How Long Does Bankruptcy Last in Canada?
Explore the Length of
Bankruptcy is a legal process that offers individuals in financial distress a chance to start fresh. It provides relief from overwhelming debts and allows for a new beginning. However, many people wonder about the duration of bankruptcy in Canada. In this article, we will explore the factors that determine the length of bankruptcy, including surplus income, previous bankruptcies, completion of duties, opposition to discharge, and alternatives to bankruptcy.
One of the main factors affecting the length of time you will be in bankruptcy is your income.
Our bankruptcy calculator will tell you how much a bankruptcy will cost you and how long you will be in bankruptcy.
The rules regarding the length of time in bankruptcy:
- A first time bankrupt without surplus income requirements will be eligible for a bankruptcy discharge in 9 months;
- A first time bankrupt who has surplus income payments required will receive their discharge from bankruptcy in 21 months, unless the court imposes a longer term;
- A person filing bankruptcy a second time who doesn’t have any surplus income payments will receive their bankruptcy discharge in 24 months;
- A second time bankrupt who has excess income payments required will receive their bankruptcy discharge in 36 months.
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Factors Affecting Bankruptcy Length
Surplus Income and Bankruptcy Duration
Surplus income plays a significant role in determining the length of bankruptcy in Canada. The government has established specific thresholds for net monthly income, which ensure a reasonable standard of living. If your monthly income exceeds this threshold by $200 or more, your bankruptcy period will be extended.
For first-time bankrupts with surplus income, the duration typically extends to twenty-one months. During this period, a portion of the surplus income must be paid into the bankruptcy estate to satisfy creditors. However, for those without surplus income, the bankruptcy period is usually nine months.
It’s important to note that surplus income payments increase the cost of bankruptcy. To calculate potential surplus income payments, you can use a Surplus Income Calculator provided by licensed insolvency trustees.
If you have previously filed for bankruptcy, the length of your current bankruptcy will be affected. For individuals experiencing their second bankruptcy, an automatic discharge is possible after twenty-four months, provided there is no surplus income. However, if there is surplus income, the minimum bankruptcy period increases to thirty-six months.
In the case of a third bankruptcy, an application for discharge must be made to the bankruptcy court. The court will then decide the length of the bankruptcy period. It is important to consult a licensed insolvency trustee in such situations to explore alternative options.
Completion of Bankruptcy Duties
To successfully navigate the bankruptcy process, certain duties must be completed. These duties include disclosing all assets, surrendering credit cards, reporting income and expenses, making required payments (including surplus income), and attending credit counseling sessions.
Failure to fulfill these duties can prolong the bankruptcy period. It is essential to prioritize and complete all responsibilities as required by bankruptcy law. If you encounter any difficulties, seek advice from your licensed insolvency trustee.
Opposition to Discharge
While rare, opposition to discharge can occur if creditors, the trustee, or the Office of the Superintendent of Bankruptcy believe that you did not deal honestly with your creditors, failed to complete your duties, or otherwise present concerns with your bankruptcy. In such cases, mediation or a court hearing may be required to determine the length of the bankruptcy.
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Bankruptcy Length in Canada
The length of bankruptcy in Canada varies depending on individual circumstances. Here is a summary of typical bankruptcy periods based on different factors:
|First-time bankrupt without surplus income
|First-time bankrupt with surplus income
|Second-time bankrupt without surplus income
|Automatic discharge after 24 months
|Second-time bankrupt with surplus income
|Automatic discharge after 36 months
|Application for discharge hearing required
It is crucial to remember that these timelines assume no opposition to discharge. If any party opposes your discharge, the bankruptcy period may be extended, and a court hearing may be necessary.
Exploring Bankruptcy Alternatives
Bankruptcy is not the only option for those facing financial difficulties. It is worth considering alternative solutions that may better suit your circumstances. One such alternative is filing a consumer proposal. A consumer proposal allows you to negotiate with your creditors to repay a portion of your debts over an extended period.
To determine the best course of action, consult a licensed insolvency trustee who can assess your situation and provide expert advice on the available options.
Discuss options to get out of debt with a trained & licensed debt relief professional.
Understanding the duration of bankruptcy in Canada is essential for individuals seeking financial relief. Factors such as surplus income, previous bankruptcies, completion of duties, opposition to discharge, and bankruptcy alternatives all contribute to the length of the bankruptcy period.
By working with a licensed insolvency trustee, you can navigate the bankruptcy process effectively, fulfill your obligations, and explore alternatives if bankruptcy is not the most suitable solution for your circumstances. Remember, bankruptcy offers a fresh start, and with the right guidance, you can recover and rebuild your financial future.