I receive some interesting questions by email, including this one by someone who just can’t wait for the bankruptcy to disappear from his/her credit report:
I claimed bankruptcy in 06/2006 and did receive my discharge on 05/2007. I have been very active on repairing my credit it currently stands at 661 and i do have a credit card under my name only for $5000.00 it is the same credit card that i placed a $250.00 deposit (secured) and captial one has been rasing my credit every 6 mths. Is there any way i can submit an application somewhere to stand in front of a judge to remove my bankruptcy? even if i have to pay back the debts, the reason im asking is because i’m getting my real estate licence but till the bankruptcy comes off my history i will not be able to get licenced.
Well… let me put it this way, we can always dream. I have never heard of a bankruptcy being “removed.” Declaring bankruptcy is not something to be taken lightly. It’s really a last resort when there’s no hope of getting back on track financially. Once we file for bankruptcy through a trustee, and go through the minimum 9 months of being an undischarged bankrupt, and if there are no oppositions, then we are granted our “Certificate of Discharge” and are then released from any and all debts that were accepted into the bankruptcy. We then have to wait at least 6 more years before the bankruptcy falls off from our credit reports. Unless you can speed up time, there is no way to get the bankruptcy removed from our credit reports.
A bankruptcy cannot just be “removed”
I suppose if there was an error, or a case of identity fraud, the bankruptcy could removed. Or possibly reversed, meaning it would still show up, but then be “corrected” or discharged. Once we have been “rewarded” by being released from our obligation to pay our debts, we must still pay for it in another way, by being constantly reminded about if for another 6 years. We are excluded from the majority of mainstream credit, even credit we once could have obtained with a bad FICO credit score, but no bankruptcy. And in some cases, there are applications which may ask a question like “Have you EVER filed for bankruptcy?” So, even if it was 25 years ago, and you’re being truthful, you would have to admit to it. Now, aside from records the government keeps, I don’t think there’s any way a potential lender would be able to know if you filed for bankruptcy once it’s fallen off your credit report.
I’m not a lawyer or a trustee in bankruptcy, but I can tell you that I have tried countless ways of trying to get around the fact that there’s a bankruptcy appearing on my credit report when considering applying for a credit card, mortgage or car loan. There’s no way around it.
Be prepared for the known, and unknown consequences when you choose to go bankrupt
There’s a saying that goes “If you do the crime, you do the time.” Although some people may not agree, bankruptcy is not a crime, or criminal offence, but if you declare bankruptcy and are relieved of your obligation to pay your debts, there has to be some sort of penalty or inconvenience.
It wouldn’t be fair to everyone who manages their credit, and pays it, or at least stays afloat making minimum payments. There would be no incentive to pay your debts if you could just keep filing for bankruptcy with no consequences, or simply go in front of a judge and ask for it to be removed so you could start a new career that required you not have a previous bankruptcy. Once you have been discharged from your debts through bankruptcy in Canada, you are not obliged to pay any of it back. In fact, it almost seems like you are encouraged NOT to do so. I’ve heard of individual companies willing to extend credit to someone who stiffed them in the past by going bankrupt, if they agree to pay back their debt to that company. But, that is in the private sector and a business transition between you and specific company.
Bankruptcy will exclude you from certain types of jobs and employment
As you’ve discovered, a side effect of declaring bankruptcy is being excluded from certain jobs and types of employment, whether commission based, self-employed or as an employee. I was not aware that you are denied a real estate licence if you have filed for bankruptcy. I wonder what would happen if you had your real estate licence first, then went bankrupt. Would they revoke your real estate licence? Or what about if it’s been discharged and no longer appears on your credit report? Since each province in Canada has its own real estate board, and licences Realtors, you would need to ask them if they are willing to make an exception. Since you’ve only got a little more than a year to go, and have increased your credit score to 661, they may be willing to look at this on an individual basis.
Do the best you can to “prove yourself” to the outside world
By the way, congratulations on raising your credit score to 661. Although it’s not an extremely high FICO credit score, to achieve this kind of score, I’m sure you’ve been working hard at removing any inaccuracies, paying your debts on time and being very diligent. Many people have scores in the mid-600s, so it’s definitely not bad. But like most people, you’re probably striving for a score in the 700s. Keep up the good work, and I’m sure you’ll get there! I’m working towards that too, as I’m still in recovery mode.
