Bankruptcy & Consumer Proposal: A Remedy For Poor Credit

Category: Bankruptcy Q&A (10) comments

credit score bankruptcy consumer proposal rebuild

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).

The real answer to whether or not you can qualify for new debt after bankruptcy is to take a look at the effect on your credit of a bankruptcy or consumer proposal.

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.

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    1. J. Douglas Hoyes

      Hi Sheldon. You would either need to find your original trustee and ask them to make an application to court, or you would need to contact the Office of the Superintendent of Bankruptcy or the court to get a copy of your original file and then make an application to court yourself, or with the help of a lawyer or trustee, to get the court to grant your discharge.

  1. Maxine M.

    I’m asking for a Friend…
    He has a house in Saskatchewan but is living here in Newfoundland now anyway the person who is renting of him is behind on Rent so the payments to his house can’t be made so he wants to file Bankruptcy now because his bank is after him,he has no money except for Employment Insurance coming in ,he got duped by his wife,this is why he is in the situation now.Can he file Bankruptcy here and what assets can he keep or is exempt from him filing a Bankruptcy with you.
    Thank you for your time and if you have any other ideals can you please let me know so that I can rely back to him..

    1. J. Douglas Hoyes

      Hi Maxine. Yes, he can file bankruptcy now, but he should first consult with a licensed insolvency trustee because the rules for exemptions are different in each province, and given that he has a house in one province but is living in another province it is beyond the scope of this website to explain how this would work in his situation. Since he is currently living in Newfoundland, he should start by contacting a Newfoundland licensed insolvency trustee to discuss bankruptcy.

  2. Dawn

    I own my home and car and have RRSP. I have a line of credit and credit cards. However for the passed several years I am unable to make my monthly bills so keep moving debt from my credit cards to my line of credit. I make interest only payments on my credit line so my debt just keeps getting bigger and bigger. I am now being sued by one creditor (a timeshare lease) and can not repay them. I have contacted them but they have refused my offers to settle. They say it’s all or nothing and the judgement will go thru… I can pay the lease cancellation fees, areas maintenance fees plus all the interest and admin fees by midnight tonight. And if not there will be legal fees added so I can find a way to pay or declare bankruptcy…Help!! Please

  3. EILEEN W.


    My question is: I have debt from my boyfriend who passed away on Feb 8, 2016. The landlord is claiming I owe him $10k for rent. My boyfriend took care of the rent and I took care of other expenses. Also, I am waiting for a survivor`s pension but if I file for bankruptcy now and get the pension in a few months, the amount will go up and they will take half of the pension! I am claiming $20k for bankruptcy but I have not signed anything yet. What are your thoughts?

    Thank you,


    1. J. Douglas Hoyes

      Hi Eileen. Regarding the landlord, the issue is whether or not you have signed for the lease. If the lease was entirely in your boyfriend’s name, then it is unlikely that you are liable for the debt. I would suggest that you either consult with a lawyer or a licensed insolvency trustee to review that issue.

      As for the pension, you are correct that an increase in your income may lead to an increase in the cost of the bankruptcy. Again, your licensed insolvency trustee can explain this in more detail. If you think it will be many months before you qualify for the pension it may be possible to start the bankruptcy now while your income is low (although that may not be an option if you receive retroactive payments). A thorough analysis of the different scenarios is necessary before you make a final decision.

  4. muath al nabulsi

    hi my name muath and just wondering I have some bad debt from three creditors which is capital one and canadian tire and I filed for consumer proposal my question is capital one secured card I can apply for secured card while iam in consumer proposal and I owe them money or which secured card I can apply

    1. J. Douglas Hoyes

      It is possible to apply for a secured credit card while you are in a consumer proposal. If you owed money to capital one we don’t advise applying for a new secured capital one card because you don’t want to confuse their system into thinking that you are continuing to pay for the old debt. Another option would be a Home Trust secured Visa card which is available while you are in a consumer proposal.


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