How much will my credit drop if I file bankruptcy?

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Filing for bankruptcy can send your credit score plummeting by 200 points or more, possibly landing you around a gloomy 300. This takes an immediate hit, tagged with an R9 rating, cautioning lenders. Unique factors like your personal credit history and the bureau’s scoring method influence the drop.

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Question

How much will my credit drop if I file bankruptcy? I’m really worried about the immediate hit to my credit score. Bankruptcy is a big decision, and understanding how much it might impact my credit is crucial.

From: Anonymous Question, Ottawa, Ontario (ON)

Debt Insiders Answer

Bankruptcy can really knock your credit score for a loop, often slicing off 200 points or more, landing you in the not-so-sweet spot of 300. Exactly how much it’ll nosedive depends on your unique credit tale and the scoring method the credit bureau is using. Plus, it tags you with an R9 rating—basically telling lenders, “Proceed with caution!” This change hits fast and can put a real damper on your plans to get new credit or loans.

From: Insider Adam

Office of the Superintendent of Bankruptcy (OSB) Answer

Filing for bankruptcy in Canada typically results in a significant immediate drop in your credit score, often in the range of 200 to 300 points, depending on your credit history prior to filing. The bankruptcy will remain on your credit report for six to seven years, causing continued impact on your creditworthiness during that time period. Specific guidelines regarding credit reporting and bankruptcy can be referenced in the Bankruptcy and Insolvency Act (RSC 1985, c B-3), particularly in sections discussing the effects of bankruptcy on credit ratings.

From: This answer is provided by scanning the Bankruptcy & Insolvency Act and related directives from the Office of the Superintendent of Bankruptcy (OSB).

Related Questions

Here are the top 5 most frequently asked questions related to the impact of bankruptcy on credit scores in Canada, along with brief answers:

1. How much will my credit score drop if I file for bankruptcy?

• Your credit score can drop by around 200 points or more[3][5].

2. How long will a bankruptcy stay on my credit report?

• A first-time bankruptcy typically remains on your credit report for 6 or 7 years, depending on the province[1][3][5].

3. What is the lowest possible credit score after declaring bankruptcy?

• Declaring bankruptcy will result in the lowest possible credit score assigned by credit bureaus[1][5].

4. How does bankruptcy affect my credit rating?

• Bankruptcy will reduce your credit rating to the lowest level, often an R9 rating[3][5].

5. Can I rebuild my credit after filing for bankruptcy?

• Yes, you can start rebuilding your credit shortly after your bankruptcy discharge by adopting positive financial habits and seeking professional guidance[1][5].

If you have a question about debt see our debt questions or ask your own debt related question.

References

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