Perhaps you've decided, after a lot of thought, to declare bankruptcy. The decision is serious and will affect you in certain ways. For some, it's the final step before starting a new, fresh and responsible financial life. But what happens when you declare bankruptcy?

Debt payments
Some of your debts are discharged after you declare bankruptcy and you won't have to pay them, so that's one less thing to worry about. Other debts, such as your mortgage, alimony or child support, will have to be paid.

You and your trustee work together to ensure that all required payments are made during the bankruptcy process. The two of you have a monthly meeting where you bring your paycheque and make payments. You will also have to attend credit counselling sessions.

Assets
People often assume that all your assets are taken when you declare bankruptcy and you're left with nothing -- but that's not true. The aim isn't to leave you empty-handed; in fact, one of the goals of trustees is to help people through the process leaving their dignity intact. After all, bankruptcy is the means to an end where you can start over.

So what can you keep? Exemptions are complicated and depend on where you live; check with a local bankruptcy trustee for a list of exemptions. Most provinces and territories try to leave you with limited amounts of essentials: food, heating fuel, clothing, furniture, pensions, retirement savings and the tools of your trade. As for your car or your home, whether you can keep them depends on the amount of equity left, and varies by province.

Bankruptcy lasts up to seven years
Equifax and TransUnion are the two credit bureaus in Canada. According to TransUnion, a personal bankruptcy will stay on your file for six years from the date of discharge if you live in British Columbia, the Northwest Territories, Nunavut, Alberta, Saskatchewan, Manitoba and Nova Scotia. It's seven years for the other provinces. Equifax keeps a bankruptcy on your file for six years from the date of your discharge.

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Bankruptcy stays on your permanent record
Even after your bankruptcy is discharged, it will remain on your credit record for a few years. Also, you will have to disclose your bankruptcy for the rest of your life if you are asked. On the plus side, you will be able to get credit again.

Credit after bankruptcy
Once your bankruptcy has been discharged and your credit record cleared, you can get credit. You'll be treated like someone who has never had credit before, meaning that you probably won't get the best credit rates. While that can be frustrating, look at it as it's intended, as a way to start all over again and do it properly this time.

Even if your bankruptcy still shows up on your credit report, you can get credit again, if you repair your credit. Some of the ways to repair your credit are going to sound very familiar: 

• Complete your bankruptcy as soon as possible.

• Start saving money.

• Contribute to an RRSP.

• Keep saving.

• Be aware of your credit by getting a copy of your credit report.

• Build your credit smartly by paying your credit card and other bills on time.

Starting over with healthy personal finances
All of this becomes a solid foundation for starting over. If you look at the bankruptcy process, you're taught how to pay your bills on time, how to manage your money and even how to save and build good credit. So while you lose many of your assets in the process, by the end of it, when your debt is discharged, you will have developed money management skills, gained good credit and maybe even saved some money. It's not the best way to learn, but sometimes you need that kick in the pants to learn financial responsibility.

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