Become An Authorized User On A Credit Card
If you dont want to take out a secured credit card, you can ask a family member or friend who has good credit to add you as an on one of their credit cards. You may see an increase in your credit score if the issuer reports the cards positive payment history to the three main credit bureaus. However, your score could take a dip if the primary cardholder makes a late payment or maxes out their credit limit.
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.
What Is A Bankruptcy Discharge
Simply put, a bankruptcy discharge is the final step of the bankruptcy processin Canada. After youve gone through all of the requirements, your;Licensed Insolvency;Trustee will issue your certificate of discharge.
To be discharged from bankruptcy means that you are released from all obligations to repay debts included in your bankruptcy filing.
A full and complete discharge is the primary advantage of filing bankruptcy when an insolvent person seeks relief under the Bankruptcy and Insolvency Act.;
You may think that you are discharged from your debts as soon as you declare bankruptcy. True, you do stop making debt payments as soon as you file. You make the required bankruptcy payments to your trustee instead. However, you remain legally liable for the debts until the end of the process. It is the final discharge that releases a bankrupt from their debt obligations.
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Bankruptcy Information Can Be Wrong
You may want to hire a credit repair attorney if your record shows inaccurate financial or bankruptcy information. They can speak with credit reporting agencies, credit card companies, or credit card issuers if you are having personal finance trouble. An attorney can also step in if a company does not discharge your debt correctly or you fall into a credit counseling scam.
Remember: A bankruptcy discharge legally stops creditors from harassing you. You have rights if a company is not following the process or respecting your bankruptcy filing.
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The Things That Happen Immediately After Filing Bankruptcy
As soon as you file your Chapter 7 bankruptcy, you are given a case number and a bankruptcy trustee is assigned to your case. The bankruptcy trustee will oversee your bankruptcy filing, will review your bankruptcy forms, and may ask for additional documents to verify your information. The trustee will also conduct the meeting of creditors.
Protection from your creditors begins immediately after filing for Chapter 7 or Chapter 13 bankruptcy. This is called the automatic stay. Once you file and the automatic stay takes effect, your creditors are not allowed to take collection action against you.
After you file for bankruptcy protection, your creditors can’t call you, or try to collect payment from you for medical bills, credit card debts, personal loans, unsecured debts, or other types of debt. Wage garnishments must also stop immediately after filing for personal bankruptcy.
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Arm Yourself With The Facts About Bankruptcy
- A bankruptcy stays on your credit report for 6 years following discharge. Discharge refers to being released from the legal obligation to repay debts that existed on the day the bankruptcy was filed. It effectively acts as an anchor to your credit score that entire time.
- If its your second bankruptcy, that turns into 14 years from the date you are discharged.
- During this time, any creditors considering lending to you are likely to see you as a high-risk borrower. Your credit rating will take a severe hit, knocking it right down to the bottom of the credit score scale. It will continue to drag your credit score in Canada down until the 6-year period is up.
How The Ontario Executions Act Can Help You Save Your Home
In 2015, the Ontario Executions Act was updated to define how much equity you could have in your home that would qualify for an exemption. If you have $10,000 or less of equity in your home, then you are not at risk of losing your home when you file for bankruptcy.
Equity is defined as the current market value of your home, minus the remaining balance on your mortgage, as well as any tax arrears and liens on the property. Lets say your home is worth $200,000. Your mortgage balance is $190,000 and you owe $1,000 in tax arrears, then you have $9,000 worth of equity. In this case, you would not be at risk of losing your home.
On the other hand, if your home is worth $200,000 and the remaining balance on your mortgage is $150,000 and you have no tax arrears, then you have $50,000 worth of equity. Your home would then be at risk of being seized and sold by the bankruptcy trustee.
Its important to consider your home and its equity before you file for bankruptcy. If you have equity in your home, then you may want to explore other options other than bankruptcy. Its in your best interest to avoid filing if youll lose your home.Explore Options to Avoid Bankruptcy ;
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How Long Will Bankruptcy Remain On My Credit Record
Filing for bankruptcy is a serious step to take, and this seriousness is reflected in the amount of time it stays on your record. Equifax maintains first-time bankruptcy on your record for six years from the date of your discharge; TransUnion maintains it for six or seven years depending on your province or territory.
