How Long Does Bankruptcy Last in Canada?

A number of factors determine length of bankruptcy proceedings. Income, size of family, and previous declarations of bankruptcy decide the date of discharge from bankruptcy. Even after you have been discharged, loans that were excluded from consideration in proceedings remain your responsibility. Furthermore, a first bankruptcy is reflected on your credit score for 6 years. A second bankruptcy will likely remain on record for 14 years. A third bankruptcy will be even longer.

Surplus income

Surprisingly, if you exceed the surplus income threshold, you will spend more time in bankruptcy than someone with no surplus income. In other words, the more money you make above a certain level, the longer you will be bankrupt. The surplus income limit is the amount the government deems enough to afford living expenses for you and your family. The larger your family, the greater the threshold. Allowable expenses, such as costs for child care or medical bills, are taken into account. If you, or you and your spouse, make over $200 of the limit, you must make surplus payments.

General guidelines

Although the rule-of-thumb is not always followed, changes made to the Bankruptcy and Insolvency Act in 2008 provides a rough sketch of the bankruptcy schedule. For a first time bankrupt, you either make your payments under bankruptcy for 9 or 21 months. If you do not make above surplus income, you will be discharged after 9 months, otherwise you will continue to pay for 21 months. If this is your second time, you are either bankrupt for 24 months for non-surplus income bankrupts or 36 months.

Outstanding taxes

If the CRA is a creditor whose claim makes up three-quarters or more of personal unsecured debt, and the total amount of personal income tax owed is over $200,000, the time frame for bankruptcy changes. The length of bankruptcy will be determined in court.

Opposition to discharge

Once you attend the mandatory financial counselling, and you have met your responsibilities as a bankrupt, you are eligible for discharge. However, if your discharge is challenged, there may be a delay in your release.