Work With A Credit Monitoring Service
Too often, consumers fail to monitor their credit rating, finding out about severe penalties only after they are too late to reverse. Using a credit monitoring service may help you stay on top of your credit report, as these companies alert you to any changes within your report as soon as they occur.
The best companies for credit monitoring also provide helpful tips for rebuilding your credit score following harsh penalties such as bankruptcies.
Let The Law Offices Of Kretzer And Volberding Pc Help You Navigate Bankruptcy
With an open mind and a skilled attorney guiding you every step of the way, bankruptcy does not have to represent financial hopelessness but instead can be about your empowerment and a chance at a fresh start. You will need a lawyer with specific experience on bankruptcy in Texas and who has the right knowledge and resources to help you.
But Ive Never Missed A Payment I Just Have No Hope Of Ever Paying Off My Debt
If youâre one of the few that has been able to stay current with all debt payments, but need to reorganize your financial situation through a Chapter 13 bankruptcy, your credit score will go down initially.
But, thatâs not the end of the story. Once your bankruptcy discharge is granted, your debt amount will go down significantly! And guess what helps build and maintain good credit? A low debt-to-income ratio.
Debt-to-income ratio?!
Put differently, the best credit rating is possible only if your total unsecured debt is as low as possible. A bankruptcy discharge eliminates most, if not all of your debt. Itâs the one thing you can do that your current debt management methods canât accomplish.
Doesnât bankruptcy stay on your record for 10 years?
Well, yes, under federal law, the fact that you filed bankruptcy can stay on your credit report for up to 10 years. This is true for all types of bankruptcy. But, Chapter 13 bankruptcy stays on your credit report for only seven years from the filing date.
According to Experian, thatâs because unlike a Chapter 7 bankruptcy, Chapter 13 involves a repayment plan that pays off some amount of debt before a bankruptcy discharge is granted.
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Can A Chapter 7 Bankruptcy Come Off My Credit Report Early
Typically, a Chapter 7 bankruptcy will remain on a credit report for ten years. However, consumers can sometimes have this form of bankruptcy removed early by proving to their creditor that the item is due to identity theft, in error, or inaccurate.
You can attempt to remove a bankruptcy from your credit report by following the steps above. You can also hire a credit repair agency to complete these steps for you, giving you a higher chance of removing the bankruptcy successfully without wasting your time and effort.
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Understanding Surplus Income In Bankruptcy
Surplus income is any income you make over the amount that the Canadian Government claims an individual or family needs to live. According to the Office of the Superintendent of Bankruptcy Canada , the current income standards in 2021 are:
- $2,248 for a single-person household
- $2,799 for a two-person household
- $3,441 for a three-person household
- $4,178 for a four-person household
- $4,739 for a five-person household
- $5,345 for a six-person household
- $5,950 for a seven-person or more household
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A Fresh Start After Bankruptcy
Mei Ling and Matt are a married couple who rent a flat in Gosford NSW. Both worked full time until two years ago when Matt lost his job. Mei Ling now works part time earning less than $40,000 per year.
For two years they tried to survive on Mei Lings wage, struggling to make repayments on their overdue credit cards and loans. They ended up with unsecured debts of over $65,000.
The only assets they owned were a car worth $5,000 and general household goods .
The pressure from their creditors became too much to handle. Debt collectors and process servers were constantly calling on them. Their electricity was turned off a few times and they stopped answering phone calls because it always seemed to be bad news. Matts health was also suffering and he was treated for depression. Most nights Mei Ling would end up in tears thinking about their situation.
They finally decided to see a financial counsellor. There was no charge for this service. The financial counsellor looked through their finances and suggested they consider filing for bankruptcy.
Matt and Mei Ling went home and looked in detail at the AFSA website. They read all about their options and the consequences of bankruptcy. The AFSA website showed that they would be able to keep their car because it was worth less than the set amount. They read they could also keep their household goods. In the end, they decided that bankruptcy would be the best option for them.
Bankruptcy Exemptions In Ontario
- No limit on clothes for you and your family
- Household furniture, utensils, equipment, food and fuel up to $13,150
- Tools and instruments used by you in your business up to $11,300
- One motor vehicle up to $6,600
- If the equity in your home does not exceed $10,000, your home is exempt if the equity exceeds $10,000, then your home is not exempt from seizure
- Most pension plans and certain types of life insurance policies
- RRSPs, except for contributions in the 12 months before the date of bankruptcy
- For farmers, up to $29,100 for livestock, fowl, bees, books, tools and implements of the trade
For more information on bankruptcy exemptions in Ontario, find a Licensed Insolvency Trustee near you.