If you file for a second bankruptcy at any time, both bureaus will maintain this on your credit record for 14 years from the date of discharge.
What Is A Licensed Insolvency Trustee
A Licensed Insolvency Trustee is a federal government licensed debt help professional who is also an officer of the court. Despite claims that an LIT only works for your creditor, which are not true, an LIT actually acts more like a mediator between debtors and creditors, using the federal Bankruptcy and Insolvency Act to ensure fairness for all parties. If you are struggling with debt, an LIT will be able to explain every option to help find the best solution for you, and is the only licensed debt professional who can file a bankruptcy or a consumer proposal on your behalf.
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Buying A Home After Chapter 7 11 Or 13 Bankruptcy
After filing for bankruptcy, youll need to consistently work on your credit score. As you rebuild, you can start to think about securing a mortgage for your next home purchase. However, you need to keep waiting periods in mind.;
For FHA home loans you may need to wait up to 2 years after filing for bankruptcy before applying for a mortgage. However, VA loan applicants who filed for Chapter 13 just have a 1-year waiting period. Check into the bankruptcy restrictions surrounding your desired home loan before you submit your application.
What To Do After Bankruptcy Discharge
Once you receive your discharge, your debts are wiped clean. However, a record of your bankruptcy, will stay on your for seven years for the first time bankrupt, longer for a subsequent bankruptcy.;
The good news is that once discharged, you have no more debt. You will have a fresh start to earn the trust of creditors from the ground up.
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How Bad Is Your Credit Now
Most people dont even consider filing bankruptcy until they owe a lot of money. By this point, their credit really isnt all that great. Filing a bankruptcy in Arizona may be a good option for you. What you should do is call and talk to a bankruptcy lawyer in Arizona. Theyll look over your and see how much you owe. Theyre familiar with a lot of the creditors and know which ones are willing to negotiate a settlement. If youre able to do that, then it may be an option. However, if you know that you dont have a lump sum to offer, then bankruptcy may be the way to go.
How Bankruptcy Affects Your Credit Score
There are a variety of organisations that can help you cope with debt, offering practical solutions, legal advice and counselling. However, sometimes you may find yourself in a position where advice is no longer enough and you need to take more serious action to deal with your debt. In this case you may need to declare personal bankruptcy. Going bankrupt can give you relief from debts, but it can also carry long-term ramifications for your finances, including your credit history.
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What Happens To Your Business
If youre self-employed, your business will be closed. Any business assets will be claimed by the trustee.
Your employees may make a claim for unpaid wages and holiday pay, payment in place of notice, and redundancy. Theyll make this claim to the National Insurance Fund, or the money may be claimed in the bankruptcy process.
You can start trading again, but youll have to follow certain rules.
Is Bankruptcy Right For Me
The first question you need to ask yourself, therefore, is, do I need to declare bankruptcy or is there a better option for me? Make sure you know what you’re getting into. It’s important that you understand whether it’s the best option for you, your family and your collective financial future. Declaring bankruptcy, while the only option for some, may be a knee-jerk reaction for others, without first exploring other options.
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How Does The Debtor Get A Discharge
Unless there is litigation involving objections to the discharge, the debtor will usually automatically receive a discharge. The Federal Rules of Bankruptcy Procedure provide for the clerk of the bankruptcy court to mail a copy of the order of discharge to all creditors, the U.S. trustee, the trustee in the case, and the trustees attorney, if any. The debtor and the debtors attorney also receive copies of the discharge order. The notice, which is simply a copy of the final order of discharge, is not specific as to those debts determined by the court to be non-dischargeable, i.e., not covered by the discharge. The notice informs creditors generally that the debts owed to them have been discharged and that they should not attempt any further collection. They are cautioned in the notice that continuing collection efforts could subject them to punishment for contempt. Any inadvertent failure on the part of the clerk to send the debtor or any creditor a copy of the discharge order promptly within the time required by the rules does not affect the validity of the order granting the discharge.
