Bankruptcy in Canada – how long does it last?

bankruptcy in canada how long does it last

Bankruptcy in Canada how long does it last? This shall depend on the following factors:

  • Whether or not you have been bankrupt before
  • Whether or not you are required to pay surplus income
  • Whether or not you’ve fulfilled your obligations in your bankruptcy proceedings

 

Automatic Discharge

If you’ve never filed for bankruptcy before and you aren’t required to pay surplus income, your  bankruptcy will last for 9 months. You’ll receive an automatic discharge from your Trustee and your debts will be legally extinguished on the day that is 9 months plus one day after the day you filed for bankruptcy.

If you’ve never filed for bankruptcy before and you are required to pay surplus income, your bankruptcy will last for 21 months. If you’ve paid your surplus income obligations within the 21-month period, you’ll receive an automatic discharge from your Licensed Insolvency Trustee and your debts will be legally extinguished on the day that is 21 months plus one day after the day you filed for bankruptcy.

If you’ve filed for bankruptcy before and you aren’t required to pay surplus income, your bankruptcy will last for 24 months. You’ll receive an automatic discharge from your trustee and your debts will be legally extinguished on the day that is 24 months plus one day after the day you filed for bankruptcy.

If you’ve filed for bankruptcy before and you are required to pay surplus income, your bankruptcy will last for 36 months. If you’ve paid your surplus income obligations within the 36-month period, you’ll receive an automatic discharge from your trustee and your debts will be legally extinguished on the day that is 36 months plus one day after the day you filed for bankruptcy.

In all of the above scenarios, the Trustee issues to a discharged bankrupt a document called a “Certificate of Discharge” which confirms that he has been discharged from bankruptcy.

Discharge application at bankruptcy court

If  a bankrupt hasn’t fulfilled his obligations in his bankruptcy proceedings, such as:

  1. Neglecting to attend credit counseling at the Trustee’s office
  2. Failure to pay surplus income obligations or the Trustee’s professional fees
  3. Failure to keep proof of income and a record of household expenses

then his discharge from bankruptcy will be delayed. The Trustee will be required to oppose the bankrupt’s automatic discharge from bankruptcy, and the Trustee would schedule a discharge application hearing at the bankruptcy court. The bankrupt would be required to attend and explain to the court why he failed to fulfill his obligations in his bankruptcy proceedings.

At the discharge hearing in bankruptcy court, the court will likely issue an Order giving the bankrupt time to remedy the unfulfilled obligations in his bankruptcy proceedings. Once he has fulfilled his outstanding obligations, the Trustee will arrange to obtain an Order of Absolute Discharge from the court .

On the other hand, if he fails to attend his discharge hearing at bankruptcy court, the court will issue a “No Order”. This simply means that the court was not able to issue any order due to the failure of the bankrupt to attend his discharge hearing. In this situation, the bankrupt remains undischarged and he remains obligated to his creditors. His creditors can proceed to pursue him again once the Trustee closes her file.

 

Length of a bankruptcy versus length of bankruptcy on a credit report

Now, having explained the above, one must distinguish how long a bankruptcy lasts with how long a bankruptcy stays on a credit report. People sometimes confuse these things with one another.

Someone is not “bankrupt for 7 years” as is commonly believed. Someone is bankrupt between the time he files for bankruptcy and the time he obtains his discharge (as explained in the preceding sections). However, a record of his bankruptcy will stay on his credit record well beyond the time he has finished his bankruptcy.

Generally, if you have filed bankruptcy, both Equifax and TransUnion remove a bankruptcy from your credit report 6 years after the date you are discharged from bankruptcy.

TransUnion removes a bankruptcy from your credit report 7 years after you are discharged in the following provinces:

New Brunswick
Newfoundland and Labrador
Ontario
Prince Edward Island
Quebec

If you declare bankruptcy more than once, then the bankruptcies will appear on your credit report for 14 years.

What happens to my assets and what can I keep when I file for personal bankruptcy? »