In finances, there’s no bigger, badder sounding word than bankruptcy. There’s a lot of stigma, too, which can make filing for bankruptcy feel like a black hole you’ll never escape.
But it’s not forever, and it might be more common than you think. In 2025, Canada had 29,068 consumer bankruptcy filings. That’s nearly 80 people per day, so you’re definitely not alone.
How does bankruptcy affect your credit?
When you file for bankruptcy, you’re scored as R9, which is the worst credit rating. It means you’re uncollectable on your debts. In comparison, a consumer proposal is an R7, since you’re still making payments.
Your three-digit credit score will likely also end up in the “poor” range. You can check where yours falls with one of these Canadian credit score apps.
The bankruptcy stays on your TransUnion and Equifax reports for six or seven years. For subsequent bankruptcies, it’s 14 years.
I asked Caryl Newbery-Mitchell, a Licensed Insolvency Trustee with MNP LTD, when you can start fixing these dings. She told me you don’t have to wait for the bankruptcy to fall off your report.
“A lot of people think, well, I'm screwed for the next seven years. But you’re not. Once you get your discharge, you can start taking steps right away to rebuild your credit.”
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To find out how to rebuild credit after a bankruptcy, I talked anonymously to three Canadians who have done it.
“Stephanie” from Calgary: Rebuilt after student debt
Time to rebuild credit: 3 years
Despite having a great credit score in her 20s and staying on top of her student loans, Stephanie struggled with debt after graduation.
“I was making poverty wages and couldn't break out of that cycle,” she said. “So, when I was offered a line of credit, of course I took it to make ends meet.”
Eventually, that line of credit added up to about $30,000 and her student loans were another $30,000.
“I wasn't living extravagantly at all. I bought all my clothes from the thrift store, rarely had a car, lived in shitty apartments, even lived in my parents' basement for a time. I was just using credit to make up for the month and deal with unexpected expenses.”
For the first year of her bankruptcy, Stephanie only had access to debit or cash. She didn’t have any available money to get a secured credit card, which made everything from buying tickets online to booking appointments more difficult.
“I tried my hardest to have a little cash emergency fund before I declared, and I made sure I had really good pet and car insurance because I knew I couldn’t afford any unexpected expenses,” she said.
After a year, Stephanie qualified for a Capital One Mastercard with a $70 annual fee. By putting small expenses on the card and paying it off each month, she was able to slowly rebuild her credit score. She also took government-funded training programs, switched careers, and worked a lot of overtime to boost her income.
“That was a really important step, otherwise I'd probably just fall right back into debt.”
Once Stephanie was discharged, her score was in the 600s. But after three years, it was up to 810. One key thing she recommends is keeping old accounts open, if you can.
“There are some VERY old accounts on my file from credit cards that I had forgotten I even had,” she said. “Since I didn't owe them any money, they weren't included in the bankruptcy and the accounts just stayed open for 20+ years, so that helps my score.”
While bankruptcy can be scary, Stephanie says not to beat yourself up.
“At the time of my bankruptcy, life was incredibly stressful and I felt super ashamed. I was worried I was going to be judged by the trustee, my peers, my parents, etc., and I felt like a total failure. Now my view has completely changed, I feel young people are set up to fail in Canada and bankruptcy or a consumer proposal is the fairest option for a lot of people.”
“Daniel” from Caledon: Helped his parents rebuild
Time to rebuild credit: 5 years
Daniel helped his parents file for bankruptcy when their debt became too unmanageable.
At the time, they owed back taxes to the CRA, credit card charges, and an unsecured line of credit. They had an existing phone plan with old phones that they were able to keep using throughout the bankruptcy process.
Daniel and his parents worked with MNP as their LIT, who suggested other options as well, like a consumer proposal. He says they were very happy with the services provided.
About five years after they were discharged, they were approved for a credit card with a $500 limit. They were also able to lease a new car with very little money down, but the agreement that if they missed a payment, the car would be repossessed.
Eventually, they were able to get an unsecured loan, but Daniel admits they still struggled to keep their spending in check. He warns that a lot of companies are willing to give you money even if you can’t afford it, so be very careful when you start borrowing again.
He also warns against credit repair services that overpromise and underdeliver. “People should be aware there are many shady operators out there that claim to be able to repair your credit,” he told me. “They charge large fees and do little to help.”
Caryl warned me of the same thing. “There’s a lot of credit rebuilding schemes out there that are not great. You have to be really careful about what you're getting. There was a time when I had all these people coming in that had obligations to pay a company monthly amounts to be reported on their credit report, but they wouldn't actually get the money.”
“Antonia” from Toronto: Building for the first time
Time to rebuild credit: In progress
Antonia is just starting her formal bankruptcy process. She mainly owes back taxes to the CRA, but a cancer diagnosis and treatment left her unable to work for a few years, compounding her debt.
While she says a consumer proposal is still technically on the table, it’s unlikely.
“After two years of unemployment while battling cancer and living off my rapidly dwindling savings, that is just not an option,” she said. “I have no plans to make any big purchases that would require good credit, so I’m fine with the looming credit crunch versus the pressure of paying off a large balance while also trying to find work and remain healthy.”
She uses the Canada Post Prepaid Reloadable Visa Card but prefers cash as she feels it’s easier to control her spending. But even though she pays her monthly bills on time, having no credit usage leaves her credit history mostly invisible to the credit bureaus.
Antonia says that getting a credit card and building up that history will be part of her financial future, after she undergoes the mandatory financial literacy training that’s part of filing for bankruptcy.
“Hilarious to be finally learning about finances at 60,” she joked. “But better late than never, right? I know there are a lot of ‘big girl panties’ moments coming up. But I’m excited to be coming at them from a place of power, rather than avoiding them out of fear.”
Her advice for anyone in a similar situation is to reach out to friends for advice or referrals, and to find professionals you’re comfortable working with.
“The reality is not nearly as scary as it feels in your head,” she told me. “I wish I had pulled the trigger on bankruptcy much earlier than I did. It’s much more common than you think. There is no stigma. You’ve had some bad luck, maybe even made some bad choices. You aren’t a bad person!”
Yes, you can rebuild after bankruptcy
You’re not doomed to an eternally low credit score after bankruptcy, as these Canadians prove. And once you’re discharged, you can borrow money again. In fact, you should!
“After you get your discharge, do something to start rebuilding your credit,” says Caryl. “Because if you don't do anything, then when all your bankruptcy debts fall off your credit report, you're actually back to having no credit history,” she explained.
“That’s almost as bad as having bad credit history because it tells the lender nothing about you. A secured credit card or even an unsecured credit card is a good way to start.”
Your utilities and cellphone bill can also help. Caryl says she’s seen Bell, Rogers, and Fido report payments to the credit bureaus.
But she also says not to get too hung up on scores.
“Every institution uses its own scoring. What you see on Equifax might be different from TransUnion, and then it's going to fluctuate depending on what's being reported on what date, at what time, by what financial institution. So, try not to obsess over it. It can cause a lot of anxiety.”
Instead, she says to focus on what you can control, like paying your bills on time and keeping your credit utilization rate low.
