How Long does Personal Bankruptcy Remain on my Credit Report?
A major concern that many people have when they consider filing for personal bankruptcy is how this process will affect their credit report. Personal bankruptcy does have a negative effect on your credit report and your credit score. However, if you are struggling with debt and are in a position where you are considering bankruptcy, your credit report is likely damaged by this fact already.
If it is your first time filing for personal bankruptcy, a note remains on your credit report for at least six years after you have been discharged.
Since the bankruptcy process typically takes at least nine months, your bankruptcy will appear on your credit report for at least six years and nine months, or almost seven years.
However, if you have filed for bankruptcy more than once, this notice remains for longer. For example, if it is your second bankruptcy, this is noted on your credit report for 14 years.
The two major credit bureaus in Canada are TransUnion and Equifax. These bureaus maintain credit reports for anyone who has ever borrowed money in Canada or who has ever applied for a loan or other form of credit. Any loan taken out in the last six years is noted on this report, as is your credit limit on each account, how much you owe, and how often you make payments as well as other important financial data.
It’s important to note that there are a number of things that can hurt your credit report even if you don’t file for personal bankruptcy. In general, your credit score is determined by:
- How much debt you have
- How much of your available credit you use
- Your payment history
- Whether or not you have paid your debts on time
- How much credit you have applied for
Taking out a high amount of debt, using a larger percentage of your credit limit, not paying debts back on time and missing payments can hurt your credit score. If you are in a position where you are thinking about filing for personal bankruptcy, one or more of the above likely already applies to you. Missing payments, making late payments and taking out high levels of debt shows the credit bureaus (and therefore, prospective lenders) that you are unable to handle your current financial situation. It shows that you need credit to pay for the majority of your expenses and that you aren’t in a position to pay these debts back in a timely manner.
This hurts your credit rating.
Therefore, as you can see, most people who are considering personal bankruptcy already have negatives on their credit reports.
Creditors and collection agencies try to scare people by telling them that, if they file for bankruptcy, their credit reports and financial future will be completely ruined. This isn’t true. While, yes, a personal bankruptcy is noted on a credit report, your report is probably already less than stellar. Continuing to struggle with debt, taking out bigger and bigger loans and potentially missing future debt payments will continue to hurt your credit report even if you do not file for bankruptcy.
It’s also important to remember that any damage done to your credit report isn’t permanent. You can repair your credit rating, even after you have filed for personal bankruptcy.
Rebuilding your Credit after Personal Bankruptcy
Your credit report isn’t damaged forever when you file for personal bankruptcy. This is a common misconception. While it does take effort and dedication, you can rebuild your credit rating. One way of doing this is by getting what is called a secured credit card. On this type of card you make an upfront payment for a fixed limited amount which then you replenish each month. . Secured cards report with the R classification which stands for “revolving” debt. The other most prevalent classification is the I or “installment” classification. Optimally, an insolvent client should re-establish new credit under both classifications. You can use these credit cards essentially anywhere where you can use a standard credit card.
With a secured credit card you can put down a $500 deposit, for example, and then have a credit card with a $500 limit that you can use to make purchases. Using this card responsibly and paying off your balance regularly shows the credit bureaus that you are able to handle using credit. This helps improve your credit rating.