Filing for bankruptcy isn’t an easy step to take. While the process is difficult, often the hardest part usually comes when you’re trying to rebuild your finances, your credit score and your life. After your bankruptcy is discharged, you may find yourself in need of a post-bankruptcy loan. While it sounds difficult, there are some lenders who offer loans to clients with bankruptcies on their records.
Can you get a loan if you declared bankruptcy?
If your bankruptcy is discharged, your options may be more limited, but you do have options. Since a first bankruptcy stays on your credit report for 6 or 7 years (and a second bankruptcy for up to 14 years), be wary of the financial products that you apply for. Should you apply and be denied, you could damage your credit score further.
Always contact a lender, be honest about your financial history, and ask if you will be considered before submitting an application. While a payday loan has the most lenient eligibility requirements, it also has exorbitant rates and extremely short repayment terms, so consider it only as a last resort and only if you’re certain you can repay it by your next payday.
1. Bad credit personal loans for bankrupts
Bad credit personal loans are available from certain lenders, some for larger amounts, like up to $10,000. Note that the maximum loan amount and interest you’ll be charged is based on the lender’s criteria and will vary based on your province or territory of residence. Keep in mind that interest rates on unsecured personal loans could reach as high as 47%. However, not all lenders of bad credit personal loans accept borrowers who have filed for bankruptcy.
To help increase your chances of approval for a personal loan as a bankrupt, consider applying with a cosigner who has a high credit score and long credit history.
As the name suggests, a credit builder loan helps you rebuild your credit score, which can be extremely helpful if you’ve filed for bankruptcy. With this loan, you make payments to the lender and receive the loan funds after you make your payments. Some lenders, like Refresh Financial, do not do credit checks.
Credit builder loans tend to have lower maximum loan amounts at around $1,250 – $10,000, with interest rates generally ranging between 9.5% and 20%. Loan terms tend to be shorter, maxing out usually between 6 and 24 months.
These are small loans with repayment terms usually within 62 days. Borrowing amounts are between $100 and $1,500, and the cost of borrowing is $14 to $17 for every $100 borrowed, depending on your province.
Only apply for a payday loan after bankruptcy as an absolute last resort because it is an extremely expensive loan. Before you apply, make sure you’ll have enough income left to pay for other debts and expenses once you repay your loan. If you don’t have enough income left, you may be forced to take out another payday loan.
⚠️ Warning: Be cautious with payday loans
High-cost payday loans are unsustainable for borrowing over a continued period of time and are expensive as a means of longer-term borrowing. View payday costs and regulations by province here. If you're experiencing financial hardship call Credit Counselling Canada for free financial counselling (Monday-Friday 8:00am-5:00pm at +1 866-398-5999). You may also want to consider payday loan alternatives.
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Maximum borrowing costs of payday loans per province
Always refer to your contract for exact repayment amounts and costs.
Province
Max. cost of borrowing a $100 payday loan
Cooling off period to cancel loan
Max. penalty for returned cheque or pre-authorized debit
Alberta
$15
2 business days
$25
British Columbia
$15
2 business days
$20
Manitoba
$17
48 hours excluding Sundays and holidays
$20
New Brunswick
$15
48 hours excluding Sundays and holidays
$20
Newfoundland and Labrador
$14
2 business days
$20
Nova Scotia
$15
Next business day (2 days for online loans)
$40 (default penalty)
Ontario
$15
2 business days
$25
Prince Edward Island
$15
2 business days
N/A
Quebec
Limit of 35% AIR
N/A
N/A
Saskatchewan
$17
Next business day
$25
4. Auto title loans for bankrupts
It’s easier to get approved for a secured loan than an unsecured loan after bankruptcy, since the lender can recoup any potential losses by seizing the collateral that you back your loan with. If you put up collateral, for example your vehicle, a lender will be more likely to allow you to borrow more money, even if you have bad credit.
An auto title loan is a secured loan where you basically attach your vehicle to the loan as security. You can then get access to a loan for anywhere typically between 25% and 50% of your car’s value. Auto title loan APRs generally range between 9% and 49%. Before applying for an auto title loan, contact the lender to discuss your options and be honest about your financial past.
