How Long Does a Bankruptcy Stay on my Credit Report?

Posted in Personal Bankruptcy
Posted by J. Douglas Hoyes, CA, CPA, LIT, CIRP, CBV

how long does bankruptcy stay on credit reportI am often asked how long a bankruptcy or consumer proposal remains on a credit report.

In Canada there are two large credit reporting agencies, or credit bureaus, Equifax and Trans Union, and they each report bankruptcies and proposals differently.

On Equifax's web site they state that "A bankruptcy automatically purges six (6) years from the date of discharge in the case of a single bankruptcy. If the consumer declares several bankruptcies, the system will keep each bankruptcy for fourteen (14) years from the date of each discharge. All accounts included in a bankruptcy remain on file indicating "included in bankruptcy" and will purge six (6) years from the date of last activity. A consumer proposal is automatically purged from your credit report three years after the last payment is made.

On Trans Union's web site they state that information is maintained on your credit report "for as long as your information is relevant to an organization making a decision about an application you have supplied... However, provincial credit reporting legislation outlines maximum reporting lengths for information that is negative. Therefore, TransUnion will not maintain negative information on your credit file longer than what is permitted by provincial credit reporting legislation."

In Ontario, credit reporting is governed by the Consumer Reporting Act which states, in subsection 9 (3) (e), that a consumer reporting agency shall not include in a consumer report "information as to the bankruptcy of the consumer after seven years from the date of the discharge except where the consumer has been bankrupt more than once."

In other words, Equifax automatically deletes a first bankruptcy six years after the date of discharge, whereas Trans Union leaves the bankruptcy on your credit report for seven years after the date of your discharge. For both agencies, a notice that you filed a proposal should be removed 3 years after your proposal is completed.

Path to Credit Recovery

If you are avoiding talking to a bankruptcy trustee because you are concerned about how your credit will be affected, it's important to consider two factors:

  1. If you have bad credit today, bankruptcy or a consumer proposal can be a step in repairing your credit history because it eliminates debt you may otherwise not be able to pay. Even if you think you have good credit, your ability to obtain a new loan may be negatively affected if you carry too much debt.
  2. It is important to note that your credit report is only one element lenders use to decide if they will let you borrow money. They are also interested in your income, job stability, assets, and perhaps co-signers. By saving money and paying your regular monthly bills on time, it is possible to gain access to credit in less than seven years after your bankruptcy has ended.

bankruptcy and credit report

About J. Douglas Hoyes

Doug is our co-founder and is a Licensed Insolvency Trustee, Consumer Proposal Administrator, certified Insolvency Counsellor and Chartered Professional Accountant.

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13 thoughts on “How Long Does a Bankruptcy Stay on my Credit Report?

  1. Afshin

    Hi there..
    My name is Afshin and I am living in Toronto, ON.

    I completed a proposal in Sep.2011.

    I corresponded with Equifax and TransUnion recently by myself, and asked them how long the transactions and consumer proposal remains on file.

    TransUnion mentioned the proposal remains till Sep. 2014, and it will remove automatically on this date.- 3 years after the satisfaction. But they have not mentioned how long the transaction remains on file.

    Whereas, Equifax sent me a letter recently that credit information typically remains on file for six years after the last account activity.

    But on your website you mention 3 years after the completion.
    My question is: when the whole negative credit report remains on my file in these 2 bureux…So far I have two vehicles leased by HONDA FINANCIAL but I have my mother co-signed on both vehicles. are these lease agreements helpful to establish my credit? the are dated July 2012, and he other one dated Oct.2013..lease starting date on both vehicles.
    I also have a credit card from capital one which I opened it in January 2012.

    many thanks for your response in advance.
    regards,
    Afshin

    Reply
  2. J. Douglas Hoyes, CA, Trustee

    Basic credit information remains on your credit report for six years. So, for example, if you pay off a credit card and cancel it, that credit card will be removed from your credit report six years later.

    A consumer proposal is a unique category; the note about your consumer proposal remains on your credit report for three years after you complete the proposal, at which point it is automatically purged from your credit report. The comment you are quoting from Equifax was the six year purge rule for a typical debt, not the three year consumer proposal purge rule.

    As for your car lease and your new credit card, yes, those items will help improve your credit score, provided you are making the payments on time.

    Reply
  3. Mk

    I have to say as I am coming to close the 6 years since my discharge I am finding it quite disheartening that it will still be on my record at TransUnion for another year. I have lost many job opportunities where a credit check was done and now this will continue for another year? I was told 6 years and this nightmare is over. Do most companies use just one agency when they request a report or is it centralized and both come up? How is the discrepancy of one having my bankruptcy on file while the other does not looked at?
    I am not looking to get more credit, I just want to finally get the job I am qualified for. It really hurts to be turned down due to a credit report. 🙁
    Thank you in advance.

    Reply
  4. J. Douglas Hoyes, CA, Trustee

    Mk: You are correct. In general Equifax removes the note about bankruptcy six years after discharge, where TransUnion may leave the note for seven years.

