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📅 Last Updated: October 4, 2021
✏️ Written By Kale Havervold
🕵️ Fact-Checked by Caitlin Wood

Dealing with excessive debt is not something people in Markham or anybody in general ever plan for. While most in Markham can repair their finances by making more money, fixing their spending issues, or adopting better habits this isn’t always the case. For these individuals, it sometimes makes sense to declare bankruptcy and start fresh. Bankruptcy is a legal status or process in which you will surrender many of your belongings in order to completely eliminate your debt.

Everything you need to know about bankruptcy court in Canada, click here.

How Does Bankruptcy Affect Your Credit in Markham?

So just how does bankruptcy affect your credit in Markham? Well, as you could imagine, bankruptcy has a relatively large negative impact on your credit. For example, a 1-9 scale is used when evaluating each of your credit accounts. An account with perfect credit would get a rating of 1, while an account with a bankruptcy note will get a rating of 9.

This note will remain on your credit report for six years after your bankruptcy period ends, so it will end up being on there for nearly seven years total. If you have a second bankruptcy, that will remain as a note on your credit report for 14 years.

Check out this article for more advice on how to improve your credit after bankruptcy.

You Can Improve Your Credit in Markham

However, while your credit will be ruined for a little while due to a bankruptcy, sometimes, that isn’t such as bad thing. Sometimes it makes more sense to start fresh with no debt and bad credit than it is to continue struggling with a mountain of debt.

Also, there are plenty of great ways to improve your credit in Markham after bankruptcy. A few of the best ways are:

  • Use credit responsibly and safely
  • Make all of your payments on time and in full
  • Don’t frequently apply for new credit
  • Keep old credit accounts open
  • Consider using a secured credit card

While improving your credit won’t happen overnight and will take some time and some sacrifices, it will be worth it in the end.

What Debts Can and Cannot be Included in a Bankruptcy?

So while it is an extreme choice, it is definitely the right choice for some people in Markham and the rest of the country. However, if you are considering bankruptcy, it is important you are as informed as possible. While many people may think that any and all types of debt can be included in a bankruptcy, that actually isn’t the case. There are certain debts that can be included and others which cannot.

Credit card debt and other types of unsecured debt can be discharged in a bankruptcy. While secured debts (mortgages and car loans) and things like child support, alimony, student loan debt, and traffic fines cannot be included.

Because of this, it is very important to be knowledgeable of all the different types of debt you have to make sure it can be included in a bankruptcy. If you’re not, you might be shocked when a bankruptcy doesn’t actually eliminate all of your debts. If you are not sure if a certain kind of debt is included or not, you may want to set up a meeting with a License Insolvency Trustee (LIT) in Markham. Keep in mind that speaking with a LIT is the first step anyone should take it they’re considering bankruptcy as a debt relief option.

Research Pre-Bankruptcy Solutions

While there are definitely consumers in Markham who should choose bankruptcy, it isn’t for everyone. It is quite extreme and is best for those who feel they will simply never be able to pay off their debt. For everyone else in Markham, there is actually a wide range of other debt relief options that might work. It is a good idea to do some research on these options beforehand, there is no use going right to the most extreme solution if you don’t need it. In an effort to help you out, we’re now going to take a closer look at some of these solutions.

Click here for a more detailed look at your pre-bankruptcy options.

Debt Settlement

Debt settlement is when you work directly with a professional in Markham in order to offer to settle your debt. For example, if you owe a creditor $10,000, you might offer to settle the debt for $6,000. Of course, the creditors aren’t required to accept your offer, but it could potentially save you a lot of money.

Debt Consolidation

Debt consolidation is when you get a large loan to cover all of your smaller loans. This can not only simplify your payments but can also get you a better interest rate. You can also opt for a debt consolidation program, this option is often a good idea for those consumers who cannot get approved for a debt consolidation loan. You’ll work with a credit counsellor in Markham to create a repayment plan and make monthly payments, which will then be distributed to your creditors.

Consumer Proposal

A consumer proposal is a legal process in Markham between you and your creditors to pay back a portion of what you owe. The amount you will end up paying back will depend on things like your income and how much you owe. This is an especially good option as many people who file for bankruptcy would be better off with a consumer proposal. It is much less harsh on your credit.

The True Cost of BorrowingDo you know what the true cost of borrowing is? Find out here.

Helping You Discover If a Bankruptcy is Right For You

Do you feel that bankruptcy could be the right solution for you? Or are you interested in more guidance? If that is the case, we can help. Reach out to Loans Canada today and we can put you in contact with a professional or expert in Markham.

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