Have you fallen so far behind your debt load that you think bankruptcy is your only option? We have a lot of clients in Manitoba who have gone through a similar situation, and before you file, there are some things you should consider. Here are answers to many of the questions that our clients have asked us – and that you need to read before you make a decision.
What does bankruptcy do to my credit report?
Well, the two biggest credit bureaus in Manitoba are Equifax and Trans Union. Both of them keep a bankruptcy on your credit report for six years after discharge, if it’s your first bankruptcy, or 14 years if it’s your second time. While this will keep you from securing most forms of home loan financing during that time, it won’t keep you from all forms of borrowing, particularly if you keep a steady job and build savings during those six years.
How can I rebuild my credit score during the time period after discharge?
Keep your job for the long term, and stay in your current residence. Stability at work and in where you live can impress a lender. After discharge, you don’t have to pay the Trustee his monthly fee, so stow that money into a savings account. Then, think about converting some of those savings into the deposit on a secured credit card. Once you have emergency savings and a secured card, start putting money into an RRSP. Take out a loan from your bank to invest in that RRSP, and pay off that loan. Now you’ve built up some savings and satisfied a loan. Steps like this will help your credit gradually improve, and you may find that you can qualify for a mortgage even before the six (or 14) years are up.
Does filing for bankruptcy affect my spouse?
This depends on your debts. If they are just yours, then your spouse’s wages and assets will not be affected. Marriage only makes a spouse responsible for joint debts, not ones that you either brought into the marriage or took out on your own afterward. Now if your spouse co-signed or guaranteed any of your debt, then the collectors can pursue your spouse after bankruptcy. Talk to a bankruptcy Trustee to get specific information about your individual situation.
Do all of my debts go away when I file for bankruptcy in Manitoba?
The unsecured ones do go away, although if you’ve piled up a ton of credit card debt and have the income, your creditors may ask the bankruptcy judge to make you pay down some of those balances before granting bankruptcy, which is a possibility.
If you have secured debt, such as a mortgage or car loan; if you have student loans and have not been out of school more than seven years yet; if you have arrears on child support or alimony, then those debts don’t go away – you still have to pay them, even in bankruptcy.
Are there any alternatives to filing bankruptcy in Manitoba?
One other alternative in the court system is a consumer proposal. You sit down with a bankruptcy Trustee and come up with a proposal to your creditors by which you agree to pay back a percentage of what you owe over time. If you creditors agree to it, then you can come through this in a matter of months instead of having to wait six (or 14) years to get out of the credit issues that bankruptcy can create for you.
Another option that keeps you out of the court system is a debt repayment or debt consolidation plan. This involves you meeting with a credit counselor, who will go to your creditors with a proposal to reduce fees and/or interest charges so that you have less to pay each month. Your creditors might sound mean on the phone, but they really just want their money, so if you can put together a cogent plan – and keep to it – this is another way to stay out of a bankruptcy courtroom.
To get more information about your own situation, talk to a bankruptcy trustee. Remember that a consumer proposal can provide a better solution than a debt settlement. If the proposal goes through correctly and the borrower has enough equity, you can come out of your consumer proposal within a few months and find yourself back on track, while a bankruptcy has implications that will affect your credit profile for years.
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