Re-establishing credit during a bankruptcy

January 3, 2018

Yes, you can re-establish credit even though you are currently in a bankruptcy or a proposal.  There is nothing under law that prohibits you from obtaining credit while going through a bankruptcy.  Section 199 (b) of the Bankruptcy & Insolvency Act requires that you notify the lender you are an undischarged bankrupt if you are applying for credit of more than $1,000.00 value.  However, it is not clear from the Act how this would apply to a non-bankrupt individual filing a proposal.

We are seeing more and more people under proposals and bankruptcies finding access to some form of credit and those being newly discharged becoming targets of lenders looking for clients with little or no debt.  Some credit card issuers are notoriously easier to obtain credit products from than banks.

Having said that, some banks have set up subdivisions that seem to specifically target bankrupts and proponents for vehicle loans at higher rates of interest than their posted rates.  These rates should make the consumer think twice but since vehicular transportation is so important to the Canadian way of life consumers tend to jump right in.  Rates as high as 29% can mean the consumer gets back into trouble with debt very quickly.

So, while credit is definitely available to people who have filed bankruptcies and proposals – often even before discharge or completion one must approach such borrowing with antennas up!