There sure is a lot of misinformation out there about bankruptcy, how long it lasts and what the long term effects are. Just when I think I have heard it all, someone comes up with a new one, “I heard you can’t have a bank account for 10 years when you’re bankrupt…” A person said that to me just last week.
So, how long does a bankruptcy affect you? There are three answers to that question:
How long you actually “be bankrupt”
This is the period of time from the date you file bankruptcy until the day you are discharged (your bankruptcy is completed). For someone filing bankruptcy for the first time with modest income, bankruptcy lasts nine months and one day. In other words, if you perform all of your duties properly your bankruptcy will be completed (discharged) nine months and one day from the date your bankruptcy started.
If your income is higher than the government standards your bankruptcy will last 21 months and one day.
Of course if you do not complete all of your duties as required your bankruptcy will last until you do – there is no time limit on bankruptcy.
If you decide to file for bankruptcy make certain you understand what is required of you during the bankruptcy and do your best to comply with the rules.
How long bankruptcy lasts on your credit report
The fact that you filed for bankruptcy will remain on your credit report while you are “in bankruptcy” and for six years from the date your bankruptcy is completed.
If you have been bankrupt more than once, then it may be reported for up to 14 years from the date of your discharge, depending on the timing of your previous bankruptcies.
How long to recover from bankruptcy
That one is entirely up to you. Most people, once they file for bankruptcy, immediately begin to feel better. They are no longer dealing with phone calls from their creditors or struggling to balance monthly debt payments.
Having eliminated their current debt problems, most find they are able to build a stronger financial future. Unless you urgently need to purchase a home for the first time or buy a car, you may not even need to worry about qualifying for credit right away. Many find they are able to live without immediate credit and since they have a stronger cash flow than before bankruptcy, they are able to start saving for when they do.
Having said that, approximately 10% of all Canadians will declare bankruptcy (or file a consumer proposal) at some point in their life. The critical period is the period you remain “in bankruptcy” and the first two or three years after you have completed the process. During this time access to credit will be restricted. (You are actually allowed to apply for credit during bankruptcy, but you are required to tell people you remain in bankruptcy so the odds of being approved are limited.) You can slowly start rebuilding your credit during your bankruptcy using a secured credit card. Once you have completed your bankruptcy you will start to rebuild your credit. As you build a new credit history after your discharge, traditional credit will become available again.
What about the “I heard you can’t have a bank account for ten years even if you file for bankruptcy?” Of course you can have a bank account if you file for bankruptcy. In fact, one of the last things you do just before you file (or the first thing you do just after you file) is open a brand new bank account.
The idea behind filing for bankruptcy is to give yourself a fresh start, a new beginning. Bankruptcy won’t affect you forever. Failing to deal with your debts may.
I was discharged from bankruptcy approximately five years ago and a student loan was included in that. But the Canada student loans center still sends me statements every year saying that I am in arrears. When I call them they it just a statement of what happened on the account. What can I do about this to get it stopped. I feel that they are still harassing me about the loan and I am not sure if this is still going against my credit score because they say that I am in arrears.
First, you should check your credit report to see what is being reported. You are entitled to one free copy per year and I encourage everyone to take a look just in case something has been misreported.
In regards to the student loans, are you certain they were discharged (eliminated) as part of your bankruptcy? If you hadn’t been out of school for at least 7 years when you filed for bankruptcy the debt would have survived. You may want to check with your trustee.
Assuming the debt was discharged, send Student Loans a registered letter advising them to either proceed to Court or stop trying to collect. If they go to Court you need to show up and show the Court your bankruptcy documents. If they go away you should still check your credit report every year to make sure it doesn’t “come back”.
I just learnt that a close family member declared bankruptcy. Had I known, I would not have hesitated to pay their debt to avoid this, however I found out after the fact. Is there any way to reverse this so that I can pay the debt for them? They also were suffering from a medical condition which may have affected their judgement.
Hi Janice. Once a bankruptcy starts, you must either complete it, apply to the court for an annulment (which is difficult), or file a consumer proposal while bankrupt. I suggest you discuss this with your family member’s trustee.
If I declare bankruptcy they told me $21,000 I got to pay can I pay that is fast is I can or not ,is faster to pay better or not thank you
Hi Conrad. You can pay the cost of the bankruptcy quickly, but there will still be a minimum period for which you are bankrupt. Your licensed insolvency trustee can explain on more detail the time periods involved in a bankruptcy.
