How to rebuild your finances after bankruptcy and what to expect.
Finding information about how to file for debt relief is easy to find. The internet is also full of information about how bankruptcy impacts your credit score. What may be a bit harder to find is information about what to expect after your bankruptcy ends.
Knowing what to expect after bankruptcy can have a big impact on your decision making process. Nine months ago in August 2017 4,945 people filed personal bankruptcy in Canada. Many of these bankrupts are receiving discharges from the process right now and they may or may not be sure what their next move should be.
After Bankruptcy – Year One
When you complete the bankruptcy process you will receive a certificate that confirms your “discharge”. Keep this document in a safe place because you may need it in the future and it will typically cost you money to replace it if you lose it. You also should keep a copy of the original documents signed with your Licensed Insolvency Trustee.
Taxes are a part of the bankruptcy process that can be confusing. It is possible to have to submit tax slips after the bankruptcy ends. You are required to send in your tax slips after you are discharged if you filed between January and April. If you filed between May and July, while you won’t be discharged until the new year, you will be discharged before the income tax deadline and required to submit tax slips after your discharge. If you waited until August or later in the year, you will not be discharged until after the tax deadline and will submit slips during your bankruptcy.
During the year after your bankruptcy the best thing you can do for yourself is save as much money as you can, spend wisely and avoid getting into any more trouble with easy lending such as payday loans.
Since you have already adjusted your budget to afford your monthly bankruptcy payment, try saving this money. Make the same monthly payment but send the money to your savings account or retirement savings plan.
Years Two – Six
Bankruptcy stays on your credit bureau report for about six years after the process is complete. During this time you can apply for new credit to help you rebuild. We recommend that you begin with a secured credit card. If you have been saving money during the year after your bankruptcy you may already have a deposit to work with. Apply for a credit card that requires you provide funds as “security”, start with a small balance card perhaps $300 or $500 and use the card regularly to make purchases. Be sure to pay the balance owing in full by the due date every month to improve your credit score and get your deposit back.
The best advice we can give to someone during these years is that slow and steady wins the race. Don’t rush into anything financially and remember that your credit report will show that you were bankrupt..Wait until you are sure that you are ready to apply for things like overdraft or loans, have a steady source of income and can afford to make payments to avoid paying interest.
After Bankruptcy – Year Six
Approximately six to seven years after bankruptcy you will want to pull your Equifax and Transunion reports. A quick review of these reports is important to ensure that everything looks the way it should. Your bankruptcy and the debts included in it will drop off of your report and this should happen automatically. If you notice any discrepancies you should contact the credit bureau and complete a correction form to have the issues fixed.
Remember the discharge certificate and creditor’s package we told you to keep safe? Now, after six years, it is the time to bring out these documents and double check your reports, both Equifax and Transunion.
If you are considering filing personal bankruptcy we can help you through the process and provide you with the information that you will need to help you when the process ends. Please call a Spergel Licensed Insolvency Trustee and book a FREE consultation at the office location that is most convenient for you. The path to debt freedom begins by dialing 310-4321, what happens next is up to you.