    Each employer is different. Most employers don’t do credit checks on new employees, unless it’s a financial services business where credit may be an issue. Presumably employers would only use one credit reporting agency or the other, since other than the specific example you mention, the information is very similar on both reports.

    If I was applying for a job where a credit check was important, my strategy would be to:

    1. get my credit report from Equifax (at the end of the six years) and provide a copy directly to the prospective employer. Perhaps by providing it to them directly they will be less inclined to pay the fee to order your credit report directly.

    2. you could explain to your prospective employer that while you were bankrupt many years ago, you have had no problems since, and you have no debt, have re-established credit, and therefore would be an excellent addition to their organization, as your past experience will make you a better employee.

    Reply
  5. Lori

    Hi There,

    Can you please clarify the rules surrounding multiple bankruptcies? Do they need to occur within the same time frame? ie there is already a bankruptcy on your credit record and before the time limit (6 years) passes there is a second bankruptcy? or is it that if a second bankruptcy occurs anytime in your lifetime it will remain on your record for 14 years?

    Thanks
    Lori

    Reply
    1. J. Douglas Hoyes, CA, Trustee Post author

      Hi Lori. There is no time limit for the reporting of a second bankruptcy on your credit report.

      So, for example, if you went bankrupt in 2000, and then filed a second bankruptcy in 2015, the standard practice for the credit reporting agencies in Canada would be to show both bankruptcies on your credit report for 14 years from the date of the discharge of your second bankruptcy.

      That’s one of the reasons why we often recommend that instead of filing a second bankruptcy it may be wise to consider a consumer proposal, because a consumer proposal only appears on your credit report for 3 years from the date of completion, regardless of whether or not you had a prior bankruptcy.

      Reply
  6. Paul

    My proposal will be purged in 3 years after completion, but what about the accounts (trades) included in the proposal?
    Will they be removed 3 years after the proposal completion?
    Or 6 years after the date of last activity like a regular account or (trade)?

    Please help me figure this out…
    Paul.

    Reply
    1. J. Douglas Hoyes, CA, LIT Post author

      Hi Paul. This is a difficult question to answer, because it depends on how each creditor reports to the credit bureau. Many creditors, when they receive notice that you have filed a proposal, will code the account as “Included in Proposal”, and that’s it; there is no further reporting. So, if you are in a five year proposal, that account would be purged six years from the date the proposal is filed, because that is the last activity date reported by the creditor. Some creditors may report the date the proposal is accepted, or even the date the proposal is completed, in which case the individual note from that creditor will appear on your credit report for six years from the date of the last activity. To find out how each creditor is reporting, you can look at the “last activity date” on your credit report.

      The note about the proposal itself, in the “legal items” section of your credit report, will be purged three years after the completion of your proposal.

      The more important question is “how does this impact whether or not I will be able to borrow in the future?” The answer is that there is not just one factor that influences your credit score. A creditor that chooses to report a proposal for six years after the date of completion will have a minimal impact on your credit score, because the most significant component of your credit score is the amount of debt you have, which after the proposal is zero unsecured debt. Other important factors include your income, how long you have worked at the same job, how long you have lived at the same address, and what other steps you have taken to rebuild credit. Because of all of these other factors a “long reporting” creditor is generally not a concern.

      Reply
  7. Matt

    I filled for bankruptcy about 2 years ago. I recently applied for credit but the lender said at least one item was not resolved from my bankruptcy. When I check my credit information on equifax I cannot find anything unresolved. All previous credit has a note saying “included in bankruptcy” or “written off”. I’m wondering if they all should say “included in bankruptcy”, or does written off mean the same thing in this case ? Could these be what the lender is seeing as not resolved in the bankruptcy ?

    Thanks

    Reply
    1. J. Douglas Hoyes, CA, LIT Post author

      Hi Matt. Some creditors use the term “included in bankruptcy” and other simply put “written off”, but for all practical purposes they both mean the same thing: you no longer owe that money. I suspect that the lender doesn’t know how to read a credit report (which is a common problem). I have two suggestions:

      First, check your credit report with TransUnion, because it may have different information, and that may be the credit bureau the lender is using.

      Second, ask the lender which item is unresolved. That may help define the exact issue, allowing you to take steps to correct it.

      Reply
  8. Tom Reynolds

    Hello,

    I declared bankruptcy nearly seven years ago. At the time it was determined that I had a minor surplus of income, even though I could barely get by with all my commitments. I followed all my duties but couldn’t pay the nearly $10,000 required to have my bankruptcy discharged.

    My question is, how long will the undischarged bankruptcy remain on my credit history?

    Thank you.

    Reply
    1. J. Douglas Hoyes, CA, LIT Post author

      Hi Tom. Based on anecdotal evidence Equifax may purge the bankruptcy after seven years, but TransUnion doesn’t start counting the time until you are discharged, so if you are not discharged it could remain on your TransUnion credit report for a long period of time.

      Your best option will be to contact your original trustee and determine what will be required to go to court and obtain your discharge.

      Reply

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