You also mentioned that you got a secured Capital One credit card. I’m not sure how long ago you obtained that card, but it must have been a while ago if they’ve raised your credit limit so much. I have two secured credit cards as well, a Home Trust Visa and a Peoples Trust MasterCard. I did not get a Capital One card as I was told by several people that the other two I mentioned looked better on a credit report. However, I have no scientific evidence to support that.
Best practice is to start rebuilding credit as soon as possible after discharge
The worst thing someone can do after being discharged from bankruptcy is to do nothing. Paying cash and avoiding credit for 7 years is one way of living, but it will not help you in our credit-based world. First of all, once your bankruptcy falls off your credit report, you will have NO credit on your credit report. Lenders are leery of extending credit to anyone with no credit. That’s why many young adults, usually 18 to early 20s, need a co-signer or a high interest loan from a subprime lender in order to get credit for anything, like a car loan or to get an apartment lease. In today’s world, it’s hard to live with credit. Several decades ago, I hear you could live under a rock after bankruptcy and it was easier to get credit when you decided to. But things are different now, and will probably never be as easy as it was decades ago.
You’re better off rebuilding credit as soon as possible once your bankruptcy has been discharged. The easiest, and sometimes only option is a secured credit card. Some cell phone plans report to the credit bureaus too (My Fido cell phone plan does). Keep using your credit responsibly and watch your credit score go up. Sure, you may have a higher credit score and still have that darned bankruptcy on your credit report, but once that bankruptcy falls off in 6 years, you’ll have a high FICO credit score and NO bankruptcy on your credit report! Just what lenders like to see, along with steady employment and living at the same address long term. That’s sure better than trying to establish new credit only once the bankruptcy disappears in 6 years. Then you have to wait at least two more years to show a pattern of responsible use of credit.
Paying back creditors won’t help
Some people may feel morally obliged to pay back their creditors, and bless you for being so thoughtful. But that kind of defeats the purpose of filing for bankruptcy in the first place! If that’s what you wanted to do, you should have set up repayment plans instead of declaring bankruptcy! Paying back debts that were discharged in bankruptcy are not required. In fact, I recall my trustee giving me the impression that it was actually frowned upon. It kind of falls into the category of “too little, too late.”
And no, I don’t think a judge would “remove” your bankruptcy, even if you pay back all of the money, with interest, to all of your creditors who were included in your bankruptcy. Once it’s done, it’s done. Bankruptcy is a fairly permanent thing. It stays on your credit report for another 6 years after you are discharged, and the government keeps a record of it forever. During those 6 years after bankruptcy, we have to accept the fact that it will be harder to get credit and even certain types of jobs. You can’t turn back time, nor can you speed it up. What’s done is done. That bankruptcy is staying on your credit report whether you like it or not!
In special circumstances, you might be able to ask an employer, or licensing authority to consider you for a job or licence on an individual basis
You can try making a special request to the real estate board in your province explaining that you’ve been responsible with your credit since the bankruptcy, perhaps explain the unfortunate series of events that lead you to file for bankruptcy way back in 2006, and that soon the bankruptcy will fall off your credit report anyways. It’s at their discretion. They have that rule in place for a reason, and if they don’t want an ex-bankrupt being licensed, then that’s their prerogative. If you really want to be a real estate agent, and are willing to move and get used to a new city, maybe you could go to another province if they won’t deny you a real estate licence for having a previous bankruptcy. Or, just wait it out. Ask them if they would licence you once the bankruptcy falls off your credit report, or if they would deny you no matter how long it’s been since you were discharged. Just remember, once a bankrupt, always a bankrupt. You may be a changed person after bankruptcy, but you can’t change the past. It’s something you chose to do.
Or, you may just have to look for a different career. Maybe you like the idea of being self-employed and working on commission, so that the harder you work, and the more successful you are, the more you make. There are lots of other commission based jobs, many of which likely do not require that you do not have a previous bankruptcy. You may be excluded from anything in the financial field, like investments, but you can ask that company first. I’ve heard of some people who became very successful at commission based jobs like selling cars, furniture and high end coaching programs. Before you dismiss any of those ideas, look into them first. Not everyone is meant to be an employee working a typical 8 hour day and being paid an hourly wage or a salary. Some us, myself included, like the challenge of performance based compensation and prefer to be our boss, whether it be by owning a business or working on commission. Don’t give up hope!