The Bankruptcy and Insolvency Act (“BIA”) is the federal legislation that governs insolvency filings in Canada. There is nothing in the BIA that prevents an individual from filing bankruptcy any number of times. As long as you owe more than $1,000 and are insolvent, you can file an assignment in bankruptcy. To balance the rights of a debtor to be relieved from their debts with the rights of creditors to expect to be repaid and to maintain the integrity of the insolvency system, the discharge process becomes lengthier and more punitive with a second or subsequent bankruptcy.
A first-time bankrupt is eligible for an automatic discharge in 9 or 21 months (depending on their income and family size), and the bankruptcy will be reported on their credit report as an R9 for 6-7 years from discharge.
A second-time bankrupt is eligible for an automatic discharge in 24 or 36 months (depending on their income and family size), and the bankruptcy will be reported on their credit report as an R9 for 14 years from discharge.
A third or subsequent bankruptcy filer must attend a discharge hearing, and the Court can suspend their discharge, impose conditions or refuse the granting of a discharge. In the Hamilton/Toronto area, we are seeing that a third-time bankrupt is receiving a suspension of 12-18 months as long as there are no other issues/opposing creditors.
The bankruptcy will permanently be reported in the credit bureaus.
The BIA is there to provide relief to an honest but unfortunate debt, and sometimes, misfortune happens more than once. Reach out to a Licensed Insolvency Trustee to review your financial situation in detail and explore all solutions with you. At a free initial assessment, a trustee will fully explain the bankruptcy process and how it will impact you in a second or third time filing.
By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)
Leave A Comment