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.
Table of Contents
- What Renters Should Know Before Filing for Bankruptcy
- Impact on Eviction
- What Happens to Your First and Last Month’s Rent
- Using a Co-Signer or Guarantor to Rent After Bankruptcy
- Options Other Than Bankruptcy
- Is a Consumer Proposal a Better Option Than Bankruptcy?
- How Long Does Bankruptcy Affect Your Ability to Rent?
- How Long Does a Consumer Proposal Affect Your Ability to Rent?
- Frequently Asked Questions
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.
What Happens to Your First and Last Month’s Rent When You File for Bankruptcy?
If you’re currently renting, you almost certainly paid a last month’s rent deposit when you moved in. A common question is: what happens to that deposit when you file for bankruptcy?
- Your existing last month’s deposit is generally safe: In most provinces, last month’s rent deposits held by a landlord are applied to your final rental period and are not considered an asset that can be seized by your bankruptcy trustee — they are held by the landlord, not by you.
- If you owe rent arrears, your landlord becomes an unsecured creditor: Any unpaid rent from before your bankruptcy filing date is included in the bankruptcy as an unsecured debt. Your landlord cannot sue you or pursue eviction solely for those pre-bankruptcy arrears once the automatic stay is in place.
- Post-filing rent must be paid on time: The automatic stay under the Bankruptcy and Insolvency Act (BIA) does not protect you from eviction for rent owing after your bankruptcy date. You must continue paying rent normally throughout your bankruptcy period.
- Planning to move during or after bankruptcy?: Coming up with first and last month’s rent for a new unit can be challenging while in bankruptcy. This is another reason many renters find a consumer proposal easier — your fixed monthly payment may leave more room in your budget to save for housing costs.
Using a Co-Signer or Guarantor to Rent After Bankruptcy in Canada
One of the most effective tools for securing a rental after bankruptcy is a co-signer (sometimes called a guarantor). A co-signer agrees to be legally responsible for your rent if you default, which significantly reduces a landlord’s risk and can make the difference between approval and rejection.
What a guarantor does
They sign the lease alongside you, providing the landlord assurance that if you miss rent, there is a creditworthy party they can pursue. This is especially useful in the first 1–2 years after a bankruptcy discharge, when your credit score is still rebuilding.
Key considerations for co-signers
- The co-signer’s credit will be checked, so choose someone with a stable income and good credit history
- If you miss payments, your co-signer is on the hook. Be transparent with them about this responsibility.
- Not all landlords require a co-signer; private landlords are often more flexible than large property management companies.
Alternatives if you can’t find a co-signer
- Offer an additional month of rent upfront as a show of good faith
- Provide proof of stable income and a letter from your employer
- Supply a reference from a previous landlord confirming your payment history
- Show your certificate of discharge and explain you are now debt-free
Working on your credit while renting is equally important. Our credit rebuilding program is specifically designed for Canadians coming out of bankruptcy or a consumer proposal, helping you qualify for better rentals and eventually for home ownership.
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?
Is a Consumer Proposal a Better Option Than Bankruptcy for Renters?
For renters specifically, a consumer proposal is often a better path than bankruptcy. Here’s why it matters if you rent:
- Credit report impact is shorter: A consumer proposal is rated R7 on your credit report and is removed 3 years after completion. A bankruptcy carries an R9 rating and stays on your report for 6 years after discharge. For renters applying for a new unit, landlords running credit checks will see your bankruptcy much longer.
- Consumer proposals are less severe: Your landlord is less likely to become concerned by a consumer proposal than a bankruptcy. This is because of an important distinction: a consumer proposal is a structured repayment plan, while a bankruptcy is declaring your inability to pay. A consumer proposal signals more financial stability than a bankruptcy.
- Your income stays yours: In bankruptcy, if your income exceeds the government’s surplus income threshold, you must pay a portion of the excess to creditors. In a consumer proposal, your payment is fixed regardless of income changes. That means you’ll always be able to budget for rent and other needs.
- You keep your assets: While renters typically don’t have major assets to seize, any savings, vehicle equity, or tax refunds you’re relying on to cover first and last month’s rent on a new unit are protected in a consumer proposal.
In 2024, consumer proposals accounted for approximately 79% of all Canadian consumer insolvencies — the majority of Canadians who need formal debt relief are choosing this route. If you’re a renter weighing your options, speak with a local debt expert to see if a consumer proposal fits your situation before assuming bankruptcy is the only path.
How Long Does Bankruptcy Affect Your Ability to Rent in Canada?
A first-time bankruptcy in Canada remains on your credit report for 6 years after your discharge date (Equifax) or 7 years (TransUnion). A second bankruptcy stays for 14 years. But how does this affect your ability to rent? Should you be concerned? Every situation is different, but here’s a general guideline:
- Year 1 post-discharge: This is the most challenging window. Landlords running credit checks will see a recent bankruptcy, and many will be deterred from accepting you as a tenant. Focus on private landlords, provide strong references, and consider a co-signer.
- Years 2–3: Consistent on-time payments for rent, utilities, or a secured credit card will allow your credit score to recover. More landlords will rent to someone with 2+ years of clean payment history post-bankruptcy.
- Years 4–6: Most renters will find landlords are much less focused on the bankruptcy by this point, particularly if you can demonstrate stable employment and a solid rental history.
How Long Does a Consumer Proposal Affect Your Ability to Rent in Canada?
If you filed a consumer proposal instead, the record is gone from your credit report 3 years after completion. Renters who complete a 3-year proposal could be clear of all negative reporting within 6 years of starting the process, compared to 7–9 years for bankruptcy.
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 strengthen your rental application, you can offer additional benefits to your landlord, such as a couple months of rent paid ahead of time, or a co-signer with a good credit score on your lease.
Will my landlord know if I file for bankruptcy?
Maybe, but it depends on your circumstances. There are two ways your landlord can find out about your bankruptcy.
Your landlord can 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 bankruptcy stop an eviction in Canada?
Yes, bankruptcy can stop an eviction temporarily. Filing for bankruptcy triggers an automatic stay under the Bankruptcy and Insolvency Act, which halts eviction proceedings for pre-filing rent arrears. However, if you continue to miss rent after filing, your landlord can apply through provincial channels (the LTB in Ontario, RTB in BC, RTDRS in Alberta) to evict you for new arrears.
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.
Can rent be included in my Bankruptcy?
Yes. Unpaid rent is classified as unsecured debt and can be included in a personal bankruptcy.
What can I do to rebuild credit so I can rent more easily after bankruptcy?
Start with a secured credit card, pay all bills on time, and ask previous landlords for reference letters. Our credit rebuilding program is designed to help Canadians in exactly this situation build a credit profile that satisfies landlord requirements faster.
