Before you make the decision to declare bankruptcy, you should know what you can expect when the process is over. The very best thing that happens is that after your bankruptcy is discharged, you’re absolved of your responsibility to repay your debts and free to make a new start. No more collection agencies calling you, no more shower of letters through your mail slot, no more stress.
There are, of course, some not so positive consequences too, the most serious of which is likely what a bankruptcy does to your credit rating.
A first-time bankruptcy stays on your credit bureau report for seven years, and will make it hard to obtain credit. That means not only that it becomes much more difficult to buy a car, a house, or other such major purchases, but it gets harder to do simple things like reserving a hotel room.
There are steps you can take, though, to start to restore your credit rating, such as obtaining a secured credit card. This means that you essentially prepay the card by putting money on deposit with the lender to mitigate their risk. That way, if you don’t make a payment, the lender will take enough of the money you’ve put on deposit to cover the debt, and reduce your credit limit accordingly. Making payments as required will reflect well on your credit rating, so don’t let that happen, though. You might also consider borrowing for an RRSP, or applying for a small-limit credit card or line of credit with a co-signer. If you don’t start repairing your credit, you’ll find after seven years have passed that you have no credit history whatsoever, and that can make it as difficult to obtain credit as having a negative credit history.
Even though you are released from your debts, your bankruptcy becomes part of your personal financial history, and as such must be honestly disclosed as the law requires, even after the seven years are up and it no longer appears on your credit report.
Depending on the circumstances that drove you to bankruptcy, you can be susceptible to repeating the same mistakes over again. Not only do you not want to repeat the anguish of becoming insolvent, but subsequent bankruptcies are harder to obtain and take more time to discharge. Make sure you get the help you need from a qualified credit counsellor, even beyond the two sessions required to fulfill your obligations for discharge if you need them, so you can make your financial future brighter than the past.