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Consequences Of Multiple Bankruptcies
A Licensed Insolvency Trustee will explain the consequences to be considered when declaring bankruptcies multiple times.
In addition to your bankruptcy lasting longer, your credit rating will be negatively impacted. The additional reporting for multiple bankruptcies is significant. Compared to a first-time bankruptcy which will stay on your record for 6-7 years, a second bankruptcy can last up to 14 years.
Why Consider Opting For A Consumer Proposal
If you have the capacity to make partial payments towards your debts, opting for a consumer proposal is an advantageous option for a number of reasons. It not only helps you avoid bankruptcy but can also relieve you of a significant proportion of your debt without interest. In addition, it consolidates your debts into one reasonable and affordable monthly payment, the terms of which can be negotiated with the guidance of a federally Licensed Insolvency Trustee. Moreover, there is no loss of assets in a consumer proposal,so assets like home equity investments, and secondary motor vehicles can be retainedwhile stopping collection calls and legal action from creditors. Proposals filed by Licensed Insolvency Trustees are the only debt settlement plans sanctioned by the Government of Canada. The Office of the Superintendent of Bankruptcy is the section of the Government of Canada that regulates the bankruptcy and consumer proposal processes in Canada.
It is important to remember that filing a consumer proposal is a positive step, and the effect on your credit rating will be temporary. Questions about consumer proposal or how does a consumer proposal affect your credit score? A Licensed Insolvency Trustee can answer your questions and help you explore your options. Contact a Trustee today for a free consultation.
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What Are The Benefits Of Keeping My Bankruptcy Discharge Papers
After you have completed your bankruptcy by successfully completing all of your bankruptcy duties, you will receive your automatic discharge.
When you receive your bankruptcy discharge your trustee will provide you with a discharge certificate that is what officially releases you from the debts that were included in your bankruptcy certain debts wont be discharged in bankruptcy and any debts that you accrue while in bankruptcy will not be eliminated by your bankruptcy discharge.
In order to receive your fresh financial start you need your discharge certificate.
Included with your discharge certificate will be a disbursement summary that covers any of the dividends that were paid out during your bankruptcy and to which creditors.
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What Is Your Credit Score After Bankruptcy
Bad news first: filing for bankruptcy can put a crater-sized dent in your credit score, causing it to plummet more than 200 points. But while this is happening, you are working on having debts you would never be able to pay off discharged, and/or reorganizing your ability to pay back those debts.
Soon, you will be either free of debts or making positive payments on those debts , and your score will begin to rise. The relative impacts of filing for bankruptcy on your credit score are short compared to ones lifespan.
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What Do You Need To Disclose If You Apply For A Loan After Bankruptcy
If you do apply for a loan above a certain limit you must let the lender know about your bankruptcy. This limit is indexed quarterly. At the time of writing, the indexed credit limit set in the Bankruptcy Act and regulations is $5,881. This means for loans worth more than $5,881, you must disclose your bankrupt status when:
- seeking to obtain goods or services on credit, by hire purchase, or cheque
- leasing, hiring, or promising to pay for goods and services
- seeking to obtain an amount by promising goods or rendering services
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How Long Does Bankruptcy Affect My Credit Report
There are two main credit reporting agencies in Ontario: Equifax and Trans Union. Information about your bankruptcy or consumer proposal is reported to these agencies by the Office of The Superintendent of Bankruptcy , not your trustee. The OSB will advise these agencies when you file a bankruptcy or proposal and when you receive your discharge.
If you file ANY of a bankruptcy, consumer proposal, debt management plan or do a debt settlement, a not will appear on your credit report that can negatively impact your credit. In general:
- a first bankruptcy will remain on your credit report for six years or seven years after you are discharged
- a consumer proposal (or debt management or debt settlement plan will remain on your credit report for three years after all of your payments are completed.
Bankruptcy does not mean you cannot borrow for six or seven years. This just means that the note will remain on your report, however there are many other factors that affect your ability to get credit.
If you have a job, and if you have a down payment or security deposit, it is possible to repair your credit sooner. Many people are able to buy a car or a house in less than seven years after their bankruptcy ends, if they are able to save money and begin repairing their credit. Here are some ways you can improve your credit after filing for bankruptcy:
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Is My Credit Going To Be Bad As Long As A Bankruptcy Shows Up
Myth: You might as well not even try because youll have poor or bad credit as long as the bankruptcy is on your record.