Hello, I was discharged in 1997, now I have a collection agency hounding me , and threatening to start legal action on a debt which I know was included in the bankruptcy. How does one handle this situation?
Send them proof that the debt was included in your bankruptcy and that you were in fact discharged. Likely what has happened is the collection agency has bought a block of old accounts for pennies on the dollar and now they are trying to recover some money. The other option is to tell them to “take you to Court and cease any other collection action”. If they take you to Court you’ll need to show the judge your bankruptcy documents to have the case dismissed.
July 2018 was the 6 year anniversary of my bankrupcy being discharged. Of The two credit companies only Equifax is using 6 years, however Transunion is using 7 years (ie will drop off July 2019). I called Transunion and they insist 7 years is correct. I have great credit now at Equifax but not Transunion, and due to this is making loans and credit cards impossible for me to get. Any way I can get this corrected?
No, but they only difference between your Equifax and Trans Union reports should be the footnote in the legal section about your bankruptcy 6 years ago. That shouldn’t be enough to cause you serious harm now. I think you should request copies of each company’s reports to see if there are any other differences between them.
Hello im not understand this :
The bankruptcy will be 9 months and 1 day
And its effect 6 years
Could you explain for me both of it??
What does it mean 9 months and 1 day
And means of 6 years effect ?
Thanks so much
If you are a first time bankrupt with no surplus, and no-one objects to your discharge, you are eligible to be discharged 9 months plus one day from the day the bankruptcy started.
There will be a note on your credit report indicating that you filed bankruptcy, and that note will remain for a minimum of six years after you are discharged.
Hope that helps.
If I filed bankruptcy can I still keep my credit card?
how about my bank account I have resp, rrsp and tfsa will they be affected?
The law states that all credit cards in your name must be surrendered when you file bankruptcy. RESPs and TFSA are impacted by a bankruptcy; the contributions you have made to your RRSP in the last year are also effected; please contact a licensed insolvency trustee to review in detail for your specific situation.
Hi i completed my duties and my dischared was filed 9 months and one day how long dose it take for the actual discharge
For a first time bankruptcy with no surplus and no opposition it takes nine months plus one day. It will take your trustee some time to prepare the final discharge certificate, so you should contact your trustee and ask them when you can expect your discharge paperwork.
I filed a consumer proposal with RBC, I only had a line of credit and credit card with them. They were also the only creditor on my proposal. After 45 days, they decided to refuse my proposal with no counter offer. They said, because my line of credit was a student line of credit and I used it for other expenses not only for schooling (I wasn’t aware I only have to use it for school and not to use it for food and emergency expenses like a broken furnace in my house) they have the right to refuse my proposal. I now have three options, to pay off all the debts which I cannot afford. Or pay $800/month which I cannot afford otherwise I wouldn’t file a proposal. Or, I should go bankrupt. I dont want to go bankrupt, it would affect my mortgage renewal, and my entire family. Is there anything that I can do to mitigate the situation with RBC? Can I do anything other than bankruptcy?
I am sorry, but there is no way to force the bank to agree to your proposal. You have the right to make the offer and they have the right to say yes, or as they did in your case no. If you can’t find a way to repay the debt and you are not willing/able to file for bankruptcy then RBC may sue you and get a Court Order to garnishee your wages or put a lien on your house. Who told you bankruptcy would mess up renewing your mortgage? It doesn’t usually impact mortgage renewals at all. You may want to have a chat with your trustee…
can I apply for bankruptcy if I live outside Canada ? I moved out of Canada 10 yrs ago.
But I would like to clear up my debts in case I am moving back.
secondly since its been so long, I have no idea anymore about the extent of my debts or to who. How do I get a current list of my outstanding debts ?
Hi Marika. You have to be in Canada when you file bankruptcy, because you must meet in person with a Licensed Insolvency Trustee before you file. So if bankruptcy is the correct option, you would wait until you return to Canada to file.
If you have been out of Canada for 10 years it is likely that your debts have been written off, and may no longer appear on your credit report, so a bankruptcy may not be necessary.
To find out, you can request a copy of your credit report from Equifax and TransUnion, and based on that information you can decide if a bankruptcy is necessary.
thanks very much , ive written to them to get an update of whats still owing.
A friend of mine declared bankruptcy and was discharged a few years ago. She didn’t declare shares that she owned in a company and now the shares are worth a lot of money. Does she have to go back to the trustee with these shares, what is the legal ramifications of her just selling the shares and keeping the money.
