The Office of the Superintendent of Bankruptcy issued its 2019 Canadian Consumer Debtor Profile reporting 22% of consumer insolvency filers had previously filed a bankruptcy. That means that 30,179 of the 137,178 individuals that filed a personal bankruptcy or consumer proposal had been bankrupt previously. With the current COVID-19 pandemic resulting in the closure of many businesses and employee layoffs, insolvency professionals are anticipating a significant increase in insolvency filings in 2021. Based on 2019 filings, many insolvency filers will have been bankrupt once before. 

An insolvent debtor can file a second bankruptcy as long as they were discharged from their first bankruptcy.

The process is similar to a first bankruptcy in that:

  • non-exempt assets will vest in the trustee to realize for the benefit of creditors,
  • tax refunds for the year of filing bankruptcy and any prior years will be sent to the trustee,
  • GST cheques will be sent to the trustee until your discharge from bankruptcy,
  • surplus income payments will be required for a specified time period if your income exceeds a set threshold,
  • your trustee has the ability to recover preferential payments and transfers at undervalue, 
  • your trustee can realize on after-acquired property (property acquired between the bankruptcy filing and discharge), and  
  • creditors have the right to oppose your discharge.

The following will differ from a first bankruptcy:

  • bankrupt is eligible for an automatic discharge in 24 months if not required to make surplus income payments,
  • bankrupt is eligible for an automatic discharge in 36 months if required to make surplus income payments, and
  • the bankruptcy will remain on your credit report for 14 years from discharge. 

If you find you are struggling to repay your debts, reach out to a Licensed Insolvency Trustee to review your financial situation in detail so you can make an informed decision on filing a second bankruptcy.  

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)