Personal financial crises can strike anyone at any point in time. For those in Canada who have already gone through the arduous process of personal bankruptcy once, the prospect of having to do it again can be rather daunting. So, the question arises: Can You Claim Bankruptcy Twice in Canada?
Understanding Bankruptcy in Canada
Before we delve into the specifics, it’s crucial to understand what bankruptcy entails in Canada. It is a legally declared inability or impairment of the ability of an individual or organization to pay their creditors. This process is guided by the Bankruptcy and Insolvency Act and involves a licensed Insolvency Trustee.
The Possibility of Multiple Bankruptcies
In Canada, legally, you can declare bankruptcy as many times as necessary. However, the process becomes increasingly involved and consequences more severe with each subsequent filing.
The Consequences of Multiple Bankruptcies
Length and Cost of Bankruptcy
The duration of the bankruptcy process substantially extends with each subsequent filing. For instance, a first-time bankrupt might be eligible for automatic discharge after nine months, whereas a second-time bankrupt would only be eligible after 24 months, or 36 months with surplus income payments.
Moreover, the cost of bankruptcy also increases. A typical first bankruptcy might cost around $200 per month for nine months, while a second bankruptcy could cost $200 for 24 months, in addition to any surplus income payments.
Impact on Credit Report
A significant downside to multiple bankruptcies is the detrimental effect on your credit report. A first bankruptcy typically remains on your credit report for six to seven years post-discharge. However, a second bankruptcy can linger for up to 14 years, making future borrowing substantially more difficult.
Bankruptcy Beyond the Second Time
In the unfortunate situation of having to file for bankruptcy a third time or more, the process becomes even more complicated. A third-time bankrupt will have to face a discharge hearing in a Bankruptcy Court, where they will need to explain their situation. The court then decides the conditions and timing of the discharge.
Alternatives to Multiple Bankruptcies
Given the harsh consequences of multiple bankruptcies, it’s advisable to explore alternatives. One such alternative is filing a Consumer Proposal.
Consumer Proposal: An Alternative to Bankruptcy
A Consumer Proposal is a negotiated settlement between you and your creditors, typically managed by a Licensed Insolvency Trustee. It allows you to repay a portion of your debt over time, thereby avoiding the need for bankruptcy. This process also ensures that you get to keep your assets, such as RRSPs, vehicles, and your home.
In Conclusion
While it’s technically possible to claim bankruptcy twice (or more) in Canada, the consequences are severe and far-reaching. Therefore, it’s highly recommended to explore alternatives like Consumer Proposals and seek the counsel of a Licensed Insolvency Trustee.
Remember, financial setbacks can be temporary, and with the right help and guidance, you can navigate through these challenging times and work towards a more secure financial future.
