Bankruptcy

Bankruptcy clears all unsecured debt within 9 to 21 months and gives an individual a fairly easy “fresh start.” Bankruptcy immediately stops all collection processes by your creditors. It brings about an immediate stay of all court actions by your creditors and all garnishments against your wages (except those under Family Court or Provincial Offenses Court orders).

Bankruptcy is filed through a Licensed Insolvency Trustee (“LIT”). A LIT is licensed by the Office of Superintendent of Bankruptcy to administer the process of filing a Bankruptcy under the Bankruptcy and Insolvency Act. Credit720 is not a LIT, Credit720 works with the debtor to fully understand all options to deal with debt and how each option fits their budget and the long term impact on their credit rating. If you decide bankruptcy is the most viable option, you will be introduced to a LIT.

The following items are exempt from seizure under provincial law (the Execution Act):

Alberta Bankruptcy Exemptions: Exempt Assets

Those you can keep.

Some of the assets that you may be entitled to keep are listed below:

• Personal Effects – up to a value of $4,000 (resale value).
• Vehicle – one motor vehicle up to a value of $5,000
• House – equity in residence up to $40,000 or your mobile home up to $40,000.
• Tools of the trade – up to a value of $10,000 if used` in your work.
• RRSP’s, RESP’s, RRIF’s, RDSP’s and DPSP’s.

Your spouse is not affected by bankruptcy unless he or she is a co-signer or Guarantor. Your may want to consult with CREDIT720 about which of your accounts involves someone else other than yourself. A house for instance will not at all be affected by bankruptcy if there exists no equity above the mortgages against that house. A vehicle, likewise, will not have to be accounted for in a bankruptcy if there are ongoing financing payments on that vehicle and there was no sizable down payment. You can keep your vehicle if it is either financed or leased, as there is no equity in a car that is either financed or leased. Contrary to common belief you can carry on your business activities if you are self-employed while you are an undischarged bankrupt. Household income is monitored until discharge from bankruptcy. High-income levels trigger the determination of “surplus income” that is set by official rules.

A 1^st time bankrupt with surplus remains bankrupt 21 months: if there is no surplus, the process lasts only 9 months. In either case, an automatic discharge will be granted, provided that the bankrupt reasonably helps along and provides the information requested. Consider contacting CREDIT720 to discuss this option or another that may best suit your needs.

Rebuilding Credit after Bankruptcy

Contrary to popular belief, rebuilding your credit score after a bankruptcy is not impossible. In fact, in some ways, it is easier to rebuild your credit score if you declare bankruptcy. The truth is: sometimes your credit score will be better off in the long run. And here’s why…

If you are struggling with your finances and your credit score, and you do not see an immediate light at the end of the tunnel, you will probably continue to struggle for a few more years. As you fight to stay afloat, you will probably miss a few payments here and there. And your credit score will suffer. In two years, it will be exactly where it is now. It might even be worse. And as you continue struggling to keep your head above water, your score might sink deeper and deeper.

But if you declare bankruptcy today, and then start the process of rebuilding your credit score after bankruptcy, in two years, you could have a great credit score!

Our point is that you can rebuild your credit score, sometimes in twelve months, and almost always in two years. The key to rebuilding credit after a bankruptcy is to take two critical steps.

1. First, you will need to open new lines of credit.
2. Second, you will need to pay your bills on time.

Opening New Lines of Credit

A lot of people think that they should wipe their hands clean of credit after a bankruptcy. They think that if they stop using credit entirely, their scores will rebound. But the truth of the matter is that the credit bureaus consider no credit to be just as bad as poor credit. If you don’t give the credit-scoring bureaus new information about your spending behaviors, they will think: “better safe than sorry” and your score will not improve.

Paying Your Bills on Time and in Full

If you have been through bankruptcy, never make a late payment. Not once. You cannot pay one minute past the deadline. The credit-scoring models consider you an extremely risky borrower, so any indication that you are slipping into old patterns will not bode well for your credit score. You must pay on time and in full each month because even if your score increases, it is on thin ice. If you cannot pay your credit cards in full, you must never exceed a balance that is more than 30 percent of you limit. Your balance-to-limit ratio is a big part of the formula used to calculate a credit score. This means that you must make a budget and stick to it. You cannot splurge on a latte “just this once” you cannot make the minimum payments as your credit card balances creep up. Not even once.