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Bankruptcy Timelines Explained

Credit Card Bankruptcy

If you’ve recently filed for bankruptcy, or think that this may be the best debt solution for your situation, you may be wondering what happens once your bankruptcy is filed. While the first big step is over, your timeline for having your bankruptcy discharged will depend on your financial situation. Here’s what to expect depending on whether this your first, second or third time filing for bankruptcy.

First Bankruptcy

If this is your first time filing for bankruptcy, you may be free from your debt in as little as 9 months! There are some conditions you will have to follow during this time if you want to be discharged in less than a year. You will be required to follow the bankruptcy duties that are required as part of the  Bankruptcy and Insolvency Act . These duties include:

  • Surrendering all credit cards in your name
  • Reporting your monthly expenses and income to your Licensed Insolvency Trustee
  • Attending two sessions of credit counselling to help you better prepare for your financial future
  • Providing your Licensed Insolvency Trustee with your income tax information including T-4 slips 

You may be required to attend a meeting with the Official Receiver of the Office of the Superintendent of Bankruptcy to review your financial situation and reasons for bankruptcy. You may also be expected to meet with creditors to review your assets and property to determine how debts will be recovered.

If you earn more after-tax earnings than the limits set by the  Government of Canada , your bankruptcy agreement may require that you make  surplus income payments  towards your debt. Whether or not you pay this amount will depend on the monthly income of your household and if you provide care for any dependents. Surplus income payments may affect the timeline for your bankruptcy discharge by extending it to 21 months.

Second Bankruptcy

If you have previously filed for bankruptcy and this is your second time doing so, the timeline for your discharge will be longer. If you are not required to make any surplus income payments, you will be eligible for an automatic discharge 24 months after filing for bankruptcy. This period extends to 36 months if you are making surplus income payments.

Like your first bankruptcy, you will be required to attend two financial counselling sessions with your Licensed Insolvency Trustee. If you fail to complete these sessions within the period of your bankruptcy, this will likely delay your discharge.

Third Bankruptcy

Although it is possible to file for bankruptcy for a third time, you will not be granted an automatic discharge. Instead, you will have to appear in court for a discharge hearing where you will be expected to disclose the reasons for having declared bankruptcy once again. Unlike the first two times, theregistrarwill decide if you will be discharged from your bankruptcy and how long this period will take. You may also be expected to make surplus income payments during this period.

Planning For Your Future

While filing for bankruptcy can help you achieve debt relief, you will need to be self-disciplined enough to get yourself back on track for the future. During the period when you’re waiting for a discharge, you will not be able to access credit as you did in the past. Since you surrendered your credit cards to your trustee, budgeting and planning will be more important than ever.

Even after you are discharged, it will take a considerable amount of time to rebuild your credit. If this is your first bankruptcy, it will remain on your credit file for 6-7 years. If this is your second time, this time doubles and your credit file will be affected for 14 years. While you may still be eligible for credit cards during this time, you will likely be expected to pay exceedingly high interest rates. A better option is to set aside money into savings to reduce the risk of falling back into debt again.

Take advantage of the credit counselling sessions you have with your trustee. They can offer a wealth of knowledge to help you prepare a budget you can stick to and help you rebuild your credit quickly.

If you feel you may be headed for a second or third bankruptcy, contact our licensed insolvency trustees to discuss whether a consumer proposal may be a viable debt relief option for you.

Contact us  for a free consultation with our licensed insolvency trustees to learn about debt solutions that can work for you.

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