The truth: Yes, bankruptcy tanks your credit score in the short term. But how much a bankruptcy impacts your credit score depends in part on how old the record is. Like many other types of items reported on your credit file, bankruptcies lose some power over time. Thats especially true if you start managing credit and debt in a more positive way while youre waiting for the bankruptcy to fall off your report.
Some ways to help positively impact your score after bankruptcy can include:
- Adding new credit, such as secured credit cards or small installment loans, to offset the negative information on your credit report.
- Making on-time payments for all debt, new and old.
- Keeping your credit card balances under 30% utilization.
Where Can You Get Financial And Legal Support With Bankruptcy
If you are in financial difficulty and are concerned you may be heading for bankruptcy, it is a good idea to seek advice. Free advice is available from a financial counsellor through the National Debt Helpline on 1800 007 007. The NDH helps consumers find individual counsellors and organisations near to them. The NDH also offers information and resources on what your rights are if you are experiencing financial hardship.
Community legal services and legal aid agencies, as well as consumer credit legal services, may be able to help you if you need legal help to assist with bankruptcy matters. Free advice and support is available to eligible Australians, with services offered across states and territories in Australia. AFSA maintains a list of state and territory legal assistance services available to support Australians.
The National Self-Representation Service can also assist if you cannot afford legal representation, but need to attend Federal Court or Federal Circuit Court. The service is provided by LawRight in Queensland Legal Aid WA in Western Australia JusticeNet in South Australia and the Northern Territory and Justice Connect in New South Wales, Victoria, Tasmania and the Australian Capital Territory.
Cover image source: TypoArt BS .
Additional reporting by James Hurwood. This article was reviewed by our Sub Editor Tom Letts before it was published as part of our fact-checking process.
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Your Creditors May Hold A Meeting
Sometimes, a meeting of creditors is required or requested. The purpose of this meeting is to
- allow creditors to obtain information about the bankruptcy
- confirm the appointment of the LIT
- appoint up to five inspectors to supervise the administration of your estate and
- allow creditors to give direction to the LIT.
If a meeting is called, you will be required to attend.
Do Your Research & Check All Credit Reports
To get details on your collection account, review all of your credit reports. You can do this by visiting AnnualCreditReport.com. Normally, you can only get one free copy of each report annually. However, due to the Covid-19 pandemic, you can check your reports from all three credit bureaus for free weekly until April 20, 2022.
Your credit report should list whether the collection is paid or unpaid, the balance you owe and the date of the accounts delinquency. If you dont know who the original creditor is and its not listed on your report, ask the collection agency to give you that information.
Afterward, compare the collection details listed on the credit report against your own records for the reported account. If you havent kept any records, log into the account listed to view your payment history with the original creditor.
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Hard Inquiry: Two Years
A hard inquiry, also known as a hard pull, is not necessarily negative information. However, a request that includes your full credit report does deduct a few points from your . Too many hard inquiries can add up. Fortunately, they only remain on your credit report for two years following the inquiry date.
Limit the damage: Bunch up hard inquiries, such as mortgage and car loan applications, in a two-week period so they count as one inquiry.
What Bankruptcy Will Affect While On Your Credit Score
Your payment history, on-time payments, and recent credit reporting can all affect how lenders work with you.
Once you file bankruptcy and businesses see your credit report’s negative information, you may have concerns about:
- Getting a car loan
- Getting loans without a qualified co-signer
- Adding authorized users to some credit cards
- Security deposits and returns of safety deposits
You have options regarding all these concerns if you are having credit or debt issues. There are ways to address each concern by yourself or with professional help. Getting a fresh start is possible, especially after filing bankruptcy.
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Exemptions For Your Home
In British Columbia, homeowners exemptions are higher if you live in Vancouver or Victoria. In this case, $12,000 of the equity in your home is protected in Greater Vancouver and the Victoria capital area. Elsewhere in the province, $9,000 in home equity is exempt from bankruptcy. For more information on bankruptcy exemptions in British Columbia, you can request a call from a local Licensed Insolvency Trustee.
How Long Can Bankruptcy Affect Your Credit Scores
Bankruptcy can affect your credit scores for as long as it remains on your credit reports. Thats because your scores are generated based on information thats found in your reports.
But the impact of bankruptcy on your credit scores can diminish over time. This means your credit scores could begin to recover even while the bankruptcy remains on your credit reports.
After the bankruptcy is removed from your credit reports, you may see your scores begin to improve even more, especially if you pay your bills in full and on time and use credit responsibly.
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