Filing for bankruptcy is a difficult decision, but the decision is made even harder when you’re a renter. The ability to rent a place to live is very dependent on an individual’s credit history, with bankruptcy taking a major toll on one’s credit. As the cost of living has increased tremendously, more people in Canada are renting than ever before.
If you’re a renter in Canada struggling with debt, there’s a few things you should know before choosing bankruptcy. We’ll cover the implications and consequences of bankruptcy while renting, and what other options are available.
What Renters Should Know Before Filing for Bankruptcy
When a renter chooses bankruptcy, their assets will be transferred to a trustee in bankruptcy. This trustee is responsible for managing the bankruptcy process, including the liquidation of the individual’s assets to pay off creditors. It is important for renters to understand that while some personal property is exempt from seizure, significant assets may be sold off to satisfy debts.
This will impact your current and future living situation. A landlord has the right to not renew one’s lease due to bankruptcy, especially if there are missing rent payments, whether they are part of the bankruptcy or not. Bankruptcy has a significant and long-term effect on your creditworthiness as well. In the future, you’ll have a harder time finding a place to rent if there’s a bankruptcy in your credit history.
Filing for Bankruptcy: Impacts on Eviction
If your landlord serves you an eviction notice, and you file for bankruptcy before the eviction date, the eviction will be halted. Your landlord is not allowed to pursue legal action for rent arrears from before the bankruptcy is filed. However, if you continue to not pay rent, your landlord can take action on unpaid amounts from after you filed for bankruptcy. If you’re unsure how to proceed with a bankruptcy while renting, talk to one of our debt relief experts.
Options Other Than Bankruptcy
Bankruptcy is not your only option if you’re renting in Canada. If you’re concerned about not being able to pay off debts on your own, here’s a few more options:
- Consumer Proposal: In basic terms, a consumer proposal allows you to pay a portion of your debt and have the rest forgiven. The amount you have to pay can go down by up to 80%. It does affect your credit, but not as strongly as bankruptcy does.
- Debt Consolidation Loans: This option allows you to combine multiple debts into a single loan, often with a lower interest rate. If you can make consistent payments on-time, it will not heavily affect your credit.
- Debt Management Plan: A DMP involves working with a credit counseling agency to negotiate with your creditors to reduce interest rates or extend the repayment period.
- Informal Debt Settlement: This option involves negotiating directly with creditors to settle your debts for less than the full amount owed. It is an informal agreement and does not involve court proceedings or a trustee.
Want to learn more about your options?
Frequently Asked Questions about Filing for Bankruptcy as a Renter
Can you rent an apartment if you filed bankruptcy?
Yes, you can rent an apartment if you’ve filed for bankruptcy. However, landlords have the right to refuse to rent to you if they don’t believe you have the financial capacity to rent. To strengthen your rent application, you can offer additional benefits to your landlord, such as a couple months of rent paid ahead of time, or a co-signer on your lease.
Will my landlord know if I file for bankruptcy?
There are two ways your landlord can find out about your bankruptcy. Your landlord might find out that you’ve filed for bankruptcy by reviewing your credit report, but this usually only happens when they review your rental application early-on. Another way your landlord will find out is if you have outstanding rent. Once you file for bankruptcy, your trustee in bankruptcy will send out a notice to all creditors (including your landlord).
Can rent be included in my Consumer Proposal?
You might be considering the consumer proposal route and wondering if unpaid rent can be included. The answer is yes, rent can be included in your consumer proposal as it is classified as unsecured debt. Like a bankruptcy, it may also halt any eviction proceedings.
