Have you ever wondered why people in so called developed countries tend to be more stressed out than those living in the “third world”? I think the main reason is the way we structure our financial affairs. We are accustomed to certain standards and take for granted some things that may not be considered necessities in poorer countries. And those things come at a cost. As a result, most of our pay cheques are almost entirely spent on bills which can’t be reduced: mortgage and car payments, insurance premiums, phone, internet and cable bills and consumer debt service.

While our income is stable we manage to cover those bills and even have a little left for other things. But the problem is that if our income disappears, these major bills don’t. Many of us live only one or two pay cheques from bankruptcy. And now another recession has come and bankruptcies are on the rise. Traditionally, the word bankruptcy is feared almost like the end of the world. But on the other hand, many look at it as a fresh start opportunity.

I have met some very successful business people who had been through it several times before getting at where they are today. So is bankruptcy really as scary as most of us imagine? Let’s take a look at some basic facts. Once you have filed for bankruptcy, all your creditors are required by law to leave you alone. That doesn’t apply, however, to secured loans. Your bankruptcy doesn’t affect your spouse, which means that you as a family unit will still have access to credit. You are allowed to keep certain assets in bankruptcy. Those assets and limits are province specific. Some debts, like alimony payments and student loans cannot be erased in bankruptcy.

Once the bankruptcy is discharged, which usually happens in about 9 months, your debts are erased and you can start over. But be more careful this time. Buying only what you can pay for is a good first step.

Nikolay Sisan is a Certified Financial Planner and freelance writer in Vancouver.