Filing a bankruptcy definitely gets you a fresh financial start. However, this is not the time to relax over the fact that most of your debts have been cleared. In fact, you should use it to ensure that you can avoid future debt problems.
On the other hand, the major concern after bankruptcy is your ruined credit score. It may be difficult to get it back on track but not impossible. Adding a little discipline to your financial decisions will really help you build it back up.
Bankruptcy in Canada
Once you have filed bankruptcy in Canada and all your follow up duties are complete, you are provided with a discharge. This is a certificate that mentions how the bankruptcy was completed.
Bankruptcy is a permanent as far as your personal financial history counts. However, it may be removed from your credit report after several years. On the other hand, you should always answer in affirmative if asked about being bankrupt. This is the required protocol. Otherwise, you will be misleading the authority that has inquired.
After you are through with bankruptcy, your credit is totally cleared. You will have to adjust your lifestyle in order to build good relationships with creditors again.
Bouncing Back from Bankruptcy
Take bankruptcy as a financial lesson. With most of the debts eliminated, you are in the perfect position to plan future and start working for your credit score. The bankruptcy will be shown on your report for about 6 years in Canada but do not wait this long to do something about building it back up. As soon as you receive the discharge certificate, begin your efforts.
How You Can Get Out of Bankruptcy
The first thing you need is to get a secured credit card. This credit card type requires you to deposit a certain amount of money. Unlike the regular credit card, this amount is quite affordable. It acts as a security in case you default on this account. You will be given a card limit equal to the deposit. Make sure that the bank you get the card from reports to credit bureaus. You may be able to increase the deposit and limit after some time. A high credit card limit means low balance. The lower your balance, the quicker you will be able to improve the credit score.
You may think that with no credit, you do not have any method to acquire a loan. After bankruptcy, you can actually get a loan for an RRSP. The loan amount is quite small and can be paid over a year. The money is transferred to an RSP account, which is only available after you have repaid the loan. This is not only a great way to develop credit but you actually get some money saved.
Mortgages After Bankruptcy
You can also get a mortgage. It may not be possible immediately after the bankruptcy. However, if you have taken the previous two steps, then you are already a little way into building trust with creditors. Mortgage lenders in Canada have three qualification categories; the income, debt level, and credit score. Your income is not affected by bankruptcy and debts are cleared. As far as credit score is concerned, the lender will be able to see that you are making an effort. In addition, if you strongly qualify for the other lending criteria, then your chances of taking out a mortgage are high.
Start taking your bill payments seriously. Keep track of all the payments and their due dates.
After being discharged from bankruptcy, give a serious thought to your lifestyle. Start planning by knowing what you owe and what you own. Cut your expenses and adjust the general lifestyle according to your means. Nowadays, you can live a comfortable life in Canada despite eliminating a few luxuries. Remember that we always have certain lifestyle options we can totally live without.
Rebuild Your Financial Stability
Start building a savings fund. To avoid future financial troubles, you must have a source you can turn to when times get tough. It will also provide you with a psychological relief. You can get a small part-time job for more earnings and invest some amount in savings periodically.
After bankruptcy, you will be very motivated to build up your credit. However, start easing yourself into using cash. With only a limited cash on you, you are inclined to buy only what you need. This way you eliminate unnecessary expenses, saving automatically.
Bankruptcy may have left you with a low self-esteem. However, treat this as a second chance. You can take your finances in control only if you make a little effort. Set financial goals and plan how you can reach them.