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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Conclusion

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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I was feeling overwhelmed by my credit debt, constantly receiving calls and letters from debt collectors, which caused a great deal of stress. It seemed like there was no way out of this situation. However, I discovered Bankruptcy Canada while listening to my local talk radio station. This organization proved to be friendly, empathetic, knowledgeable, and professional, with extensive experience in their field.

During our initial meeting, they took the time to understand my debt and financial circumstances. They explained the various options available to me and helped create a personalized plan that would be most beneficial for my situation. With their assistance, I was able to avoid declaring bankruptcy by presenting a consumer proposal to my creditors. Fortunately, my proposal was accepted, and I am extremely relieved to finally be free of debt, all thanks to BankruptcyCanada. The burden on my shoulders feels significantly lighter now, and I truly believe that Bankruptcy Canada has the most skilled specialists in debt relief.

Geoffrey,

Toronto

Filing for bankruptcy in Canada is a serious financial decision that will impact your future.

In truth, most individuals should view this as a last resort.

Despite this, bankruptcy is still considered the most appropriate course of action for 125,000 Canadians each year.

It might be the right option for you too – but only after you’ve fully understood every aspect, including how long bankruptcy will affect you for.

Here’s all you need to know before entering the bankruptcy proceedings.

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The Bankruptcy Period Explained

After filing for bankruptcy, the first stage you encounter is the phase in which you are declared bankrupt.

This is also known as “undischarged bankruptcy”, which means you are waiting to be discharged from the bankruptcy proceeding before resuming the road to financial recovery.

It is a legal process that begins from the moment you complete the formal bankruptcy filing.

Under most circumstances, the bankruptcy procedure lasts for nine months and one day.

So, if you are a first-time user with an average level of income, you will stay bankrupt for the best part of a year.

However, when your income surpasses government thresholds, the bankruptcy period is extended to 21 months and one day.

The discharge is only achieved if you successfully perform all of your financial duties.

This includes making payments, attending financial counseling sessions, and providing tax info as well as monthly reports.

Your financial opportunities are severely hindered during the undischarged bankruptcy period, such as:

 

 

This is the hardest period of life after filing for bankruptcy, but is a relatively short process.

Once again, though, you should only consider this route when you are ready to satisfy the financial obligations.

On a side note, you should familiarize yourself with the debts that are not covered by the bankruptcy before entering the process.

However, if you’ve heard that it’s impossible to get a bank account during bankruptcy, you will be pleased to learn that this is incorrect.

On the contrary, it’s one of the first things you’ll do after filing for bankruptcy.

Post-Bankruptcy Financial Restrictions

As stated, filing for bankruptcy in Canada is not an issue that should be taken lightly.

While gaining a discharge will lift a weight from your shoulders, there are plenty of financial restrictions to consider.

The first 2-3 years are particularly tough, especially if you want to access additional credit.

However, it should be noted that the bankruptcy will appear on your credit report for at least six years, starting from the date of acquiring the bankruptcy discharge.

While this won’t necessarily preclude you from borrowing large sums of money, especially if you have a good level of income and can prove financial responsibility.

Throughout this post-bankruptcy period, you can expect to encounter;

 

 

If this isn’t your first bankruptcy, it may appear on your credit history for up to 14 years, which can cause further financial limitations.

What Can Be Done To Soften The Blow?

Despite the financial difficulties caused by bankruptcy proceedings, most individuals that complete the process find that removing the burden of debt is a positive move.

Nevertheless, it’s important to take a proactive approach to recover in style.

A range of credit building techniques can be used to speed up the journey to a better financial situation.

Prepaid secured credit cards are a good example, not least because they do not pose any major risks to you.

Cosigned agreements are another option that may be suitable for some individuals.

As you rebuild your credit score, new forms of credit will become available.

However, you should resist taking on more than you can handle.

Financial responsibility is the key to overcoming the bulk of your post-bankruptcy problems.

It’ll also enable you to secure larger credit agreements far sooner too.

Is Bankruptcy Right For You?

Bankruptcy will affect your financial situation for a long time.

However, the opportunity to start over is often an attractive prospect when multiple debts have spiraled out of control.

Before confirming that this is the right option, though, you should speak to an impartial agent.

Give us a call on (877) 879-4770 to take the first steps today.

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