What is the Credit Reporting Process For A Bankruptcy?

In Canada, credit reports are maintained by two main credit bureaus: Equifax Canada Inc. and TransUnion of Canada. Their objective is to collect information that lenders would consider important in making a decision about whether or not they should grant you a loan.

What each credit bureau does is collect and compile factual information about your bill and debt payment history. This information comes from two sources:

• Transactions reported to them by banks, credit card companies, finance companies and other financial institutions.
• Public records. This includes items such as judgements, bankruptcies, consumer proposals and any registered liens or debt actions.

As a result, you can see that if you file for bankruptcy, or file a consumer proposal, it will appear on your credit report. What the credit bureau is reporting however is a statement of the facts. What will be included will be:

• The fact that you filed bankruptcy, a consumer proposal, or that your debts have been subject to a repayment program including an Orderly Payment of Debts or Debt Management Plan through a credit counselling program.
• The date of filing.
• The date of discharge or completion.

So in most circumstances your credit report is updated in a 3 stage process: a notification appears shortly after filing, a notice that you have been discharged or completed your proposal is updated once this has occurred, and then, after a specified period of time this information is removed.  The first two statements appear based on information collected from the Office of the Superintendent of Bankruptcy. Your trustee does not report the information to the credit bureaus. The removal should happen automatically however it is important that you monitor this process to ensure this last step happens as it should.

How Long Does Bankruptcy or A Proposal Remain on Your Credit Report?

By law, there are restrictions on how long negative information can be kept on your credit history.

TransUnion is very transparent about how long they maintain information on your credit report.  According to their website, a record of your filing is retained on your report as follows:

Bankruptcy: TransUnion maintains this information for the maximum length of time permitted by provincial law. For a first time bankruptcy that means:

BC, YK, NWT, NU, AB, SK, MB, NS- six (6) years from the date of discharge
ON, PQ, NB, PEI & NL- seven (7) years from the date of discharge.

If you declare bankruptcy more than once, each bankruptcy will remain on your report for fourteen (14) years from the date of discharge.

When your bankruptcy is removed, all of the debts included in your bankruptcy will be removed from your file as well.

Consumer Proposal: A consumer proposal and all accounts satisfied through the proposal will be removed from your file three (3) years from the date you completed the proposal or (6) years after the date you defaulted on the account, whichever date comes first.

Other Debt Repayment Programs: Debts satisfied through the filing of an Orderly Payment of Debts or a Debt Management Plan (Credit Counselling Program) will be removed from your file two (2) years from the date you completed the program or (6) years after the date you defaulted on the account, whichever date comes first.

Equifax has made it much more difficult to determine the exact length of time they maintain this same information. As Equifax has redesigned their website in an effort to sell their credit monitoring programs, it has become very difficult finding information to fact based questions.  However, if you order a copy of your credit history report on the bottom of that report it stipulates that Equifax retains information pertaining to a bankruptcy for 6 years from the date of discharged. This is independent of what province you live in. A consumer proposal is treated similar to the way TransUnion reports.

While it is true that the credit bureaus will report the fact that you are bankrupt (or in a proposal) and retain that information for a period of time you need to look at why you need to file for bankruptcy. If you are already late or missing payments, this too will be reported on your credit report and you may already have poor or no credit. You might consider that bankruptcy can be the first step to rebuilding your credit rather than the end of your credit.