Few things in life can be as devastating, as embarrassing and as damaging as bankruptcy. This can happen to both individuals and businesses that have reached a point where they are no longer able to service their debt and where there is little prospect for their ability to recover enough. With insolvency all possessions and assets are forfeited. If it is a business, the doors will be closed and the employees will be fired. With these dire consequences in mind, it makes sense to pursue every possible avenue before going the route of insolvency.

When a business or the creditors of a business file for insolvency, Chapter Seven of the Bankruptcy comes into play immediately. On receipt and acceptance of the application, courts normally act very quickly. A trustee is appointed by the court and the doors of the business are closed straightaway.

It is the responsibility of the trustee to conduct a thorough investigation into the affairs of the company and to determine the exact extent of its financial responsibilities. Trustees are empowered with extensive authority to enable them to perform their duties and they can make many decisions without consultation with anybody. It may be decided, for example, to auction the business, to close the business down and to sell the assets or even to keep the company running.

Individuals, too, are sometimes no longer able to honor their financial responsibilities and if there does not seem to be any chance of recovery. In such cases an application for a straight insolvency can be made. It would be a very big mistake, however, to make such an application in the belief that it would make all debt disappear.

As with insolvent businesses, all possessions will be sequestered and sold on a public auction. All moneys raised in this way will be distributed among the creditors. While any further debt to these creditors will be cancelled, certain other financial responsibilities will remain valid and even insolvent individuals will have to continue to honor child support payments, fines and taxes, among others.

In the past, many people used the system to rid themselves of debt, even when they could have made arrangements with their creditors. That is why a means test is now applied when individuals file for insolvency. This test determines the disposable income of the person and it is compared with his financial responsibilities. When the income is deemed sufficient, the application is refused.

Many people and businesses applying for insolvency do not realize just how serious the matter is. They will have to expose every aspect of their lives for scrutiny and they will have to adhere to the will of the trustee without question. They may not make any financial agreements and they will not even be able to make decisions regarding the disposal of their income.

The entire process can be embarrassing and humiliating. Applicants will be forced to admit the facts to their creditors, their loved ones and their employers. If there are any indications of even the slightest dishonesty during the process the consequences can be severe and it is even possible that criminal charges will be laid.

Before submitting to this brutal and humiliating process, it is certainly worthwhile to first try every other possible option to try and rescue the situation. Many creditors are willing to renegotiate payments and debt counseling can do much to help individuals towards sensible debt consolidation. Truly, bankruptcy should be the very last resort.

Relieve your stress about your finances with Ottawa credit counselling from Doyle Salewski Inc., and learn how you can solve your debt problems.

Relieve your stress about your finances with Ottawa credit counselling from Doyle Salewski Inc., and learn how you can solve your debt problems.
http://www.doylesalewski.ca/personal/en/

Author Bio: Relieve your stress about your finances with Ottawa credit counselling from Doyle Salewski Inc., and learn how you can solve your debt problems.

Category: Finances
Keywords: bankruptcy,debt,credit,counselling,money,finance,family,personal,management,life,home,shopping,econo