How Long Does Bankruptcy Affect Me?

How Long Do You Have to
Pay For Bankruptcies?

Bankruptcy is a legal process that provides individuals with a fresh financial start by canceling their debts. If you find yourself considering bankruptcy, one of the key questions you may have is how long the process will last and how it will affect you in the long term. In this comprehensive guide, we will explore the timeline of bankruptcy in Canada, including the duration of the bankruptcy itself, its impact on your credit report, and the steps you can take to recover financially after completing the process.


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I. The Duration of Bankruptcy: From Filing to Discharge

The duration of bankruptcy refers to the period starting from the date you file for bankruptcy until the day you are discharged, marking the completion of the bankruptcy process. The length of bankruptcy in Canada varies depending on several factors, including your income, whether it is your first bankruptcy, and whether you have fulfilled all your duties as a bankrupt individual.

A. First-Time Bankrupts with Minimal Income

For first-time bankrupts with low income, the minimum period of bankruptcy in Canada is nine months. This means that if you comply with all the necessary requirements and responsibilities during this period, your bankruptcy will be discharged after nine months and one day from the date it commenced. It is important to note that during this time, you are expected to fulfill specific duties as a bankrupt person.

B. Surplus Income and Extended Bankruptcy

If your monthly income exceeds the government-set surplus income limit by $200 or more, your bankruptcy may be extended beyond the minimum period of nine months. In such cases, you will be required to contribute a portion of this surplus income towards your bankruptcy. This extension typically results in a total bankruptcy duration of twenty-one months for first-time bankruptcies.

C. Second Bankruptcy and Prolonged Duration

If you have previously filed for bankruptcy, you will not be eligible for an automatic discharge after nine months. Instead, a second bankruptcy typically lasts a minimum of twenty-four months. However, if you have significant surplus income during your second bankruptcy, the duration may be extended to a minimum of thirty-six months.

D. Completion of Bankruptcy Duties

To ensure a smooth and timely discharge, it is crucial to fulfill all your duties as a bankrupt person. Failure to complete one or more of these duties can lead to delays in your discharge. The seriousness of the failure and the promptness with which you rectify the situation will determine the length of the delay.

E. Opposition to Discharge

While a discharge from bankruptcy is usually granted if you have met all the necessary requirements, there are instances where opposition to discharge may arise. Creditors, the Trustee, or the Superintendent of Bankruptcy can oppose a bankrupt’s discharge if they believe that the individual has not dealt honestly with their creditors, the Trustee, or has failed to fulfill their bankruptcy duties. In such cases, the matter may proceed to mediation or court hearings.

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II. The Impact on Your Credit Report

Bankruptcy can have a significant impact on your credit report, affecting your ability to obtain credit in the future. It is important to understand the timeline for how long bankruptcy will appear on your credit report.

A. Duration While “In Bankruptcy”

While you are “in bankruptcy,” the fact that you have filed for bankruptcy will be reflected on your credit report. This period extends from the date you file for bankruptcy until the day you are discharged. During this time, your credit report will indicate that you are undergoing bankruptcy proceedings.

B. Six Years After Discharge

After your bankruptcy is discharged, the information regarding your bankruptcy will continue to appear on your credit report for six years from the date of discharge. It is important to note that this duration applies to individuals who have filed for bankruptcy for the first time.

C. Multiple Bankruptcies and Extended Reporting

If you have been bankrupt more than once, the reporting period may be extended beyond six years. Depending on the timing of your previous bankruptcies, the information may remain on your credit report for up to 14 years from the date of your discharge.

III. Recovering from Bankruptcy

Recovering from bankruptcy is a process that requires time, effort, and careful financial planning. While bankruptcy can initially provide relief from overwhelming debt, it is essential to take steps towards rebuilding your financial health.

A. Immediate Relief and Building a Stronger Future

Upon filing for bankruptcy, many individuals experience immediate relief from the stress of dealing with creditors and the burden of monthly debt payments. With their current debt problems eliminated, they can focus on building a stronger financial future. It is important to note that immediate access to credit may not be necessary for everyone, as they can rely on improved cash flow and focus on saving.

B. The Critical Period: During and After Bankruptcy

The critical period for individuals who have filed for bankruptcy is the duration of the bankruptcy itself and the first two to three years after discharge. During this time, access to credit may be restricted. While it is possible to apply for credit during bankruptcy, the disclosure of your ongoing bankruptcy status limits the chances of approval. However, you can gradually begin rebuilding your credit during bankruptcy by utilizing secured credit cards. After completing your bankruptcy, you can continue to rebuild your credit history, eventually gaining access to traditional credit options.

IV. Debunking Common Misconceptions

Bankruptcy is often surrounded by misconceptions and misinformation. Let’s address one common myth: the belief that you cannot have a bank account for a specific period of time after filing for bankruptcy. This is entirely false. In fact, one of the initial steps before or after filing for bankruptcy is to open a new bank account. Bankruptcy is designed to provide individuals with a fresh start and does not restrict their ability to have a bank account.

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Understanding the timeline of bankruptcy is crucial for individuals considering this legal process to alleviate their financial burdens. The duration of bankruptcy in Canada varies depending on factors such as income, surplus income, and previous bankruptcies. It is important to fulfill all your duties as a bankrupt person to ensure a smooth discharge. While bankruptcy has an impact on your credit report, the duration of its appearance is limited. With proper financial planning and responsible credit management, you can recover from bankruptcy and build a stronger financial future. Remember, bankruptcy is not a life sentence, but an opportunity for a fresh start.

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