One of the key questions people often have when considering bankruptcy is how long the process will last.

You can complete a first-time bankruptcy in just nine months, provided you fulfil your duties under bankruptcy law, don’t need to make surplus income payments, and no one objects to your discharge.

Your duties include making all the required payments, supplying the necessary documents, and attending two financial counselling sessions to learn how to manage your finances better.

How long does bankruptcy last in Canada?

Most Canadians spend only a short time in bankruptcy, typically between 9 and 21 months, but it depends on how much money you make and whether it is your first or second bankruptcy.

A first-time bankruptcy lasts 9 months if you have no surplus income.

You will be eligible for an automatic discharge if you perform all the duties required during your bankruptcy.

For a first-time bankruptcy:

  • 9 months if you have no surplus income.
  • 21 months if you have surplus income.

For a second-time bankruptcy:

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

If you are required to pay surplus income, your bankruptcy takes longer. Surplus income is the amount a household makes above the levels set by the government. If you exceed the monthly threshold by more than $200 per month, you must pay 50% of the excess amount into your bankruptcy.

Surplus income in bankruptcy in Canada.

If a creditor, your trustee or the Office of the Superintendent of Bankruptcy opposes your discharge, your bankruptcy requires a court hearing to decide if you should be discharged.

How to get discharged from bankruptcy in Canada

There are steps you must follow, called bankruptcy duties, to be officially discharged from bankruptcy. Here are some of the most common tasks:

  • Make payments towards your bankruptcy.
  • Show proof of income and expenses each month.
  • Give up any assets that are not protected by bankruptcy law.
  • Hand over credit cards to your trustee for cancellation.
  • Attend a meeting of creditors or examination to answer questions about your finances.
  • Supply documents to your trustee, such as income tax returns and insurance policies.
  • Attend two financial counselling sessions.

Once you complete your duties, you will be discharged and released from bankruptcy.

Bankruptcy discharge means you’ve successfully completed the bankruptcy process and no longer need to repay your debts.

What happens if bankruptcy is not discharged in Canada?

Failure to get discharged from your bankruptcy can result in your trustee closing your file. You no longer receive protection from creditors, and they can contact you again. It also means you can’t borrow a large sum of money without informing the lender that you are bankrupt.

How long does it take to rebuild credit after bankruptcy?

If you choose bankruptcy, your credit score will suffer, making it hard to borrow money.

If this is your first time declaring bankruptcy, it will appear on your credit report for at least six years after completion. Subsequent bankruptcies remain on your credit report for fourteen years from completion.

The good news is that bankruptcy can give you a fresh start, and you can start to rebuild your credit immediately after you have been discharged.

It’s a good idea to check your report at least once a year. Many people review it monthly to avoid unexpected changes, identity theft and unauthorized credit inquiries.

Many lenders offer credit-building products, such as secured credit cards, that help improve your credit score.

You have to put down a deposit that determines your credit limit. Payments are reported to the credit bureaus, which helps improve your credit score. After a while, you can apply for a regular credit card and get your deposit back for the secured card.

Making payments on time is the single most important thing we can do to boost our credit scores, as it accounts for 35% of a credit score calculation.

Wrapping up

In most cases, a first-time bankruptcy in Canada takes nine months. But, if you have declared bankruptcy before or have surplus income, it will take longer.

Schedule a free consultation with a Licensed Insolvency Trustee to figure out how long it will take you to complete the bankruptcy process.

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