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)
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