There are a number of questions that are common to most, if not all of the people I meet with. If you have a car, you want to know if you can keep it (the answer is, almost always). If you run a business, you want to know if you can keep running it (the answer is almost always). And if you have debt, you want to know if you declare bankruptcy will you be able to borrow again (you guessed it, the answer is almost always).
When it comes to credit ratings, we see every conceivable situation in my office. From people with perfect scores, who never missed a payment and just got a credit limit increase a few months ago, to those who have gone so long without paying that they’ve been sued and are already having their wages garnisheed. Why did they wait so long? I wish I knew, I think fear of calling us is a big factor, but if I can, let me assure you we are here to help and not judge your situation, because the reasons for debt are unique to everyone.
The question they all ask is: how long will it take to rebuild my credit and what affect will bankruptcy have on my credit?
There are two answers: one is academic, one is practical.
The practical answer: my response to this is always: “what is your credit doing for you right now?” So, you’ve made all your payments, but has it been enough? If it was, you wouldn’t be here. In fact, I bet your debt has only gone up in the last year. In most cases, those with ‘good credit’ who come to see a bankruptcy trustee have already asked for and been turned down for a consolidation loan by their bank. So, what is the ‘good’ credit rating doing for you? Nothing. Just keeping you tied to a bank, in debt and struggling to manage your expenses while they profit. For those with bad credit already, what have you got to lose, (except for the debt)?
The academic answer: The filing of a consumer proposal or personal bankruptcy STOPS the negative reporting. Whether it’s missed payments or over-use of credit, when you file, those bad reports stop immediately. Yes, a bankruptcy will stay on your credit report for six or seven years after you are discharged, and a consumer proposal for three years after you complete payments, but in both cases, when you are done you are FREE of most unsecured debt and you can begin to rebuild your credit the right way.
There will be opportunities to rebuild and you don’t necessarily have to wait seven years to do so. One component of both bankruptcies and proposals is that you meet twice with a licensed credit counsellor – and one of the things they will do is give you some tips on rebuilding your credit.
So let’s not hang on to the myth that your current credit rating is doing you any good; all it’s doing is letting you buy a shovel to dig deeper instead of a ladder to climb out. Let’s get rid of the debt so that you can rebuild a usable, safe level of credit later, using the tools and strategies that you learn along the way.
If you’re worried about your credit score or need advice about how to rebuild it, contact a local bankruptcy trustee to review your situation and create a plan going forward. The consultation is free and just like your failing credit score, you have nothing to lose.