The legal answer is that all assets must be disclosed to the trustee. The trustee then values the assets and either sells them or makes an arrangement with the bankrupt to repurchase the assets. So, if when your friend declared bankruptcy the shares were worth $1,000, it’s likely that your friend could have made an arrangement with the trustee to pay $1,000 to keep the shares. The trustee may still be willing to make that deal, or the trustee may require your friend to surrender the shares so the trustee can sell them. If they are worth a lot of money your friend should either discuss it with their trustee, or get advice from an insolvency lawyer.
I declared bankruptcy 9 years ago not realizing the serious ramifications of it (and in hindsight, I didn’t need to do it, I was all alone and scared I couldn’t get a decent job while suddenly being a single parent of 4. I did it to take the pressure of debt off my shoulders…stupid!!). 2 weeks after I declared it, I received an unexpected inheritance that more than covered all my creditors. The trustee froze my bank accounts so the bank confiscated my cheque when I went to deposit it. The trustee then paid off my debt and then CHANGED and INCREASED his original fee to the EXACT amount of surplus I would have had after paying his ORIGINAL fee and all my creditors. It was in excess of $12k. He stole my funds from me and there was nothing I could do about it. To this day I still cry if I think about it too much, he was such a crook and I didn’t know how to fight back. When I brought it up in court during the discharge, the judge basically told me to shut up and sit down. The trustee strutted around the courtroom bragging that this was a “unique case” because he was able to pay off all my creditors. Is this normal?? Once in awhile when I come across people who are considering declaring bankruptcy I tell then DON’T DO IT!! YOU’LL REGRET IT!! THERE ARE OTHER OPTIONS OUT THERE!!
Hi Barb. No, it is not normal for a trustee to strut around court. If you believe that the trustee and the court did not properly do their jobs, you can file a complaint with the Office of the Superintendent of Bankruptcy.
If I filed for bankruptcy in 1995 and it was properly discharged, and I’m considering another bankruptcy now in 2019, does the first one from 25 years ago matter? Is my 25 year old bankruptcy relevant? Is it brought up now, or has it disappeared from the records? If I filed for bankruptcy today, Would it be considered a second bankruptcy?
Yes, if you file for bankruptcy again it will be considered your second bankruptcy. Your first bankruptcy stayed on your credit report for 7 years, but it stays on the record of bankruptcies permanently. That’s why you should have been told back in 1995 if anyone ever asked you in the future if you have filed for bankruptcy before the answer would be yes regardless how many years have passed. Sorry…
I have a family member with a chronic mental illness. She had a bankruptcy after university and then a 3 year consumer proposal that fell through with only a few months to pay 4 years ago. She is 56 years old and is hoping to file for bankruptcy now that she is responding to treatment and able to deal with it. Is there any leniency for her illness? Is there anything that can be done about the money she had already paid back during her proposal? Does that count towards anything? What is the financial cost of a third bankruptcy and what does this mean for her in the long term?
I would appreciate any advice. I am her SDM.
The cost of filing a third bankruptcy is based on household income and size. The procedure will run a minimum of 24 months (36 if their income is above the government guidelines), after which they must appear in Court and request their discharge. 3rd bankruptcies are unusual, but the medical facts will likely temper the Courts view of things. The money they paid into the proposal would have been disbursed when the proposal was cancelled 4 years ago and won’t have any affect on the cost of filing now – sorry.
As an alternative, she does have the right to apply to the Court to ask for her proposal to be revived. If the Court agrees then all she’d have to do is complete the original proposal terms. It is at least worth looking into, but there will be legal costs to bring such a motion.
I have been discharged from my first and only bankruptcy 6 years and 1 weeks now. It have been remove from equifax last time I check. But why does it still appear on transition. Can i do something about it. Do I have to says to the bank I had declared bankruptcy 6 years ago if they ask. Or the fact I have been cleared I don’t have to mention it anymore.
Sorry, but each of the credit reporting agencies has their own policies and procedures for removing information. All I can suggest is you contact Trans Union directly and ask them when the bankruptcy will stop appearing in your report.
Unfortunately, no matter when someone asks you “have you been bankrupt before?” the answer will always be “yes”. If you fail to disclose your bankruptcy and something goes wrong with the account in the future the lender can claim you failed to disclose/misrepresented your financial history and potentially bad things may happen…
11% of all Canadians file bankruptcy or a consumer proposal at some point in their life. It is what it is…
I filed for bankruptcy 4 years ago. I had to leave the country due to some personal matter, and later there was a court hearing and the court gave a no order/no discharge.
