Will Bankruptcy Ruin My Credit?

People often try to avoid bankruptcy at all costs because they are worried about ruining their credit score. They pride themselves on paying their bills on time, have always maintained a strong credit score, and the thought of doing anything to jeopardize that is unthinkable.

What’s important to remember is that your credit score is not a reflection on you as a person; it’s a reflection on how you pay your debts.

If you are having difficulty paying your debts, because of something beyond your control; like loss of employment, sickness, or marital breakdown, you will have to make some tough short-term choices to protect the overall long-term well-being of you and your family.

Federal bankruptcy legislation, known as the Bankruptcy and Insolvency Act, provides for the legal process designed to do just that. It’s meant to provide relief from unmanageable debts for the honest but unfortunate debtor. At the completion of a bankruptcy you are released from all debts you owed prior to your bankruptcy (with some exceptions).

Here is a list of debt solution options and the impact they will have on your credit score:

Debt Settlement Companies

They negotiate settlements with your unsecured creditors to accept less than what you owe. Debt Settlement programs are reported as R-9 on your credit report and will remain on your credit report for 6-7 years after the agreement is completed.

Credit Counselling Companies

They offer Debt Management or Debt Repayment Programs whereby they negotiate reduced payments and interest with your unsecured creditors (who participate in the program), but the debts are typically paid in full. Their program terms usually run for 4-5 years and will eventually get reported as R-7 on your credit report. The information will remain there for 2-3 years after successful completion.

Licensed Insolvency Trustee (Trustee in Bankruptcy)

Bankruptcy – Is a process that is available to individuals and businesses and can only be provided by a Licensed Insolvency Trustee (formerly Trustee in Bankruptcy). The debts included in the bankruptcy will reflect as R-9 on your credit report and will remain there for 6-7 years (14 years for multiple bankruptcies) after your discharge date.

Consumer Proposal – Allows you to settle your debts for less than 100% of what you owe, payable as a monthly payment for five years. Unlike credit counselling or debt settlement company programs, a consumer proposal, once accepted, is legally binding on all of your unsecured creditors. All interest and late fees will cease, and you only pay the towards the principal. A completed proposal will stay on your credit report for three years after the proposal is completed.

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

• You won’t be stuck in an assembly line process.

• You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.

• We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.

• We help Canadians with overwhelming debt get fresh financial starts.

Once you file a consumer proposal or personal bankruptcy, we deal directly with your creditors on your behalf. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you. Contact us for a free consultation.

We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in-person in Saint John, Moncton, Fredericton, Charlottetown, Dartmouth, or Miramichi.