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How do I re-establish my credit after bankruptcy or a consumer proposal?



This is one of the first questions we are asked when someone is considering bankruptcy or a consumer proposal to assist them with their financial difficulties. Here we will let you know how your credit rating is impacted and how to repair it after filing.

Bankruptcy

With bankruptcy, your credit score can drop by up to 200 points. In addition, the bankruptcy will be noted on your credit report for 6 – 14 years after you receive your discharge from bankruptcy. For first-time bankrupts, it will be noted on your report for 6 years after discharge, which normally takes 9 or 21 months. If you have previously filed for bankruptcy, it will be noted on your credit report for 14 years from discharge, which takes 24 – 36 months.

During bankruptcy, you will have a difficult time obtaining credit, but you can use visa debit cards, and you can ensure that your utility, phone, and secured loan payments are made on time and in full to help keep your post-filing credit score clean.

Once discharged from bankruptcy, you are free to focus on rebuilding your credit. Here are some tips to get you started:

If you haven’t already, start a savings account. During your bankruptcy, you likely had a monthly payment obligation that you no longer have. Keep paying that monthly payment, but to yourself and into a savings account. You can look at different options, but an RRSP or TFSA are the two most popular savings options.

In Canada, we have two credit bureaus, Equifax and Trans Union. You can get a copy of your credit report from each. It’s important that you check your reports after discharge to ensure your report is accurate and that you correct any errors.

Apply for a secured credit card. A secured credit card will require a small security deposit to get you started. There are many financial institutions that offer secured credit cards. First, check with your own financial institution to see what they offer. With a quick Google search for secured credit cards in Canada, the following options come up.

Explore these links to find out more.

Consumer Proposal

After filing a consumer proposal, your credit score will likely drop 100 – 150 points. In addition, the consumer proposal will be noted on your report for 6 years from the date of filing or 3 years from the date you complete the terms of your proposal, whichever is sooner.

If you have a credit card with a zero balance at the time of your filing, you can keep that credit card and use it to rebuild your credit rating while you are paying your proposal. This is one benefit that you have by filing a proposal vs. bankruptcy. If you don’t have a credit card with a zero balance, then you can wait until the proposal is approved and apply for a secured credit card.

Once you’ve got a good grasp on your monthly budget, follow the same tips as indicated in the bankruptcy section above to start on the path of rebuilding your credit score.


Our experienced counsellors can provide you with sound advice to assist you with rebuilding your credit score.

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