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Calgary and the rest of Alberta enjoy some of the highest incomes of anywhere in Canada. Unfortunately, Calgary and the province also struggle with some of the highest levels of debt. While many in Calgary are capable of keeping up with their debt payments on things like vehicles or credit cards, others in Calgary struggle and may eventually stop making payments altogether.
Falling behind on your credit card payments? Check this out.
If this negligence goes on long enough, a consumer could find themselves under a mountain of debt, with no way out. Once this happens, seeking the help of a professional in Calgary is usually the best option. But what happens when the most common debt relief options just aren’t enough?
If this is the case, one of the last things you can do is file for bankruptcy. Bankruptcy is the legal status of an individual who is unable to pay back their debts. Generally speaking, a person going through bankruptcy will surrender most of their assets to their Licensed Insolvency Trustee in Calgary and in exchange, their debts will be eliminated. Of course, because of this, bankruptcy should be a last-resort type of option and other debt relief solutions should be considered first.
Now that you’ve got a brief understanding of how bankruptcy works, how will taking this step affect your credit? Well, as you can expect, bankruptcy has a negative effect on your credit score and credit report.
According to credit bureaus, a first bankruptcy will remain on your credit report for six years after your date of discharge, and second bankruptcy will appear on your report for 14 years. When it comes to rating credit, there is a scale of 1-9. Perfect credit is an R1 and a bankruptcy is R9, which means it’s one of the worst things you can do to your credit.
Having trouble understanding your credit score and credit rating? Read this.
While your ability to borrow and get approved for new credit depends on more than your credit report and score, there is no doubt that a bankruptcy will hurt your ability to borrow in Calgary and Canada, in general, at least for a while. So while it is terrible for your credit, if that is your only option, it is a great way to get a fresh start and rebuild your credit, as opposed to perpetually living with mountains of debt and creditors constantly calling you.
Take a look at this infographic to learn more about how credit scores are calculated.
So once you are discharged from bankruptcy, your first step should be to repair your credit and ensure you never have to deal with bankruptcy again. However, with your credit being incredibly broken after a bankruptcy, where do you begin? Well, there are a few things you should be doing to repair your credit after a bankruptcy:
This will often take a lot of time and could be tough to do, but will be well worth it and without repairing your credit, borrowing in the future will be quite difficult.
Click here to discover more ways of rebuilding your credit after a bankruptcy.
As mentioned before, bankruptcy should be a last resort for most people in Calgary after they have tried other debt relief options. As a result, it isn’t for everyone. There are a few things you can think about any questions you can ask yourself when figuring out if bankruptcy is the right choice for you. These include:
Also, if you haven’t tried or considered things like debt settlement, credit counselling, debt consolidation, or a consumer proposal, you should try those first before filing for bankruptcy.
Bankruptcy is a big step to take and a tough choice to make. If you are considering bankruptcy, or want to learn more about it, don’t hesitate to get in contact with Loans Canada today!
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