In Canada, about 15% of people that have filed for bankruptcy end up declaring bankruptcy a second time. Since approximately 60,000 Canadians will be declaring bankruptcy this year that means 9,000 of them likely have done so before.
The number of people filing second bankruptcies is large enough that in 2009 the federal government brought into effect new bankruptcy rules to deal with repeat filers.
Second Time Bankrupt
Assuming a second time bankrupt performs all of their required duties during their bankruptcy, then they are entitled to an automatic discharge from bankruptcy in:
(a) 24 months if they are not required to make any payments based on the Surplus Income Rules; or
(b) 36 months if they are required to make surplus income payments.
A detailed description of the Surplus Income Rules can be found in Directive 11r2 from the Office of the Superintendent of bankruptcy. This Directive is updated every year to reflect any adjustment for inflation so make sure you are looking at the most recent release when preparing your Surplus Income calculations.
Otherwise, the requirements and duties of a person that has filed a second bankruptcy are similar to those for a person declaring bankruptcy for the first time.
Third Time Bankrupt
Approximately 1% of all persons that declare bankruptcy do so three or more times – roughly 1,000 people each year. These individuals must comply with the rules for persons that have filed a second bankruptcy, with the following additional requirements:
- Instead of an automatic discharge, they must also appear in Court and formerly request their discharge.
- The Court may impose a time penalty and/or financial conditions on the individual before discharge depending on the amount of time that has elapsed between each of their previous bankruptcy filings and the creditors that were included in each filing.
Alternatives To Repeat Bankruptcies
If you have been bankrupt previously you should give serious consideration to a consumer proposal as an alternative to declaring bankruptcy again. If you determine a second bankruptcy is the best solution for your situation make sure you understand each of your required duties before you file. Talk to a bankruptcy trustee about your situation to see whether filing a second bankruptcy or a consumer proposal is best for you.
Whether you file bankruptcy a second time or file a consumer proposal, take full advantage of the mandatory credit counselling sessions that are part of your duties so you can avoid another bankruptcy down the road.