You’ve been bankrupt once due to life circumstances – a job loss, a divorce, lack of knowledge about managing debt, or other issues. Once discharged from bankruptcy, you started to claim your life back, re-built your credit rating and acquired debt. Life is full of reoccurring challenges and you may find yourself dealing with serious financial issues again.

You may consider filing for bankruptcy a second time. You may recall from your previous experience that this will provide you with relief from amongst other things, collection calls. However, the rules are slightly different a second time around.

Firstly, it takes longer to be discharged from a second bankruptcy. You will be entitled to an automatic discharge 24 months from filing provided there is no surplus income. Surplus income is money earned over the government-set limits, which varies depending on your family situation. If there is surplus income the discharge will take three years. It is also important to know that you will be accountable to the Trustee for your income over this period and any assets you may receive (i.e. inheritance, lottery winnings, etc.).

Secondly, a second bankruptcy will remain on your credit report for 14 years from your discharge, rather than the six years in a first bankruptcy. That will make it difficult, though not impossible, to rebuild your credit again.

You have other options which a Trustee in bankruptcy will be able to assess as they review your financial situation. One such option may be a consumer proposal. This will allow you to keep your assets and will lessen the impact on your credit report.

When considering bankruptcy a second time, carefully evaluate whether it’s the best option given your set of circumstances. It is highly recommended that you consult with a Trustee in bankruptcy before deciding to file for a bankruptcy, second time around.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)