Life after a Bankruptcy

After the completion of your duties and obligations under the Bankruptcy & Insolvency Act (BIA), and depending on whether the discharge occur automatically or by way of a court hearing, the Licensed Insolvency Trustee (LIT) will send the following documents to you, your Creditors and the Official Receiver:

• Your Certificate of Discharge or an Order by the Court (Absolute or Suspension Order): This is a legal document that states you have completed your Bankruptcy process.
• Statement of Receipts and Disbursements This is an accounting of the monies paid and disbursed in the Bankruptcy for your records.

Note: Credit rating agencies will be notified of the date of your discharge by a government agency through the Official Receiver, not the LIT.

Fresh start and credit rebuilding

Typically, a first Bankruptcy stays on your Equifax and TransUnion credit report for six years after the discharge date, or seven years after the date filed without a discharge date. If you file a second Bankruptcy, then the first will re-appear on your credit report and both Bankruptcies will remain for 14 years after the discharge dates.

We recommend contacting both credit bureaus following your Bankruptcy (links above) to request a copy of your free credit report. Review the information thoroughly to ensure it is accurate and up to date.

To start rebuilding your credit after your discharge:

• Apply for and regularly use a secured credit card. This financial tool allows you to put a cash deposit down on the credit card, which acts as collateral for the lender and acts as your credit limit for spending purposes. Be sure to pay the balance in full every month.

This booklet from the Financial Consumer Agency of Canada explains how secured credit cards work and why they’re useful in building your credit rating.  

• Build a relationship with your financial institution. Try to do most of your business through one bank, including having a chequing account, savings and a credit card. Being a member in good standing with one bank can help you get access to better account perks as your credit improves.
• Consider applying for and RRSP loan. You can use this relatively small, low-interest rate loan to kickstart your retirement savings. Making consistent monthly repayments in full and on time will help to improve your credit rating. 
• Once your credit improves, try to arrange two credit cards from major chartered banks. The bank you deal with on a daily basis may even give you an unsecured card with a low limit ($500 or so). Use these cards for regularly budgeted purchases and pay the balance in full every month.
• Avoid pre-paid or reloadable credit cards. While they’re issued by major credit card providers, they function more like a gift card and will not improve (or impact) your credit.

Other important steps following your discharge:

Now that you’re debt free, it’s time to make the most of your financial fresh start. Here are six ways you can set yourself up for long-term financial success.

1. Budget: Bankruptcy required you to fill out monthly income and expense reports. These likely forced you to be mindful about how much you earn and where you spend your money. If you haven’t already, use this knowledge to create a monthly budget to direct and manage your spending. Be sure to include line items for savings and retirement contributions.
2. Pay all your bills on time and pay off credit card balances every month. Consider automating your payments so the money comes out of your account on time and in full. This will help to minimize your financial stress and keep you from falling behind.
3. Re-invest tax refunds and other windfalls: Contributing to RRSPs will often generate an income tax refund at the end of the year. Contributing these extra funds to your retirement accounts will significantly accelerate their growth. It’s never too late to save for retirement.

If you receive a bonus at work or other windfall (e.g., commissions, overtime, gifts, etc.) consider saving these as well. This is usually easier if you have a specific goal in mind such as a down payment for a new car, building your emergency fund, or a much-deserved vacation.

4. Open a Tax-Free Savings Account (TFSA) and contribute monthly. While contributions are not tax deductible, you will not have to pay any tax on interest or investment gains. Speak with a financial advisor about your investment opportunities through this financial vehicle.
5. Dispute incorrect information on your credit reports. Contact creditors directly if they are reporting incorrect information and follow up with any reporting agency who lists incorrect information.  

Some common concerns to look out for include discharged debts which still appear on the report, incorrect balances, credit inquiries you didn’t make, accounts showing as delinquent, incorrect spelling of your name, etc. Use the online dispute form on the credit bureaus’ website or mail a dispute form directly.

6. Limit the number of credit applications you make. It may negatively impact your credit if too many potential lenders inquire about your credit in a short period of time. Note, this only applies to so-called ‘hard’ inquiries. Checking your credit report will not impact your credit.