Myths About Your Credit and Bankruptcy
Two common questions I get asked when I meet with clients is, "Will my credit rating will be ruined if I file for bankruptcy?" and "Will I be able to get credit again if I file bankruptcy?"
Creditors sure don't like to see a bankruptcy notation in someone's credit file. But if you're many months behind in paying your bills, collection agencies are calling and you're not able to pay back anything close to what you owe, your credit rating will already be a disaster. For the record, in Ontario, a bankruptcy notation remains on your credit report for six years after you're discharged (which can occur in as little as nine months after filing). Arranging a consumer proposal (often thought of as a less drastic solution to bankruptcy) remains on the credit file for at least three years after it's been satisfied (which can itself take several years). Even entering into a debt management plan through a credit counselling agency (where you will often be paying back every cent owed) gets a notation on a credit report. But as I said, if you're already thinking about filing bankruptcy, your credit rating is already ruined. By filing bankruptcy, you are taking a step in the right direction by getting out of debt and starting to build up your credit rating.
As already mentioned, a bankruptcy notation will remain on a credit file for at least six years after the discharge. During that time, every creditor will be able to see the bankruptcy notation. After those six years have expired, there will be nothing on the file to show a bankruptcy. Even during that six-year period, people can take steps to rebuild their credit ratings by getting a secured credit card or a car loan shortly after beign discharged. Provided you meet the income tests, a year after your discharge you should be able to qualify for most loans. There are many lenders specialize in clients who've had a less-than-stellar credit history, but be aware that many of those lenders have very high interest rates.
If you're contemplating bankruptcy, contact our office today to meet with a licensed insolvency trustee. We will discuss your situation and come up with a solution that's best for you.