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5. Secured credit cards for bankrupts
With a secured credit card, you give the lender a security deposit, which acts as collateral, and then use the card like a regular credit card up to a certain limit. The amount you deposit as collateral — usually between $200 and $10,000 — often becomes your monthly credit limit. Because it’s secured, the lender takes on less risk, which means you have a higher chance of approval even after getting discharged from bankruptcy.
Like with typical credit cards, you’ll be charged interest, typically around 15% to 20%, on purchases made with a secured credit card. If you default on payments, the lender can seize the deposit. Keep in mind that secured credit cards may come with monthly and/or annual fees.
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6. Personal overdraft for bankrupts
Your current bank may be willing to approve you for a small overdraft if you have a good history with them. An overdraft allows you to withdraw cash that you don’t have in your available balance. You won’t damage your credit score either by visiting your bank and asking if you’re eligible for this type of credit.
Other types of loans for bankrupts in Canada
Besides personal financing, you also have access to other types of loans once you’ve been discharged from bankruptcy.
Bankruptcy mortgage
Since buying a house is one of the biggest purchases most people will make, lenders are very careful when approving mortgage loans. That said, it is possible to get a mortgage with bankruptcy on your record. The most important factor is to show the lender that you’ve started successfully building up your credit history.
Each lender has their own criteria around bankruptcy mortgage requirements, but you’ll usually need to be discharged from bankruptcy for anywhere between a few months to 2 years to be eligible. Having a large down payment can also help improve your chances of approval.
Bankruptcy car loans
It is possible to get a car loan after declaring bankruptcy, although your choice of lenders will be limited. You can improve your chances of getting approved for a bankruptcy car loan by taking some time before you apply to first build up your credit history. It can also help to choose a less expensive car and have a large down payment.
The lender will likely have to be in contact with your Licensed Insolvency Trustee at some point in the process. You should expect the car loan interest rates you’re approved for to be on the higher side.
What to consider before you apply for bankruptcy loans
Calculate if you can afford the repayments. Since your assets and income may have been affected by bankruptcy, you’ll need to seriously consider whether you can afford the loan repayments.
Take the decision seriously. Applying for a loan when you’re in a difficult financial situation isn’t a decision that should be taken lightly. Consider the reason why you’re taking out the loan and determine if there are other more affordable ways of paying for what you need without taking out a payday loan.
Understand that you will be charged high interest rates. Lenders see borrowers who have previously defaulted on payments as higher risk, which is why they charge them higher interest rates.
What is bankruptcy?
Bankruptcy is the legal process where you declare that you can no longer afford to repay your debts. The process involves you signing all of your assets over to a licensed insolvency trustee lawyer. You’ll then be legally discharged from paying back your debts. Once you’ve filed for bankruptcy, creditors can no longer contact you or garnish your wages to collect debts. Just be aware that filing for bankruptcy won’t necessarily eliminate all of your debts and your credit score will decrease dramatically.
How long does bankruptcy stay on your credit report in Canada?
A bankruptcy will stay on your credit report for 6-7 years after you’re discharged, depending on the the credit bureau and where you live in Canada. If you declare bankruptcy a second time, it will stay on your report for 14 years. You can start rebuilding your credit as soon as you’re discharged, but in most cases it will take several years to get your score back to normal.
How to find bankruptcy loans in Canada
There are a few things you can do to narrow down your options and find the right bankruptcy loan in Canada for you. Taking these steps before you apply for post-bankruptcy loans can help ensure you’re in the best position to qualify:
Get a copy of your credit report. You’ll want to know your credit score and what your credit report looks like before you apply for a loan with bankruptcy. You can request a copy of your credit report from one of Canada’s main credit bureaus, Equifax or TransUnion. Once you know your score, you’ll be able to figure out which loans you can apply for.
Check your credit report for mistakes. Go through your credit report very carefully to make sure that there are no errors. Errors on your report could bring your score down even further. If you find any errors, report them to the credit bureaus to have them corrected. Learn more about correcting errors on your credit report here.
Narrow down your options. Compare lenders that offer credit cards or loans to clients with bankruptcies, like the lenders above. You may want to call any providers you’re interested in to ask about the minimum credit score requirements, and see if they have any procedures in place for approving loans with bankruptcies.
How can I be approved for a bankrupt loan?