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.
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Keep Paying Credit Cards If Bankruptcy Isn’t Needed
When contemplating bankruptcy, the first thing to consider is whether you can afford to pay off your credit cards. Why? Because if you make enough money to do so, you probably won’t qualify for Chapter 7 bankruptcy. The court requires filers with significant disposable income to pay some or all of your credit card debt through a Chapter 13 repayment plan. Plus, a bankruptcy filing will remain on your credit report for seven to ten years. So it’s best to consider all available options first.
What Happens To My Regular Income If I Declare Bankruptcy In Canada
Your wages are not affected by your bankruptcy, but part of your duties during bankruptcy includes providing your trustee with your household monthly earnings and expenditures. Additionally, if your income changes or you gain or lose a dependent, you must inform your trustee.
You may be required to make monthly payments to your trustee. These are called surplus income payments. Your trustee determines whether you have to make surplus income payments based on your average earnings over the bankruptcy and the number of people in your household.
Watch the video below to learn more about surplus income payments.
Video transcript: Meet Stephanie, the mother of a young son, James, who is just about to enter Primary School. Recently, Stephanie has overextended her credit and, despite her best efforts, is unable to pay her bills. Realizing that she needed to speak to an expert, Stephanie found a Licensed Insolvency Trustee located in her area and has gone to meet with her. After speaking to the trustee, Stephanie has determined bankruptcy was the most appropriate option for her.
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Three Types Of Bankruptcies
Not all bankruptcies are created equally. There are several different options for businesses and individuals, but today well cover the types of bankruptcies available for individuals.;
Before you decide to file for bankruptcy, you should consult a bankruptcy attorney or financial professional to determine the best option for you.;
Should I File For Bankruptcy
The first step to declaring bankruptcy in Canada is recognizing and assessing your financial situation. Filing for personal bankruptcy starts with understanding your debt situation. The sooner you can accept your financial struggles, the sooner you can begin your bankruptcy claim. If you have been wondering whether or not you should file for bankruptcy, here are a few signs that you might need to consider taking this step:
- Your credit cards are always at their limit;
- You are paying bills with your credit cards or cash advances;
- You continually fail to make one or more important payment each month;
- You have received letters threatening legal action against you in order to collect money owed
- Loss of income in the household means there is no money to pay the debts;
- You are making the payments but the debt isnt going anywhere and its too much to maintain;
- You are credit reliant the cost of the debt is so high there is no money left for everyday expenses so you need use your credit cards to buy gas and groceries;
- You are overwhelmed and stressed out about your finances and its affecting your sleep and personal wellness; and,
- You have reached the borrowing limit and your bank will not provide you any further financial assistance.
Make sure all of your questions and concerns are addressedbefore deciding if bankruptcy is the right choice.
If any of those apply to your current debt situation, declaring personal bankruptcy may be the right choice to make.
What Is The Difference Between Default And Bankruptcy
Defaulting on a loan means that youve violated the promissory or cardholder agreement with the lender to make payments on time. Each lender has its own requirements on how many missed payments you can have before it considers you in default. In some cases, that may be as little as one missed payment or as many as nine missed payments.
Filing for bankruptcy is a legal process that involves listing out your debts and assets and finding a way to resolve those debts. A judge will decide if any of your debts can be discharged and if your assets will be used to pay off the outstanding balance. The judge will also decide which assets youre allowed to keep and which can be taken from you.
Default and bankruptcy usually go hand in hand. Many borrowers default on their loans and then subsequently file for bankruptcy.
What Happens To My Credit Rating When I File For Bankruptcy
Its important to note that if youve been missing bill payments, have used up all or most of your available credit, or your debt has become unmanageable and youre thinking about filing for bankruptcy, your credit rating will most likely already be negatively affected. Filing for bankruptcy will impact your credit score, giving you an R9 rating, which will stay on your file for approximately seven years. However, bankruptcy can offer you a fresh start, and help you to rebuild your credit score faster than some other debt relief solutions.
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