however, excessive debt is caused by an unexpected problem or problems. The most common unexpected problems are a relationship ending through a marriage separation or divorce, job loss, or medical problems.

Most people first realize how serious their financial problems are when they miss a payment and start receiving calls from collection agents. It is then that they decide to investigate the personal bankruptcy option.

Before considering personal bankruptcy, most people attempt to get a debt consolidation loan to reduce their monthly payments, or they try to borrow from friends or family. Credit counseling is also an option.

If that doesn't work, another option to consider is a consumer proposal. A consumer proposal is an alternative to bankruptcy; this alternative is only available in Canada. In a consumer proposal, the debtor offers to make payments over up to a five year period to their creditors; in return, the debts are discharged. For many people this is better than going bankrupt. They are making a deal with their creditors, and they feel better about themselves.

If a consumer proposal is not possible, bankruptcy becomes the final option. You start by contacting a bankruptcy trustee who will help you prepare the paperwork. Once you have signed it, you are bankrupt for a period of at least nine months. During that time you are required to report your income each month to the trustee, attend two credit counseling sessions, and provide the trustee with information to file your taxes.

At the end of the nine month period your bankruptcy is over, and most of your debts are discharged. Certain debts such as child support and court fines are not discharged in a bankruptcy.

The fact that you filed for personal bankruptcy will remain on your credit report for at least six years; longer if you have been bankrupt more than once. This will make it more difficult to borrow money in the future. You may need a co-signer or a large down payment or security deposit if you are borrowing soon after your bankruptcy has ended.

As you can see, there are advantages and disadvantages to personal bankruptcy in Canada. Your debts are eliminated and you have the peace of mind of knowing that you can get on with your life without worrying about having your wages garnisheed. However, this protection comes at a cost. You must make payments to the trustee, report your income each month, and have a bankruptcy listed on your credit report.

While personal bankruptcy is not something anyone wants to do, for many people it is the only way to eliminate their debts, and therefore you should seek the advice of a professional if you believe personal bankruptcy is something you need to consider.

Author-Bio
The article "What is personal Bankruptcy in Canada" is written by Douglas Hoyes. He is associated with Personal Bankruptcy Canada. Visit his site for more details on Personal Bankruptcy in Canada.

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