Going through a divorce is a very troubling experience, especially when bankruptcy is a byproduct of the situation. Unfortunately, for many Canadians, this is a reality and the aftermath can be devastating to your credit.
Why should a credit agency, financial institution, or dealership care if you have gone through a divorce you might ask. Your personal affairs should be none of their business, right? The truth is, getting divorced will not directly affect your credit score, but it CAN affect it indirectly. One of these common indirect problems that can occur after a divorce is bankruptcy. Let’s break it down into further detail.
Table of contents
- Does getting a divorce affect your credit score?
- How can getting a divorce affect your credit score indirectly?
- Can you still get a car loan if you have had a bankruptcy?
- Steps to recovery after filing bankruptcy
- How long will a bankruptcy stay on your credit report?
- Your life is not over – you can recover from bankruptcy
Does getting a divorce affect your credit score?
There is nothing that states getting a divorce will affect your credit score. It is your right to divorce, just as it is your right to get married, and you will not be penalized by Equifax or TransUnion credit agencies. However, there are certain things which can result in negative consequences following your divorce that can affect your credit if you are not careful.
How can getting a divorce affect your credit score indirectly?
As discussed above, filing a divorce will not directly hurt your credit, but the aftermath can be devastating if you are not careful. There are multiple ways that your credit can suffer:
- You stop making payments on your existing accounts
If your divorce consumes your life to the point where you stop making payments, you can find yourself in a financial mess. Understandably, this is a stressful time in your life. However, forgetting to make payments on your credit card, mortgage, car loan, or line of credit will have severe consequences.
- You have joint payments with your ex-spouse
Even if a judge has ordered even payments split between your existing accounts with your ex-spouse, you can get in trouble if your relationship with them ended on negative terms. The only person you can truly rely on in a scenario like this is yourself. You cannot expect your ex-spouse to honour any arrangement.
- You fail to change your lifestyle
The expression, you can’t teach an old dog new tricks, is applicable in this scenario. After so many years being involved in a marriage, you might find yourself accustomed to a specific lifestyle. News flash: your life has changed, and so must your spending habits. One of the biggest advantages to any marriage is the economic benefits of dual income. Now that you are single, you need to re-think how you spend your money and what becomes a priority. If you overspend, and the debt piles up, it will be much more difficult to pay it off. You might find yourself in a situation where you need to downgrade your house to an apartment or condo. Every dollar counts at this point more so than ever.
- Your ex-spouse takes revenge
Okay, this is a less likely scenario, but there are stories of ex-spouses being so spiteful after a messy divorce, that they decide to take it upon themselves to ruin your credit. How will they do this? By accessing old accounts they know the password to and meddling with your payment information. They might even decide to hurt their own credit on a joint account just to take revenge. Remember, not everyone cares about their credit score. Make sure you change your passwords to important sites to prevent unwanted visitors.
Can you still get a car loan if you have had a bankruptcy?
The short answer is yes. In fact, there are many bad credit car loan solutions available online which will get you approved for a car loan even if you have had not one, but two or three bankruptcies. At Car Loans 411, we can help you get approved and work with you to obtain a vehicle loan, even if you have bad credit from the result of a bankruptcy.
Steps to recovery after filing bankruptcy
Filing for bankruptcy in Canada will have negative consequences not only on your credit, but on your lifestyle. However, sometimes it is necessary to overcome dire financial situations. You can recover from a bankruptcy if you are disciplined and are committed to repairing your credit. How can you recover from a bankruptcy?
- Make sure you adhere to the rules and requirements of your bankruptcy. This is probably the most important step to the path of recovery. After filing for bankruptcy, you will be required to make monthly payments to your trustee, and if your income exceeds a certain amount, you may have to make additional ‘surplus’ payments.
- You will also need to attend mandatory credit counselling sessions. During these sessions, various debt management strategies are reviewed to prepare and educate so you do not find yourself in the same situation all over again.
- During this time, it is important to take on as little debt as possible. This is true for a few reasons, specifically for the fact that any type of credit you obtain will come attached with a higher interest rate because of the risk that is now attached to your name.
How long will a bankruptcy stay on your credit report?
Equifax: A first time bankruptcy will stay on your credit report for 6 years after you have been discharged. For second time bankruptcies, it will stay on your credit report for 14 years after discharge.
TransUnion: A first time bankruptcy will stay on your credit report between 6-7 years (depending on the province) from the date of discharge. For second time bankruptcies, similar to Equifax, it will stay on your credit report for 14 years after discharge.
Your life is not over – you can recover from bankruptcy
If you have gone through a divorce which resulted in bankruptcy, your life will not end. You will simply need to adapt to your new lifestyle, learn from your mistakes, and continue to push forward.
At Car Loans 411, we understand that life is never straight forward, and there are many bumps along the road. This is why we have helped nearly a million Canadians get approved for a car loan, even if they have poor credit.