Establishing Credit after Bankruptcy or Proposals
It is important to keep all of the documents pertaining to your affairs in a safe place. Shortly after you signed your papers we mailed a copy of all of the documents which you signed to all of your creditors. This confirms the starting date of your proposal or bankruptcy. The credit bureau does not always have an accurate record of your debts. The Statement of Affairs, which you signed at the start of the bankruptcy or proposal contains the best available information for you to update the records of the credit bureau should it become necessary to do so.
If you filed a bankruptcy you (as the debtor) will normally be discharged nine (9) months after you filed the assignment in bankruptcy. If this is not your first time filing an assignment in bankruptcy or if you filed a proposal before or if a creditor, the trustee or other party is opposing your discharge from bankruptcy than the nine (9) month automatic discharge from bankruptcy will be delayed until after a court hearing takes place. The court and not the trustee will set the date of the court hearing. Unfortunately we have no control over the length of time it takes to schedule the court hearing. Once you (the debtor) are discharged the trustee must apply for a discharge also — this can take 1 ½ to 2 years after your discharge.
If you filed a proposal you will receive a certificate that you have completed the proposal shortly after the last payment is made. The trustee will apply for his discharge within a few months after you have paid the full amount of the proposal.
Once the trustee has been discharged your file will be placed in storage for a period of five (5) years after which the file will be destroyed. If you need duplicate copies of any document while it is in storage there will be a minimum charge of $150.00 in order to retrieve your file.
Once you have been discharge from bankruptcy or completed your proposal, there are several ways to establish your credit again.
1. Applying For A Secure Credit Card
Many banks and trust companies today have a secured credit card. These are cards where you provide a cash deposit or security in the amount of your credit limit for that card. The security is held as collateral on the card in case you do not pay. The bank reports to the Credit Bureau that you have the credit card and records your payments.
The credit bureau report does not mention that this credit card is a secured card, only that you have a credit card. Since you have given security up front there is no risk factor to the bank.
It is important that you make sure that you pay your credit card in full each month by the due date on statement. This shows the creditor that you are now financially responsible and thereby helps to establish a good credit rating with the Credit Bureau.
Please note: only some Banks and Trust companies have these cards at the present time. They include: The Bank of Montreal, The TD Canada Trust, The Bank of Nova Scotia, The Royal Bank of Canada and Home Trust.
2. Applying For A Secured Loan
Once you have a secured credit card the next step is to save up some money and give it to trusted family member or friend to buy a Canada Savings Bond, Guaranteed Investment Certificate or deposit the money into a Term Deposit which will be used as collateral for the bank loan. The security cannot be in your name.
Then set up a meeting with your Bank Manager to discuss a bank loan using the Canada Savings Bond, etc. as your security. It is important that you request this meeting with the Bank Manager where you do your banking or have some banking history with them as a customer. The better they know you the easier it will be to get a loan.
The Bank Manager should agree to the bank loan, as there is no risk factor to the bank, because they will hold the security.
Once the loan is received, it is very important not to spend this money. You will be using this money to pay back the loan. Put this money in a separate bank account so it does not get spent on other things.
Your payments on the loan should be made as follows:
1st month: Payment should be made on the due date. Same with 2nd & 3rd month.
4th month: Payment should be made before the due date.
5th month: Payment should be made before the due date.
6th month: Payment should be made before the due date.
7th month: Payment should be made before the due date.
8th month: Payment of balance of loan.
Please note that it takes approximately 90 days to register a rating with the Credit Bureau.
3. Leasing a Vehicle
There are several good automotive dealers who are willing to lease vehicles during and after the bankruptcy or proposal process which can help in establishing a good credit rating. When leasing a vehicle the ownership continues to be registered with the car dealer until after the Lease Agreement is paid out, therefore the risk factor to the car dealer is small.
After you have finished your lease or during the lease period you may request a letter of reference from the Lessee stating your payment history on your account with them. Send a copy of this letter into the credit bureau. When other people are checking your credit history they will see a reference to the good credit rating you have established.
Make sure that you keep a copy of this letter for your records as it can be used at a later time if needed.
Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.
