Filing for bankruptcy is not a life sentence –you will have your financial life back once the bankruptcy is discharged if you develop a new strategy for dealing with debt.

The decision to file can be difficult and emotional since you are likely feeling embarrassed and disappointed in yourself. However, there may be a number of contributing factors such as job loss, divorce, or business failure. Fortunately, the government has a provision in the Bankruptcy and Insolvency Act that recognizes that sometimes life doesn’t go the way we want and gives us an opportunity to start over with a clean slate.

Although it may seem overwhelming to rebuild your life post-bankruptcy – your credit rating, finances and your emotional well-being – you don’t have to wait for years to start the process.

First of all, find a way to make peace with the guilt feelings. In 2011 there were 122,999 filings according to the Office of the Superintendent of Bankruptcy Canada. It’s not uncommon for filers to consider themselves as failures. It’s important to see the situation in a positive way in order to move forward. Also, consider getting a support system of family and friends – make sure to surround yourself with positive people – who can help you deal with some of the ups and downs you may feel after bankruptcy.

Second, reflect on how you got to this point and what you will do differently in your financial afterlife. One strategy might be to make sure you have a reserve fund set aside in case of job loss or illness.

Third, create a realistic budget. It’s critical that you become more aware of your financial situation. Where does the money go?  A budget can help you manage your cash flow better. Try to live within your means, which shouldn’t be difficult once the debt has been taken care of in the bankruptcy. You will want to try and prevent yourself from getting into the same situation.

Two items are important when developing your budget – have an emergency fund and a line for savings so you can pay yourself first. Also, pay all your bills on time. Don’t underestimate the power of this last suggestion. It is one of the single most powerful things you can do to restore your finances and your self-esteem.

Finally, a key strategy is to start to rebuild your credit by getting a credit card. You can do this with a secured credit card. You deposit an amount of money, such as $300, with the credit card company and that becomes your credit limit. Ensure the company reports to the credit bureau and make your payments on time, even if it’s just the minimum.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)