For most people, filing for bankruptcy is a “once in a lifetime” event. Unfortunately, sometimes things happen and you may be finding yourself once again facing financial hardship and looking at the possibility of filing bankruptcy a second time. If so, you are not alone. Approximately 10% of bankruptcies are for individuals who, for one reason or another, needed to file bankruptcy more than once.
Consequences of Filing Bankruptcy More Than Once
There are, however, implications and consequences of filing bankruptcy more than one time.
One of the most serious implications of a second bankruptcy is that you will be bankrupt for a longer period of time. The first time you file bankruptcy you are eligible to be automatically discharged from bankruptcy in nine months (or 21 months if you have surplus income). In a second bankruptcy the length of bankruptcy increases to a minimum of two years, and increases to three years if you have surplus income.
A second bankruptcy will also have an impact on your credit report. The major credit reporting agencies in Canada generally report a first bankruptcy for six or seven years after the date of discharge. A second bankruptcy can remain on your credit report for up to 14 years, or twice as long as a first bankruptcy. That can negatively impact your ability to borrow in the future.
How often can you file bankruptcy? It is possible to file bankruptcy for a third time, but if you do you will be required to attend a discharge hearing in bankruptcy court. You will be required to explain to the judge why you filed bankruptcy three times, and it will be up to the court to decide if and when you get discharged. The court could impose conditions on your discharge, such as holding your bankruptcy open for an extended period of time, or requiring you to make additional payments. A third bankruptcy is something to avoid.
Consider a Consumer Proposal
What are your options if you have declared bankruptcy in the past, and you have new debts? To avoid the additional costs and consequences of filing bankruptcy more than once you could consider a consumer proposal as a way to negotiate a settlement with your creditors. You will avoid a repeat bankruptcy but still find a solution to your current financial problems.
If you find yourself facing the possibility of filing bankruptcy a second or third time, contact a trustee in bankruptcy and ask them about your alternatives.