Bankruptcy - After Discharge and Credit Reports - Canada

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RE: After Discharge and Credit Reports

Postby footloose » Sun Aug 12, 2012 05:09:01 PM

The reporting policies can vary significantly between Equifax and TransUnion. And these practices will be reflected on the Credit and Consumer Disclosure Reports that they issue.

It is not uncommon for a Discharged Bankrupt to present their Certificate of Discharge and their Statement of Affairs to Equifax which clearly shows which accounts were included in the bankruptcy and that Equifax will adjust the balances shown on their credit file to zero. This is a "courtesy" adjustment on the part of Equifax because they are under no legal obligation to do so. On the other hand, TransUnion refuses to make this "courtesy" adjustment by taking the position that they are not legally required to do so.

Another major difference between the reporting practices of the two credit bureaus is that Equifax shows all inquiries from collection agencies and debt buyers as "soft" inquiries while TransUnion shows these inquiries as "hard" inquiries, even if the inquiry pertains to a debt that has been purged or is "statute-barred".

Equifax used to report these inquiries the same as TransUnion until they received a "Compliance Order" from ConsumerProtectionBC earlier this year to change their reporting practices. Equifax complied with the Order but TransUnion refused to comply. The Compliance Order was then filed with the B.C. Supreme Court which has the full force of a Court Order issued by that Court. TransUnion has since filed a "stay" of the Order and has filed for a "Judicial Review" of the Order. No date has been set to hear this matter.

In regards to your comment about only requesting an Equifax Credit Report should you make a credit request in the future, this choice is not your's to make. Most credit grantors only use one credit bureau and do not offer a choice to a credit applicant. For example, Royal Bank uses TransUnion exclusively while the Bank of Montreal uses Equifax exclusively. Unlike in the U.S. where a credit grantor will request a credit report from Experian, Equifax and TransUnion and average the credit scores reported by each credit bureau, the same practice does not happen in Canada.

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footloose
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RE: After Discharge and Credit Reports

Postby Jay Jay » Sun Aug 12, 2012 02:42:12 PM

Thank you Footloose!

While I don't agree with the policies, you've helped clear things up for me. I was able to have Equifax clear the balances but Transunion won't. I just don't like how my score is being affected with Transunion because of these balances when "technically" they are no longer owing. I have no intention of applying for more credit now but when I do, I'll request an Equifax pull.

Thanks again!
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RE: After Discharge and Credit Reports

Postby footloose » Sun Aug 12, 2012 01:38:45 PM

When you initially made an Assignment in Bankruptcy, your Trustee took total control of those accounts which were included in your bankruptcy. That means, your creditors were relieved from any further reporting requirements to the credit bureaus.

During your bankruptcy, you were required to make monthly payments to your trustee from which monies ( dividends ) were paid ( disbursed ) to the creditors included in the bankruptcy. Your trustee did not and has no legal obligation to report these payments to the credit bureaus. As a result, while dividends were being paid to the creditors included in the bankruptcy, this information was NOT being reported to the credit bureaus. Consequently, the balances shown on your accounts included in the bankruptcy were NOT being reduced by the amount of the dividends paid.

Under normal circumstances, when you make a payment on an account to a creditor, the creditor reports that payment to the credit bureau thereby showing a reduced balance owing on the account. And because a trustee is NOT a member of either credit bureau, no reporting of any dividends paid is reported.

On a monthly basis, both credit bureaus contact the Office of the Superintendent of Bankruptcy and report all Absolute and Automatic Discharges on the Discharged Bankrupt's credit file. In Ontario, the date of the Absolute or Automatic Discharge is reported for 7 years before it is purged from the credit report.

However, no adjustment is made to the balances shown on the accounts that were included in the bankruptcy. For example, let's say that an account included in a bankruptcy had an outstanding and unpaid balance owing of $5,000 at the time the Assignment was made. And during the bankruptcy, the trustee paid dividends to the creditor of $1,000 leaving a balance owing of $4,000. The payment of those dividends to the creditor would NOT be reported to the credit bureau. Consequently, the account would continue to report on the credit report a balance owing of $5,000.

