A person holding a credit card

How Does Bankruptcy Affect Your Credit Score?

At Bernier & Associates in Ottawa, our team of licensed insolvency trustees (LITs) belong to the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) and is committed to assisting individuals and businesses file for personal and commercial bankruptcy. Our team has outlined key information regarding how filing for bankruptcy can affect your credit score.

What’s a credit score?

Your credit score is calculated using the information on your credit report, which contains information like your credit limit or loan amount, account balances payment history and more. Based on this information, a Canadian credit bureau like Equifax or TransUnion will give you a three-digit score to help lenders determine your creditworthiness and whether you pose a financial risk.


What’s bankruptcy?

According to the Bankruptcy and Insolvency Act, anyone that’s unable to pay off their debts can file for bankruptcy. Additionally, when you file for bankruptcy, your creditors can no longer garnish your wages or sue you in court. Your debts are erased (certain exceptions apply) to give you a fresh start financially.


How does bankruptcy affect your credit score?

Bankruptcy stays on your credit report for six to seven years. However, if you declare bankruptcy more than once, this information will appear on your credit report for 14 years. Moreover, bankruptcy drops your credit score to the lowest possible rating at most Canadian credit bureaus.


Banks, insurers, employers and landlords often look at your credit score to determine whether to give you a loan, increase your credit limit, insure you, hire you or rent you an apartment. If you have a low credit score, you may find it difficult to do these things.


However, if you’re saddled with insurmountable debt and your credit score is already suffering, personal or commercial bankruptcy may be the right solution for your situation. The licensed insolvency trustees at Bernier & Associates in Ottawa can help you manage your debt and repair your credit. Contact us for a free consultation.