The Affect on Job Search and Credit When Declaring Bankruptcy in Alberta

Posted by: Krista McDonald on 12/21/2011

If you are in over your head with debt and are considering declaring bankruptcy in Alberta as a possible solution, chances are you are using the Internet as a source of information just as you are doing right now.  Have you read anywhere on the Internet anything at all about the impact a structured debt solution like bankruptcy in Alberta can have on your future job search activity?

Chances are you haven’t but you have undoubtedly read article after article on how bankruptcy in Alberta will destroy your credit report.  Some of those articles are from websites pushing credit counseling or debt settlement solutions that supposedly are less harsh on your credit report.

The spreading belief that you would be in a better position regarding future credit use if you stayed out of bankruptcy is based on a gigantic half-truth.  Here it is – on a scale of 1 to 9, with 1 being the best and 9 being the worst, a 7 is better than a 9.  If you end up declaring bankruptcy in Alberta your unsecured credit accounts get an R9 rating.  If you enroll in a debt settlement plan or credit counseling solution you get an R7.

Here’s the other half of the truth you rarely read about – in the case of credit ratings, there is no practical difference between an R7 and an R9.  Both ratings tell potential lenders you could not manage to keep up with your bill payments and have opted for a structured settlement.  In both cases you can forget about rebuilding your credit rating until you successfully complete the program. 

In short, no one is going to consider you for new debt if you have outstanding old debt.  You can be done with bankruptcy in Alberta and ready to start using secured credit cards and other strategies to repair your credit in as little as nine months.  The longest time first time filers could remain in bankruptcy is twenty-one months.  Contrast that with the three to five year time frame to complete one of those non-bankruptcy alternatives.

What’s more, the failure rate of non-bankruptcy solutions is high, with many finding themselves declaring bankruptcy anyway. 

Now, what about job search?

These days, more and more companies are running credit checks on applicants as some kind of measure of good judgment and stability.  Although they cannot do this without your permission, they can reject your application based on your credit report.  However, if they do so, you have the legal right here in Alberta to ask for an explanation of their reasoning.

To an employer, both bankruptcies and non-bankruptcy debt solutions tell them the same thing – you were not responsible enough to keep up with your bills, but you are taking action to deal with your debt.  If you have a reason for your troubles – like job loss or divorce – you can include a letter of explanation in your credit file.