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As a licensed trustee in bankruptcy in Ontario,
Canada, I meet with hundreds of people each year who are in serious financial
difficulty, but they don't want to go bankrupt because they are afraid
they will never be able to borrow again. The vast majority of people I meet
with are honest, hard working people who have experienced a life altering event,
such as a job loss, marriage break-up or medical problem. They used credit to
survive, and now they have more debt than they can handle. In many cases they
need to declare personal bankruptcy to get a fresh start.
People who live in Ontario are no different than people who live everywhere
else: one of their financial goals is to one day own their own home, and they
worry that if they declare bankruptcy, they will never be able to borrow again.
They worry that with a personal bankruptcy on their credit report they will
never qualify for a mortgage.
When people raise the issue of borrowing after personal bankruptcy, here's
what I tell them:
First, if you already have more debt than you can handle, if you don't deal
with your debts you will never be able to borrow again, whether you go bankrupt
or not! If you are so far behind on your bills that collection agents are
calling, your credit rating may already be damaged beyond your ability to fix it
on your own.
If you are already being hounded by bill collectors, a bankruptcy filing
may actually, over time, improve your credit rating by eliminating your debts
and getting you back on track financially.
Second, I tell them that your ability to borrow is based on many factors.
Obviously your credit report is one of those factors, and so obviously filing
personal bankruptcy will have a negative impact on your credit report, and your
ability to borrow.
However, there are factors other than what's on your credit report that
lenders use to make the lending decision. They also consider your income, job
stability, and the amount of a down payment you can contribute to the purchase.
For many people, that's the key: if after bankruptcy you can save
money, instead of using all of your extra cash to service your debts,
you have a great chance to save enough for the down payment on the car or house
you want!
Over the years I have served as the trustee in thousands of personal
bankruptcies, and many of those people have learned to manage their money
wisely, save money, and go on to finance the purchase of a car or a house.
Your ability to borrow again after bankruptcy depends
primarily on your ability to save money, so if you do go bankrupt, use it as a
fresh start to get back on track. financially.
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