| By :
Adrianna Noton
One of the most difficult choices in life that is faced by persons with money problems is the decision to file for bankruptcy. In this legal action, all one's financial assets are placed in the care of a bankruptcy trustee until the case is discharged. It is good for the person who makes the filing to remember that this person assigned your case represents the creditors and not you. At one time, there was a great social stigma for persons that filed either a Chapter 7 petition or a Chapter 13 petition. However, due to recent hard times when debt settlement has not been an option for unemployed citizens without sufficient income, the stigma of a filing is no longer as evident. Canadian laws differ from those in the United States where a Chapter 13 filing allows the individual to pay back a portion of the debt owed before it is discharged. In Canada, the debtor may file a Consumer proposal which works in a similar manner. Even though the large number of people filing petitions in the court has reduced the social stigma of such a financial proceeding, the financial results remain the same. The document remains a part of public record for up to 10 years, so it can affect one's ability to get financing to buy a car or a home. Before filing a petition, the individual may want to consider possible future ramifications. Filing the petition has several benefits. It can stop collection actions of debtors. This can include wage garnishment as well as most phone calls asking for money. However, the action does not clear such debts as tax liens or student loans. In many cases, the action will free up significant amounts of cash flow that may make it easier for these debts to be paid. In cases where debt is secured, the property securing the loan may still be reposed by the creditor unless the debt is reaffirmed. This means that it is possible to file a petition and still lose a home or vehicle that would normally be protected. Once again, the reduction of unsecured debt may make it possible to meet the obligations of the secured debt that has been reaffirmed. Once the filing has been finished, the petitioner may want to take steps to rebuild credit. Many persons exiting a filing will begin with the purchase of a used vehicle. By making payments on time, the person can rebuild credit. In addition, time does help to improve the credit score and in a few years, the filing is a simple black mark that might have less impact than all the negative reports one might face without having made the petition. In some cases assets belonging to a person may be seized by the court and sold with the proceedings going to the debtors. In other cases, the petitioner may have few assets and they could all be protected by the petition. In the later case, since the debtor has no assets, the petition simply dismisses all the debts included in the case. The bankruptcy trustee makes many of these decisions.
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