My question is that, since i am still bankrupt and not discharged, is there a way to file for a consumer proposal so at least i can start paying my debts?
A bankrupt may file a consumer proposal, BUT the date for establishing your debts is the date you filed you bankruptcy. You cannot add any new debts accumulated since that date. Your best bet will be to contact the trustee than handled your bankruptcy and find out what you need to do in order to be discharged. Then once you are discharged from your bankruptcy you may file a consumer proposal or even a second bankruptcy if that makes the most sense.
If I filed personal bankruptcy in 2016 am I eligible to apply to buy a house as a co owner in 2021 with the other co owner having top credit rating with income of 100g a year if I am putting 30g as a down payment ?
Hi Trevor. Assuming you are discharged from bankruptcy, you can buy whatever you want. The issue will be whether or not a lender is willing to give you a mortgage, and that will depend on the amount of your down payment, your income, the co-signer’s credit, and what you have done to rebuild your credit since the end of the bankruptcy. So to answer your question, there is nothing preventing you from buying a house, other than the requirements of the lender.
I filed for bankruptcy in 2006 but never completed it because I found out it would hurt my chances of getting a mortgage. Now in 2021 this is on my CRA Income tax return as Insolvent. My credit is good now, what do I do now?. Do I just ignore it or do I have to claim the bankruptcy when I’m not bankrupt now or go back to court to get it removed from public record? It’s not on my credit reports.
The only way to clear the 2006 bankruptcy is to go to Court and either (1) complete the bankruptcy as required, or (b) have the bankruptcy annulled/cancelled. Option B sounds easier, BUT to have the bankruptcy annulled you need to show you were not eligible to file in 2006 (ie you were not insolvent at the time) or you have to prove to the Court that all of your debts from 2006 have been repaid in full. You do not have the option of filing for bankruptcy again until you’ve completed the one from 2006.
So contact the trustee firm that helped you in 2006 and see if they will assist you now to follow option a, or hire a lawyer and ask them to deal with option b for you.
You may of course simply do nothing and carry on as you have been. At some point the undischarged bankruptcy may cause you financial and/or legal complications, but you may wait and deal with them when it becomes necessary.
I have an RBC credit card debt and an receiving loan I took out to cover the card, (which I also haven’t been paying, and a Canadian Tire credit card from about 20 years ago that still calls, my income is odsp (Ontario Disability) how will I pay for the bankruptcy if the government is supporting me? How does bankruptcy work for those on government assistance?
Unfortunately, the government doesn’t provide financial assistance to cover the costs associated with filing for bankruptcy. Most trustees, ourselves included, will adjust the basic fees for persons with limited income. Something to keep in mind is that your government assistance it “protected” under the law. A Court will not allow someone you owe a debt to garnishee (take) payments from your assistance. In most cases, people on assistance don’t file.
I went bankrupt in 2009 and received a conditional discharged. The only thing remaining at the time was to pay the trustees fee. At the time I was going through a lot (domestic situation) and had to put the well-being of my children and the situation we found ourselves in first. Therefore I never finalized the bankruptcy. I have been trying to get it done in the last few years so I can move on with that part of my life. Unfortunately the trustee I was with at the time no longer deals with person bankruptcy, therefore, it was stated I would have to pay a 1000$ to get a new trustee , provide documents for the last 12 years which I don’t understand and pay the original amount, which I have no problem with. What are my options to resolve this.
If a Conditional Order was issued all those years ago you need to comply with the Order or go to Court and ask that the Order be varied (changed). You can hire a lawyer to do this, or you can find out who the successor trustee was for the firm you used to deal with. Whether it is a trustee or a lawyer they will want to get paid for their work…
I felt bankruptcy in 2016 August. Says my date of resolved is November 2017. So basically my bankruptcy will stay on my credit reports till approximately November 2024 give or take a few months? Thanks for the help.
Hi Sean. Yes, if this was your first bankruptcy, the minimum it will remain on your credit report is 6 years after your date of discharge, so if you were discharged in November 2017, the bankruptcy should be purged from your credit report around November 2023. (Different provinces and different credit bureaus have different rules, so it is safer to assume seven years to be safe, so you are correct, by the end of November 2024 your bankruptcy should not appear on your credit report). Here’s how TransUnion reports: https://www.transunion.ca/credit-report
30 years ago I loaned a friend some money for her business but 5 years later she declared bankruptcy and had close her business. She has been discharged for 25 years and now would like to repay me but can she do this legally?
