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How long does bankruptcy last in Canada?

If you complete the duties assigned to you during your bankruptcy and your trustee, your creditors, or the Superintendent of Bankruptcy do not make any objections to your discharge, you may get out of bankruptcy in as little as 9 months. Your duties during bankruptcy also include attending two counselling sessions to help you understand why you went bankrupt and to assist you in managing your financial affairs in the future. 

See below for a summary of the time periods to obtain your discharge under various situations. The number of months indicated below start counting from the day you are officially bankrupt:

For 1st time bankruptcy:

  • 9 months if you do not have earnings in excess of the income guidelines set out by the government based on the size of your household (known as “surplus income”)
  • 21 months if you have surplus income and pay it to the trustee for your creditors

For 2nd time bankruptcy:

  • 24 months if no surplus income
  • 36 months if you have surplus income 

In the above situations, your discharge happens automatically provided you fulfill all of the duties imposed on you.

There are situations where the court has to decide when you are discharged from bankruptcy, such as the following: 

  • If you owe personal income tax debt of $200,000 or higher and it represents at least 75% of your total unsecured proven debt
  • If a creditor, the Superintendent of Bankruptcy, or your trustee oppose your discharge 

In both of the scenarios, a court hearing will determine when you will be discharged from bankruptcy.

What does “discharged from bankruptcy” mean?

Getting discharged from bankruptcy is the final step in filing for bankruptcy. When you are discharged from bankruptcy, it means that you are no longer bankrupt: you are free from your debts and you can start to rebuild your credit. 

If you do not get discharged from your bankruptcy, your trustee may get discharged from your file. Should this happen, your creditors can start contacting you again to collect their outstanding debt. 

To learn more about the bankruptcy discharge, including how long the process takes and what debts are discharged in bankruptcy, watch the video below. 

Video transcript: Meet Vincent, the father of two young children. A recent separation has left him unable to meet his financial obligations. After having his options explained by a Licensed Insolvency Trustee, a professional whose duties are regulated by the Office of the Superintendent of Bankruptcy Canada, Vincent has decided that bankruptcy is the most appropriate solution to his financial troubles, the trustee explains that after fulfilling his bankruptcy obligations his debts will be discharged and he will be free to start over financially. The trustee further explains that in the case of most first bankruptcies, the discharge will happen automatically after 9 months or 21 months if surplus income payments have to be made. The trustee also tells Vincent the automatic discharge happens only if it is not opposed by the Licensed Insolvency Trustee, a creditor, or the Office of the Superintendent of Bankruptcy Canada and he attends two counselling sessions to help him understand why he went bankrupt and to assist him in managing his financial affairs in the future.

If the discharge is not automatic, Vincent is told a court hearing will be scheduled. At the hearing, the court will determine if and when the discharge will occur. Once the discharge is granted, Vincent will be relieved of his debt as of the day he filed for bankruptcy and he will be free to start rebuilding his credit rating and his financial future. But, the trustee explains there are certain debts that will not be discharged. These include alimony and child support payments; in some cases, student loans, court-ordered fines or penalties; and debts arising from fraud.

When can I start to build credit again after bankruptcy?

You can begin to rebuild your credit as soon as you are discharged from your bankruptcy. This signals to lenders that you can manage your finances and are creditworthy.

You can apply for a credit card after you have been discharged from bankruptcy. Your financial institution may require that you apply for a secured credit card. With a secured credit card, you have to put down a deposit on the credit card amount. After paying your balance regularly for a period of time determined by your financial institution, you can get your deposit back and apply to have an actual credit card. The decision to give you a credit card is made by the bank or other company issuing the credit card.

Additionally, after your discharge, you should review your credit report and address any errors. For example, any debts discharged during bankruptcy cannot be reported on as debts you still owe, or are outstanding, etc. If they appear on your report, you should contact the credit agency and have them correct the information. Going forward, you can check your credit report on a yearly basis.

Can I get a mortgage or other loan after bankruptcy?

While your bankruptcy will remain on your credit report after you are discharged, you can apply for personal bank loans and car loans. These are private loans provided at the discretion of the lenders. Some lenders may require that you obtain a guarantor for your loan. Like all new credit, you should review the terms and conditions to make sure you understand them, including the interest rates and repayment terms, so that you are confident you can afford the payments within your budget.

Learn more about bankruptcy.

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