What happens when you declare bankruptcy?

If you have a debt problem, you might be considering declaring bankruptcy. Here's what happens in Canada after the bankruptcy process is started. 

Starting over with healthy finances
Bankruptcy stays on your permanent record
Even after your bankruptcy is discharged, it will remain on your credit record for a few years. Also, you will have to disclose your bankruptcy for the rest of your life if you are asked. On the plus side, you will be able to get credit again.

Credit after bankruptcy
Once your bankruptcy has been discharged and your credit record cleared, you can get credit. You'll be treated like someone who has never had credit before, meaning that you probably won't get the best credit rates. While that can be frustrating, look at it as it's intended, as a way to start all over again and do it properly this time.

Even if your bankruptcy still shows up on your credit report, you can get credit again, if you repair your credit. Some of the ways to repair your credit are going to sound very familiar: 

• Complete your bankruptcy as soon as possible.

• Start saving money.

• Contribute to an RRSP.

• Keep saving.

• Be aware of your credit by getting a copy of your credit report.

• Build your credit smartly by paying your credit card and other bills on time.

Starting over with healthy personal finances
All of this becomes a solid foundation for starting over. If you look at the bankruptcy process, you're taught how to pay your bills on time, how to manage your money and even how to save and build good credit. So while you lose many of your assets in the process, by the end of it, when your debt is discharged, you will have developed money management skills, gained good credit and maybe even saved some money. It's not the best way to learn, but sometimes you need that kick in the pants to learn financial responsibility.

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