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In Canada, Bankruptcy Discharges May Negatively Affect Debtors

Feb 1, 2008
Just like in the United States, Canada debtors look to bankruptcy as a last resort to fiscal ruin. Certain types of property are protected from seizure, while collection agencies are no longer permitted to attempt debt collection.

Yet unlike in the United States, the fresh start so desperately desired by debtors who are up to their eyeballs in debt is quite frequently marred by the negative consequences. In Canada, bankruptcy discharge to some is equal to a loss of the ability to earn a livelihood.

Prevented from exercising certain professional options, those who in the past may have made a living as an elected official, will no longer be able to do so. In the same vein, those who may have operated in a trustee position are barred from engaging in this activity.

In some cases the bankruptcy discharges are conditional and some of the conditions may need to be met prior to the discharge while others are taking effect upon the discharge and thus will carry over into the debtor's life after bankruptcy. Additionally, several contracts that the individual may have with service providers of varying kinds will be subject to review and many times a service provider will cancel a contract and thus force the newly discharged debtor to contract for a similar service elsewhere and quite possibly at higher rates.

Although this is not decreasing the number of Canada bankruptcy filings, it does in some ways deter those who fear professional reprisal if they seek out the fresh start their situation merits.

Most people may believe that following bankruptcy, their financial life is over and unless they can pay cash, they cannot own a car. Obtaining credit for a car loan following a bankruptcy is going to be more expensive than if they have perfect credit, but for most people it is possible.

Before any credit company will consider any type of loan after bankruptcy, the case must be discharged through the court. It usually takes about six months following the court date for all the debts to be discharged and until then most creditors will not accept an application for a loan of any type. After the bankruptcy has been discharged, the debtor has no outstanding debt and while still considered a high credit risk, some sub-prime lenders may be willing to take a chance with an after bankruptcy car loan, knowing the individual cannot file for another seven years.

The interest rate for a car loan after bankruptcy will usually be at the top of the legal limit and a few companies may slip in a few extra fees to add even more to the cost of the loan. For some people just coming out of bankruptcy, the type of car and the price they pay is rarely open to negotiation as some sellers take advantage of their desperation.

If it is possible for them to hold off on the car purchase, after bankruptcy car loans may be more available if they have established even six months worth of credit history that shows they are trying to turn their credit life around.
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