5 Reasons Not to Declare Bankruptcy You may be wondering: is declaring bankruptcy right for me? You can\u2019t keep up with minimum payments on your credit card debts, you have collection agencies contacting you, and you\u2019re struggling to make ends meet. Despite it crossing your mind when you\u2019re in financial trouble, filing bankruptcy may not be the right solution for you. In its simplest terms, bankruptcy is when a person can no longer repay their debts, and they need a legal resolution to their creditors demanding repayment. Sure, it wipes the slate clean for your debts, but it\u2019s a major life decision that comes with a lengthy list of long-term repercussions, caveats, and implications that will negatively affect many facets of your life. Only about 10 per cent of consumers who visit the Credit Counselling Society move on to the bankruptcy process. Ultimately, you need a good reason for declaring bankruptcy and it needs to make sense for your situation. Here are five of the most common reasons why bankruptcy is not an ideal first choice for consumers: 1. It Crushes Your Credit Rating When you file for bankruptcy, you\u2019re giving your credit rating and credit score a death sentence for the next six to seven years, or longer \u2013 depending on how long it takes to obtain your discharge or if it\u2019s your second or third bankruptcy. Once bankruptcy is noted on your credit report it becomes extremely difficult to qualify for new bank loans, credit cards, car loans, mortgages, and other credit products at reasonable interest rates. While avoiding credit so as not to end up in debt again might seem like a good idea, living long-term without any form of credit isn\u2019t reasonable for most Canadians. For instance, if you\u2019re at a life stage where you\u2019re planning to secure a mortgage for a new home, or even get through credit checks to rent a property or obtain new employment, bankruptcy will negatively affect your chances of getting through this checkpoint. Even years down the road, creditors may see you as high risk, often asking on applications if you\u2019ve ever declared bankruptcy. 2. It Doesn\u2019t Erase All Debts A common misconception is that bankruptcy absolves you of all of the debts you can\u2019t pay; this isn\u2019t true. As a general rule of thumb is that once you declare bankruptcy, unsecured debts, such as your credit cards, unsecured lines of credit, payday loans, and other personal loans and unpaid bills are dealt with. But filing for bankruptcy doesn\u2019t extend to secured debts, e.g. mortgage or car loan, and loans such as recent student loans (less than 7 years from when you stopped studying), alimony and child support payments, court-imposed fines and other penalties, and debts tied to fraud. Depending on the types of debts you have, you could be declaring bankruptcy and taking on its ramifications, without adequately resolving your situation. 3. Your Assets are in Jeopardy When you decide to move forward with declaring bankruptcy, you need to meet with a Licensed Insolvency Trustee. They are the only people licensed in Canada by the Superintendent of Bankruptcy to carry out consumer proposals and bankruptcies. They\u2019ll take into account your income, assets, and debt to help discern if you\u2019re a prime candidate for bankruptcy. There\u2019s a reason why: declaring bankruptcy needs to be worthwhile. Most consumers end up losing their RESPs and tax refunds (Trustees file tax returns on your behalf), contributions made to their RRSPs in the past 12 months, and most of the equity in their homes as Trustees liquidate assets to offset debt. 4. Another Option is Better If you\u2019re worried about the long-term ramifications of bankruptcy, take relief in knowing that there are viable alternatives to bankruptcy that can help you deal with the stress of being in debt. It\u2019s often only through a free, confidential meeting with a professional Credit Counsellor that consumers become aware of the other avenues they can take to get debt relief. Little-known options available to Canadians include: debt management programs, debt consolidation, debt settlements, and consumer proposals \u2013 all of which won\u2019t batter your credit rating and financial health as badly as bankruptcy would. 5. It\u2019s Costly and Time Consuming Many people don\u2019t realize it, but the bankruptcy process comes with a price tag. Between fees to your Trustee, which are about $1,800, to other administrative charges and additional payments to creditors based on your level of income, bankruptcy costs can add up. The fees cover the work of your Trustee, who acts as your representative while going through all of the bankruptcy paperwork, as well as court costs and filing fees. It\u2019s also a lengthy process of between nine and 21 months (for a first bankruptcy), which starts when you file for bankruptcy through to when you obtain your discharge. During this time you need to report your income monthly to your Trustee, attend 2 credit counselling appointments, and provide income tax information and other requested information to ensure you comply with the process. Where to Get Free, Confidential Bankruptcy Information Bankruptcy is a major undertaking, so it\u2019s worth the time to meet with a Credit Counsellor who can discuss your situation with you and help you decide if it\u2019s the best option for you. The Credit Counselling Society is a not-for-profit service \u2013 highly trusted by countless Canadians, and the highest accredited credit counselling organization in Canada. Our Credit Counsellors are certified professionals in the field and are readily available to evaluate your financial situation and answer your questions. We can help you in many different ways, but for starters, we simply go over your financial situation with you, and walk you through the various options that may be a good fit for your needs. If bankruptcy is your choice, we can refer you to a Trustee to help you with the process. This is an important step as there are many get-out-of-debt-quickly entities that may entice you with quick fixes only to leave you on the hook with hefty bills and little support. How to Contact the Credit Counselling Society (CCS) Contacting CCS is easy by phone, email, or anonymous online chat. Appointments with us are free, confidential, and you can talk to a Credit Counsellor in person or over the phone. You aren\u2019t obligated to take any further action by speaking with the Counsellor, and your meeting is a judgment-free zone. We\u2019re a non-profit organization \u2013 there are no hidden fees, fine print, or strings attached. We\u2019re here to help you make a decision that benefits you and your family in the long run.