In essence, bankruptcy sounds relatively straightforward. I get to walk away on my debts. Right? Well, sort of actually but there’s a lot more to it then that. First of all, there’s a long process to enter bankruptcy, involving negotiation with creditors (the first step is to find a solution NOT to enter bankruptcy), but sometimes a conclusion can’t be drawn, so instead we file with the courts. Once you enter bankruptcy, the control of your funds go to a trustee in bankruptcy. From there, they decide what to do with your assets in order to pay creditors. Luckily, they are well equipped to make great choices on your behalf.
There are a lot of different aspects of debt management. Some people often confuse “financial advisors” as well, but if you are referring to the narrow definition then that is more often used for investments (mutual funds, RRSP’s etc.) as opposed to debts. If you need a clear picture of what the various lingo even means then you can check out this debt definitions page over at the HMA team’s website.
You can also review this video on personal bankruptcy and the various steps of financial hardship and what actions you can take to get out of it:
Heard about consumer proposals in the above video but still not 100% sure what it really means? Then you can check out these consumer proposal questions with their answers to get a better understanding.