Obtaining Credit While Bankrupt

 Most bankrupts, and many creditors, are surprised to find that it is entirely legal to obtain credit while bankrupt. There is no provision in any law that I know of that prevents a bankrupt from obtaining credit, and certainly no such provision is contained in the Bankruptcy and Insolvency Act (“BIA”). The BIA does require that any bankrupt obtaining credit for $1,000 or more must inform the new creditor of the bankruptcy. Accordingly, individuals in bankruptcy who obtain credit must take care to inform prospective lenders (in writing, preferably) that they are in the process of going through a bankruptcy. While it is virtually certain the fact will appear on the credit history of the bankrupt this should not be relied on by bankrupt in that situation. The fact that the law does not prevent a bankrupt from obtaining credit does not, however, mean that credit is available. There are only two types of credit that I know of that bankrupts can access as follows: a)Secured Credit Cards – there a couple of lenders now who will provide a credit card with a limit equal to the amount of funds placed on deposit with them to bankrupts, during the bankruptcy. There are many such lenders who will provide a secured credit card after a bankrupt is discharged. As always, any person contemplating getting such a card should shop around for fees and interest rates, but these can be a useful tool for restoring a credit rating and are particularly useful for a bankrupt who is required to travel. b)Buying a Car while Bankrupt – while not as easy as it was a year or so ago it is still possible for a bankrupt to buy a car while in bankruptcy, provided they have the regular income sufficient to make the payments they would be required to make. Interest rates are typically around 30%, so a bankrupt should consider their needs carefully before making such a purchase, but it is at least possible to make such a purchase if it becomes necessary. Bankrupts have several reasons why they might wish to obtain such credit while bankrupt – one of which is the desire to start improving their credit rating again, even during the bankruptcy process. Please do not hesitate to contact us if you wish to discuss your situation or require further information. Ian Schofield MNP Regina 306-790-7904