Obtaining Credit after an Alberta Bankruptcy Discharge

Posted by: Shawn Stack on 10/27/2011

Credit has become such an important part of the financial lives of all Albertans that the thought of never having access to any kind of credit for the rest of their lives is enough to keep residents from giving serious thought to declaring an Alberta bankruptcy as a means of getting out of debt.

The fact is some Albertans believe obtaining credit after an Alberta bankruptcy discharge is not possible.  Any resident who has received phone calls from debt collection agencies knows one threat that they rely on is loss of credit.  However, the phrase “bankruptcy will destroy your credit rating” is a half-truth.

If you file for an Alberta bankruptcy, your credit accounts are assigned an R9 rating in your credit report.  The R stands for revolving charge and the 9 indicates bankruptcy or bad debt.  R9 is the worst rating you can get and it does destroy your credit rating in the short term.  While you are in bankruptcy, you are restricted from any form of credit. 

What many Albertans do not know is you end up in the same place if you enroll in a credit counseling solution or debt settlement plan to avoid bankruptcy.  Although the actual rating is less severe – an R7 indicating debt in settlement program – the net effect is the same as in a bankruptcy filing – you are restricted from any form of credit until you successfully complete the program.

Obtaining credit after a discharge from an Alberta bankruptcy is not only possible, you can begin the process sooner than with any structured debt solution.  While non-bankruptcy solutions take from 3 to 5 years to complete, bankruptcy takes from 9 months to 21 months to complete for first time bankruptcy filers.

Another misconception out there about obtaining credit after a bankruptcy discharge is the belief you have to wait till the R9 rating falls off your credit report 6 years after your discharge.

This is not true.  Once discharged, the R9 remains but your account balances show zero balances.  The fact you owe virtually nothing makes you an attractive prospect for some lenders.

If you have a stable source of income and a cash nest egg, the only other thing you need for obtaining credit after a bankruptcy discharge is time.  You can start with secured credit cards – where your credit limit is set by the amount you place in a saving account with the credit card issuer.  Over time, you can establish a history of repayment that can lead to getting unsecured cards.