Debts not released
- fines or penalties imposed by a Court for an offence or for default on bond bail;
- student loans where you have not been out of school for more than seven years. The federal legislation was changed on July 7, 2008 to reduce this waiting period from ten years. In the meantime, it is now possible to obtain post-bankruptcy relief from student loans as soon as five years from the date of completion of school;
- alimony or support for child or spouse;
- debts from fraud, theft or fraudulent misrepresentations, i.e. borrowing money without full disclosure of existing debts; and
- non-disclosure of creditors to the Trustee (these creditors will be entitled to the share that would have been paid to them if they were aware of the bankruptcy and submitted a claim).
At the date of bankruptcy, any cash on deposit at a bank to whom you owe money may be taken by that creditor as it has the right to offset the cash against the amount it is owed. After bankruptcy, it is advisable to do your banking at an institution not owed money at the date of bankruptcy in order to avoid funds being offset in error after the bankruptcy.
A New Start: Rebuilding Your Credit
Getting rid of the negative credit report information and getting caught up on past due bills will raise your credit score. To increase your credit score you will have to rebuild your bad credit by proving that you can handle credit responsibly. Getting started might be difficult, but once you build momentum, you’ll be coasting your way back to a good credit score.
The following are the steps you will need to take:
- Get a copy of your credit report so you can find out what is on it.
- Pay your bills on time. Improving your credit score means staying well below your credit limit and paying your credit card bills on time, preferably in full.
- Don’t overdraw on your bank account, even if you have overdraft protection.
- Make contributions to an RRSP, even if you borrow from the bank. Banks view it as a demonstration that you are looking towards the future.
- Try to place money each month into a savings account.
- Obtain a secured credit card. You may not qualify for one immediately after your bankruptcy, however, with a secured credit card a cash deposit is paid to the credit card company and you obtain a credit card with a limit capped at the value of your deposit. Many people swear off credit cards after bad credit, but that’s not the way to go. Using a credit card the right way helps to establish a positive payment history.
A bad mark on your credit report can remain there for seven years, but taking charge of your credit score will help restore it sooner.
To build new credit, you must replace your credit-damaging spending habits with better ones so you don’t end up back where you started. Avoid bad spending habits such as charging things you can’t afford, making minimum-only payments, and skipping credit card payments. Remember, what you used to do with credit cards led to poor credit. Your new goal is to cultivate better habits so you can watch your credit improve.