Debt Managements

Does bankruptcy eliminate all debts in Canada? This and other frequently asked questions about bankruptcy in Canada

Can you get good credit after bankruptcy?

Yes, you can get good credit after bankruptcy, but you have to wait more than 6 years for that to happen. You can speed up the process by getting a cash secured credit card or a cash secured loan to help rebuild your credit, but these will only be of marginal benefit until the remaining derogatory notes on your credit report are removed from bankruptcy 6 years after you do so you are discharged From bankruptcy (this happens 9 to 21 months after filing for bankruptcy if you followed the process and completed all of its conditions). Once this super negative information is dropped from your credit report 6 years after you emerge from bankruptcy, your credit will rebound quickly if you have good reports on your credit bureau such as a cash secured credit card or loan. You can also ask someone to add you as an authorized user on their credit card. This can help too. Once your bankruptcy information is cleared from your credit report, you are essentially starting over with a clean record. You will then be able to rebuild your credit score.

How quickly can you come back from bankruptcy?

From a credit perspective in Canada, it takes over 7 or 8 years to come back from bankruptcy (9 to 21 months for the bankruptcy process and then 6 years for all bankruptcy information to be removed from their credit reports). However, there are things that can be done to overcome the limitations caused by the terrible credit resulting from bankruptcy. These solutions are not easy or convenient, but some are possible. This can include taking out a cash secured credit card or a cash secured loan (to rebuild credit). Some lenders may allow someone with a history of bankruptcy on their credit report to apply for a car loan or mortgage if they have one or more highly qualified cosigners. Another way to obtain and improve credit is to become an authorized user of someone else’s credit card. This could be a partner, friend or family member. This person will essentially guarantee the card because if anything bad happens, this person will be responsible.

Is it difficult to get credit after bankruptcy?

Yes, it is very difficult to obtain credit after bankruptcy. In Canada, the bankruptcy process takes 9 to 21 months, after which if you do everything you were supposed to do during the process, you will be discharged from bankruptcy. Once this discharge occurs, the countdown begins when all derogatory information from the bankruptcy is erased from your credit report. Unfortunately, you have to wait 6 years for this to happen (and then it should happen automatically after 6 years). During this time, it is extremely difficult to obtain credit. One reason is that a note is placed on your credit report stating that you have filed for bankruptcy. This notation scares creditors, but this is not the only problem. The biggest problem is that most lending to consumers is based on their credit score. All debts involved in bankruptcy are assigned the worst possible rating (because the debt was not paid as agreed, and instead was written off as unpaid and will never be paid). Having this rating on one debt will lower someone’s credit score, but having this rating on multiple debts, completely kills someone’s credit score.

With a bad credit score, a person cannot qualify for any regular lending product (credit cards, loans, line of credit, overdraft, or mortgage). However, there can be ways around this. One way is to get a cash secured credit card. With one of these, you can put money on the deposit as security (security) for the credit limit they give you. So, if you want a credit limit of $1,000, you must deposit $1,000 as security for that credit limit. You will then get $1,000 back in the future when you decide to close that card. However, while you have the card, it will report to the credit bureaus like any other credit card and help slowly rebuild your credit. A card like this can also be used for hotel deposits when traveling. To obtain an auto loan or mortgage within the six years following bankruptcy, a highly qualified co-signer will be required if the lender allows it.

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