Yes, a debtor can repay a debt from bankruptcy. It is not legally required, and since the debt was discharged in bankruptcy it is no longer a legal debt. However, if your friend wants to give you a gift of that amount, there is no prohibition for her doing so, providing she is doing it voluntarily.
Hi I declared bankruptcy in 2003, it is still saying bankruptcy adjourned on my credit record the trustee I has since retired it’s been 20 years know is there any way to get this bankruptcy discharged as I’m a senior an this still has affected my credit score all these years
The only way to obtain your discharge is to bring a motion to court asking to be discharged from the bankruptcy. If you contact the Office of the superintendent of Bankruptcy (OSB), they should be able to tell you if a new trustee firm assumed responsibility for your retired trustee’s files when they stopped working. The OSB can send you copies of the most important forms from your bankruptcy – whatever lawyer you hire will need those documents to bring the motion.
Hello, we declared bankruptcy in 18 years ago, we went through everything, payments made, court, released, and everything was fine. They took $20,000 from the equity from our house. We are looking to sell and our realtor said that it still had the bankruptcy listed in city files. Do you know what this could be and/or how to get rid of it?
Hi Roger. I suggest you talk to your trustee (if they are still around) or your lawyer. It’s possible that the trustee “registered on title” when you filed, and did not remove the registration when you paid the $20,000 in equity, but that’s a question for your trustee or lawyer.
I just wanted to share my appreciation for this information and for the fact that comments are still being replied to 5 years later. Thanks for taking the time and energy to help those of us that are struggling.
I went into 1st time bankruptcy, the LIT spent 10 mins and calculated numbers then gave me a total and a monthly payment of 348.50. I had some surplus income and at some times I has zero income months.
During the 19 months out of 21 month duration I have paid over $7k however, my trustee says I’ve only paid just over 4K. They now want me to enter into mediation for a term of 48 months (to pay 4,800. Ive asked them to explain the discrepancies, and they wont put it in writing and state they will only talk on the phone. Now they are opposing the discharge and want me to go to mediation. Additionally, if I agree to mediation then my bankruptcy will be a total of 71 month’s. Am I correct to think I will not be discharged until 2026 and then have another 7 years in my credit file until 2033? I cannot get the LIT to explain anything and How do I figure out why they said I only paid 4K when I paid 7K and is there a law stating they don’t have to respond?
Hi Felix. I suggest you book a meeting with your trustee and ask for a complete accounting of the numbers. If they don’t give you that, I suggest you contact the Office of the Superintendent of Bankruptcy and file a complaint against the LIT, or at the very least ask them to intervene so you can get an explanation. https://www.ic.gc.ca/eic/site/icgc.nsf/eng/h_07026.html#from=Insolvency
If I have a CRA tax debt that is the result of not filing my income returns for 6 years because I knew I owed money I couldn’t afford to pay due to cost living and child support . I owe 20k but with penalties and late filing I know it will be alot more the 20k in back taxes can I claim bankruptcy. Will I get charged with tax evasion.
Yes you may file for bankruptcy to deal with tax debts. No you won’t be charged with tax evasion for not filing. Get the returns filed and assessed then speak to a trustee once you know how big the problem is.
I filed for bankruptcy in 1998 and I think something happened but I ended up going to jail or something and the trustee discharge themselves in court, but did not discharge me. No I didn’t know this happens and I’ve been going my whole life now to this date without having a knowing that I had a bankruptcy until I tried to sell my mobile home now I have a bankruptcy and I didn’t even know about it. Is there anything I can do about that?
You should contact the trustee that was handling your file back in 1998 to see what needs to be done in order to be discharged (released) from the bankruptcy. If you don’t remember which trustee was assisting you then contact the Office of the Superintendent of Bankruptcy and they will be able to tell you who it was. Basically, the only way to be discharged from bankruptcy now is to go to Court and ask to be released. The first thing the judge will ask you is “what still needs to be done?” No point even going to Court if you cannot answer that question.
I filed for Bankruptcy in 2017 and was discharged in September 2018 , everytime I checked my credit report at Transunion it showed Bankruptcy. Now when I check it shows on a couple of accounts derogatory. What does this mean?
The fact that you filed bankruptcy may stay on your creditor report for up to 7 years after the date of your discharge. In your case that means Sep of 2025. The derogatory accounts are a separate issue. If they are debts that were included and eliminated by your bankruptcy then you’ll need to use the dispute resolution process offered by the credit report agencies to have them corrected. Unfortunately, companies have been selling old accounts to companies that revive them on your credit report as a way to pressure you into dealing with them…