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Many individuals that Risman Zysman has helped over the years have asked us how a bankruptcy will affect their credit score.
It is best to analyze your score before and after bankruptcy.
What is your credit score before you file for bankruptcy?
Most individuals who are thinking about bankruptcy as an option usually have a poor credit score.
This is a result of not being able to pay your debts as they come due. Creditors report your late or missed payments to the credit reporting agencies in Canada. Each late or missed payment reduces your overall credit score.
After your bankruptcy:
When you complete your bankruptcy and receive your discharge, the debts you originally owed are wiped from your record.
You will be required to contact the credit reporting agencies to update your record by submitting your certificate of discharge.
If you are a first time bankrupt, the credit reporting agencies will keep your bankruptcy on your record for six years following your discharge.
For second time bankrupts, this can be on your record for up to 12 years.
While this may seem like a long period, you can begin to rebuild your credit.
If a bankruptcy shows up on my credit score for that long, why should I file for bankruptcy?
This is a common questions that we are asked frequently. The truth is that most individuals who face the debt burdens that warrant a bankruptcy find it impossible to ever pay debts in full. High interest rates result in debt balances growing at exponential rates. It could take years or decades to pay balances in full. The length of time it would take to pay debts outside of a bankruptcy can take several times longer then the bankruptcy process.