While there are lenders who will consider applicants who are in bankruptcy or who have previously been bankrupt, filling out the application isn’t all it takes to be approved. Here are some of the requirements you may need to meet.
Income. This is probably the most important factor for your application because lenders use income to determine whether you have the ability to repay a loan. Lenders typically have minimum income requirements, and you will need to provide proof of income, such as pay stubs or bank statements, to show that you meet the minimum.
Employment situation. The stability of your employment also plays a factor, especially if you’re self-employed or a part-time worker. Different lenders have different restrictions, so be sure to check with the lender before applying.
Age and location requirements. Most lenders only offer loans if you’re the age of majority in your province (18 or 19), and they may only service certain provinces and territories. You will need to provide them with government-issued ID with your name and address, such as your driver’s licence.
Assets. For loans after bankruptcy, the lender may require you to secure an asset to the loan as a guarantee in case you default.
Guarantor. If you don’t meet the lender’s criteria, you may be able to apply with a guarantor to increase your chances of being approved. A guarantor agrees to sign the loan with you and cover your payments if you default on them. Their finances would need to be in good shape in order to qualify.
How does bankruptcy affect my credit and loan eligibility?
Whether you’re currently in bankruptcy or have a bankruptcy listed on your credit report, you’ll need to understand the long-term effects it has on your credit score and your financing eligibility.
Your credit report. A first bankruptcy will remain on your credit report for 6 to 7 years, while a second bankruptcy will remain on your report for up to 14 years.
Your credit score before bankruptcy. If you had poor or bad credit before you declared bankruptcy, then your credit won’t take a huge hit because it’s already low (with the lowest possible score being 300). Lenders will take into account your credit history before and after bankruptcy and make a decision based on all of the facts.
Your loan eligibility. Lenders may view your application as risky since you’ve demonstrated your inability to pay back your debts in the past. Once you find a lender willing to provide you with a loan, make sure you’re able to repay it in order to avoid falling into the vicious cycle of debt again.
Your interest rate. Be aware that you can’t file for bankruptcy again for a few years. This means that predatory payday lenders will offer you money at very high interest rates. If you can avoid taking out a payday loan you should, otherwise you might find yourself stuck in another, often worse, debt spiral.
Your payment history. If you do decide to get a loan, make sure you have a steady income that’ll help you pay it back on-time and in full. This will help rebuild your credit after bankruptcy, which means you’ll have access to better rates down the road.
Frequently asked questions about bankruptcy loans
No, a legitimate lender should not ask you to pay any funds upfront. In many provinces, it is actually illegal for a lender to request any money upfront. If a lender charges an origination or processing fee for a loan, they will typically deduct it from the loan amount. If a lender is asking for a prepaid card loaded with funds, you should look elsewhere for a loan – it's likely a scam. You should also be aware that loan insurance is never required.
In order to find out which lenders accept bankrupt applicants, you can either browse our curated lists of bankruptcy lenders here, or review the eligibility criteria of different lenders and call their customer service lines before applying.
If the lender's application includes a question regarding bankruptcy, it can be considered fraud if you answer untruthfully. Besides, many lenders will check your credit report when deciding whether or not to approve your application, where they can see any bankruptcy in the past 6 to 7 years.
Yes. Some lenders of payday loans and credit builder loans do not do credit checks.
Yes, in most cases, declaring bankruptcy in Canada will clear your debts. However, there are a selection of "non-dischargeable" debts that are exempt from bankruptcy, including alimony and child support back payments as well as student loans (within 7 years of when you stopped being a student).
Yes, it is possible to get a line of credit with bankruptcy on your record. Lenders who offer these types of lines of credit typically require you to be discharged from bankruptcy.
One of the easiest ways to find lenders willing to offer lines of credit to bankrupts is to apply through a loan broker service, like Loans Canada and LoanConnect, which are partnered with lenders who work with people from a variety of financial backgrounds.
Emma Balmforth is a producer at Finder. She is passionate about helping people make financial decisions that will benefit them now and in the future. She has written for a variety of publications including World Nomads, Trek Effect and Uncharted. Emma has a degree in Business and Psychology from the University of Waterloo. She enjoys backpacking, reading and taking long hikes and road trips with her adventurous dog.
Read our guide to payday loan regulations in your province or territory.
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