Second Bankruptcies in Canada
Second bankruptcies in Canada are fairly straight forward – the process is nearly identical to a first-time bankruptcy, with the following differences.
Second bankruptcies without surplus income
If you’re filing bankruptcy for the second time and you have no surplus income, you will be eligible to receive an automatic discharge from your debts in 24 months. In comparison, you’d receive your automatic discharge in 9 months if you were filing bankruptcy for the first time.
Second bankruptcies with surplus income
If you’re filing bankruptcy for the second time and you have surplus income, you’ll be eligible to receive an automatic discharge from your debts in 36 months so long as you’ve completed payment of your surplus income obligations. In comparison, you’d receive an automatic discharge in 21 months if you were filing bankruptcy for the first time.
Impact on your credit report
A bankruptcy will stay on your credit report for 14 years from the date of your bankruptcy filing. In contrast, a first-time bankruptcy stays on your credit report for 7 years.
Consumer proposal as an alternative to a second bankruptcy
There are clear disadvantage in filing bankruptcy a second time: (i) you’ll be in bankruptcy for a longer period time; (ii) if you have surplus income, you may be required to pay quite a lot of money to your Trustee; and (iii) a record of your bankruptcy will stay on your credit file for 14 years.
With all of these disadvantages, you should consider filing a consumer proposal as an alternative to a second bankruptcy filing:
- Unlike a bankruptcy, if your proposal is approved, you’ll be paying a fixed monthly payment. In contrast, your monthly surplus income payments in a bankruptcy will change with any increase in your monthly income, such as a work bonus or a payout of your vacation pay.
- A record of your filing a consumer proposal will stay on your credit report for 3 years after you’ve completed your proposal payments. And it’s up to you how quickly you want to pay off your proposal. In contrast, a second bankruptcy will stay on your credit file for a fixed period of time, namely 14 years.