At the time of the Assignment, the creditor MAY report to the credit bureau a comment such as "Included in Bankruptcy", "Bad Debt" or "Account Written Off". The account will have received a R9 or I9 rating and this account will continue to remain on the credit report for 6 years from the "Original Date of Default with the Original Creditor". No further reporting will be made on this account until it is purged.

Neither credit bureau has any authority to reduce any balance showing on any account without the consent of the original creditor. And since the original creditor has been relieved of their responsibility for the account at the time of the Assignment, the credit bureaus are not permitted to make any adjustment to the amounts owing on the accounts.

You stated in your original post "I was under the impression that once discharged, your debts are cleared and you have a "fresh start". Your statement is absolutely correct. While your debts are cleared, meaning that they are extinguished and you have no further legal obligation to repay them, it doesn't mean that they cannot still be reported on a credit report. Under the Ontario Consumer Reporting Act, no debt containing "derogatory" information can be reported beyond 7 years. While the policies of both credit bureaus is to purge accounts containing "derogatory" information after 6 years, bankruptcies are reported for 7 years from the Automatic or Absolute Date of Discharge.

When a credit grantor is reviewing your credit file, it is very important that they have full disclosure of your credit history, including any bankruptcies and possibly any accounts that were included in the bankruptcy before they can make an informed decision as to whether to grant credit to an applicant. This is why accounts included in a bankruptcy with their original balances at the time of the Assignment are shown on a credit report until they are purged. By showing these accounts on a credit report, the credit bureaus are in complete compliance of the reporting requirements of the various Consumer Reporting Acts.

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footloose
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RE: After Discharge and Credit Reports

Postby Jay Jay » Sun Aug 12, 2012 11:25:05 AM

I've been discharged since January 2011. It was an automatic discharge and I've made sure that my creditors and the credit bureaus have my discharge certificate and my statement of affairs that shows what accounts were included.

It's not a matter of Transunion not knowing by bankruptcy has been completed but how they should have my accounts listed now that they know. I've called multiple times and sent in a dispute by mail and they insist that it is reporting correctly.

I believe that my balances and past due amounts should be zero by definition of discharge from the superintendent.
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RE: After Discharge and Credit Reports

Postby Bankruptcy101 » Sun Aug 12, 2012 09:58:05 AM

How long ago did you receive your discharge, and what type of discharge did you receive? Transunion may not yet have record of your discharge. There are a number of possible reasons for the delay; your trustee needs to send the discharge to the Superintendent of Bankruptcy for it to be input into their system and if you received anything other than an automatic discharge, you may have to wait for the trustee to receive the order from the bankruptcy court.

As I understand it, credit rating agencies pull data from the Superintendent's Office on a monthly basis so that they can update their records. All in all, there can be a lengthy delay before your discharge is reflected.
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After Discharge and Credit Reports

Postby Jay Jay » Sat Aug 11, 2012 06:21:50 PM

Hi,

Does anyone know how accounts included in bankruptcy should be reporting to the credit bureaus? I was under the impression that once discharged, your debts are cleared and you have a "fresh start". I know the accounts and bankruptcy notation will stay on my report for up to 7 years.

I ask because my accounts that were included in bankruptcy still show a balance and past due amounts on my credit report. Should they still have a balance? This is only at Transunion and they said it's correct and the balances mean nothing. That's great. Then why is it that when I buy my score, the number one reason that my score is low (lower than it should with a bankruptcy) is because of my high balances?

This definition is from the Superintendent of Bankruptcy

Discharge from Bankruptcy- The release of a debtor from the obligation to repay his or her debts. A bankrupt's discharge may be automatic, suspended, conditional or absolute. A bankrupt may also be refused discharge.

Order of Absolute Discharge
This official document issued by the court relieves the debtor of the debts incurred before the debtor declared bankruptcy, taking under consideration the exceptions provided in the Act.

From that I would say after discharge, the debts are cleared.

Anyone with insight?

Thanks!
Jay Jay
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Posts: 3
Joined: Sat Aug 11, 2012 04:17:08 PM
Province: ON


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