How To Recover From Bankruptcy or Consumer Proposal: A Step By Step Guide | Refresh Financial
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How To Recover From Bankruptcy or Consumer Proposal: A Step By Step Guide

walletSo, you’ve gotten yourself into a little bit of credit trouble. You’ve got no other way out but to declare bankruptcy or go through a consumer proposal. It happens - that’s why bankruptcy and consumer proposals exist. Don’t beat yourself up over it. Instead, use this time to plan your financial rebound - look forward instead of back. Here’s how:

Step 1: Understand your money

The process of bankruptcy and a consumer proposal is going to have you looking closely at your money, anyway, but use these requirements to get a real grasp on your entire money situation. While just about everything about bankruptcy and consumer proposal feels negative, there is one upside: it’s like resetting the clock, going back to ground zero. You get to start fresh, and how you do this is going to colour your entire financial future. It’s important to understand where your money comes from and every last drop of latte it’s spent on. Get in the habit of recording every little expense, keeping receipts and going over where your money has gone every month. Make friends with spreadsheets and familiarize yourself with all of your bank and bill statements. Get a real understanding of your money and make that a habit.

Step 2: Learn to budget

This is where you train yourself to use self-control. Set limits for yourself with regard to how much you spend in each category, and stick to those limits. This is going to take discipline and sacrifice but what better time to develop these good habits than while you’re reporting your expenses each month to a bankruptcy trustee? You’re already doing the work, now you just have to make it a habit. Learn to live within your means - this is the single most important thing when it comes to avoiding bankruptcy or consumer proposal a second time. Those who live within their means do not accumulate debt, and never spend their way to financial trouble.

Step 3: Plan to save

While in bankruptcy or a consumer proposal, any excess money you earn is going to have to go to your debtors. That makes it pretty impossible to save. That doesn’t mean, though, that saving money shouldn’t be in your plan. As soon as you are discharged from bankruptcy or your consumer proposal is completed, start saving money every month. Work a specific amount into your budget so that you learn to live month-to-month with that much less cash flow. Establish an emergency fund first, so that you can avoid having to face bankruptcy again in the future, no matter what bad luck may befall you. Once you have several months expenses saved in an emergency fund, continue to save by contributing to your RRSP or TFSA as much as you possibly can while still meeting your month-to-month expenses.

Step 4: Grab a secured credit card

A secured credit card behaves just like a regular credit card, with your lender reporting to the credit bureaus on a regular basis. The only difference is that you put up cash to secure the credit up front. This protects the lender from the possibility of you defaulting on what you owe. You use your secured credit card anywhere you might use any other card; it looks and functions just the same. Once you use your credit, you have to pay it back on time, every month. If you do that, your good habits will begin to boost your credit score and it can happen fairly quickly, even if you still have the bankruptcy on your credit report. The key to making it rise even faster is to pay your monthly payments on time, but also to pay off what you owe in full each month, rather than just the minimum payment. If you do this, steadily, without fail, your credit score will start to gain some momentum.

Step 5: Get a secured line of credit

Much like a secured credit card, a secured line of credit is revolving credit that is secured by money you offer up in the beginning. As you use your credit and you pay what you owe on time, you will establish a picture of good money habits which will both boost your credit score and enable you to unsecure your line of credit eventually, even if your bankruptcy is still on your credit report. These lines of credit are available through most banks and they usually have lower interest than your secured credit card.

Step 6: Start a credit building program

A credit building program sounds similar to the secured line of credit and the secured credit card, but with two major differences: a credit building program is a form of installment credit, as opposed to revolving, which means you borrow a certain amount of money, and you pay the whole amount back in installments. The other difference is that you don’t have to offer any money upfront to secure the program. The principal of the program itself acts as the security funds, which are not paid out until you’ve paid portions of your program off. With a regular loan, you get the funds up front and them pay them. With a credit building program, you pay the program down and then you get your funds. This program looks like a loan on your credit report and all your good, on-time payments will boost your score, while any late payments and bad habits will lower it.

Step 7: Regularly check your credit report in full from both credit bureaus

You are entitled to a free credit report once per year from each bureau in Canada. You want to get your eyeballs on your own and familiarize yourself with what your credit looks like. You’ll also want to skim your report to make sure that no one has used credit in your name, there is no fraud going on, and that there are no mistakes. You can grab your free copy of your credit reports at:



As you can see from these 7 steps, the real meat of bankruptcy recovery is self-control, discipline, and forming good habits. There is no quick fix when it comes to improving poor credit, but so long as you stick to the game plan and follow these 7 steps religiously, you’re going to be able to recover from bankruptcy or a consumer proposal in time.

Have you ever considered bankruptcy or consumer proposal before? Tell us about your experiences in the comments!

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I would really like to thank Refresh Financial. My credit has built substantially and I was able to obtain a mortgage in just over a year. Unlike its competitors (very high interest rates) the Refresh Financial program is truly designed to help people. I am so thankful that you treated me with utmost respect and provided the support I needed. You are highly educated with respect to credit repair and by following your guidance I climbed out of the rut I was in. I am in a much more comfortable place financially than ever before. I have attached a picture of my house in Kelowna BC. This is proof that with guidance, discipline and perseverance anyone can achieve their goals. ”

Matthew, Peachland, BC