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Multiple Bankruptcies

How Many Times Can You File For Bankruptcy? Multiple Bankruptcies in Ontario

Life rarely goes as smoothly as we’d like, especially in today’s economy. And when you find yourself deep in debt once again, you may be considering filing for Bankruptcy for a second time.

It is not as unusual as you might think to file for Bankruptcy a second or even a third time. But each time you file it will last longer and in turn cost you more.

Filing for Bankruptcy

The Bankruptcy and Insolvency Act in Canada details the process of filing for Bankruptcy and receiving a discharge from Bankruptcy. The process is more straightforward the first time you file for Bankruptcy than the second time you file. However, receiving a discharge becomes much more difficult if you file a third time.

What happens the first time I file for Bankruptcy?

First, you must have a Licensed Insolvency Trustee (LIT) file for Bankruptcy on your behalf. Your LIT will work with you to establish a budget, determine a surplus income requirement, and advise you of the assets you can keep.

The surplus income requirement is an important part of your filing. The government outlines the minimum amount an individual or family needs to live on. The excess is considered surplus if your income exceeds the minimum amount. Part of your extra income will pay your creditors.

The surplus income requirement is essential because it determines the length of time you will be in Bankruptcy before you can be discharged. If you have no surplus income, you can receive an automatic discharge from your first Bankruptcy after nine months. However, if you have to fulfill the surplus income requirement, your discharge from Bankruptcy will take 21 months.

Being discharged means you are released from all obligations to repay the debts included in your Bankruptcy. A condition of being discharged is that you fulfill all your duties of the Bankruptcy. Once your Bankruptcy has been discharged, it will stay on your credit report for six years after being discharged and then drop off.

You will receive a Certificate of Discharge from your LIT when your Bankruptcy has been discharged. It’s important to keep the certificate because it shows that you have fulfilled your obligations, been discharged from your Bankruptcy and will show all disbursements paid as part of the conditions.

Filing a second time for Bankruptcy

While filing for Bankruptcy isn’t something most people take lightly, sometimes life’s events can leave you with few alternatives. You may be in a situation where you need to file for Bankruptcy a second time. Financial problems can result from health issues, job loss, a relationship breakdown, and other circumstances beyond your control.

Your first Bankruptcy must be discharged before you can file for Bankruptcy again, but you can file for Bankruptcy in Ontario or anywhere else in Canada a second time. In fact, there’s no limit on the number of times you can file for Bankruptcy. Some people have multiple bankruptcies, but this is not recommended for several reasons.

First, filing for Bankruptcy a second time or more will be more expensive than the first time. When you file for Bankruptcy the first time, you need to make a base contribution cost toward the court of approximately $205 for nine months, costing you $1,845. For your second Bankruptcy, the base contribution cost is similar, but you have to make the payments for 24 months, which will cost you about $2,050.

Secondly, it will take longer to receive your automatic discharge from Bankruptcy the second time you file. With your first Bankruptcy, you can receive a discharge in as little as nine months without a surplus income requirement. It will take 21 months if you have a surplus income requirement.

You will not receive a discharge for your second Bankruptcy for 24 months if you have no surplus income requirement. Your automatic discharge from a second Bankruptcy will be extended to 36 months with a surplus income requirement.

Thirdly, a second Bankruptcy will stay on your credit report for 14 years instead of seven. Getting a loan or any other type of credit will be difficult with a Bankruptcy on your credit report for 14 years. Because Bankruptcy results in the lowest credit score, you might find being hired or finding a place to rent challenging.

Filing for multiple Bankruptcies

Your circumstance could leave you in a situation where you must file for Bankruptcy a third time. Your second Bankruptcy must be discharged before you can file for a third.

First and second bankruptcies are automatically discharged once you have fulfilled your obligations and the required time has passed. This is not true for a third Bankruptcy. In this situation, there is no automatic discharge.

You’ll need to appear in Bankruptcy Court to formally request a discharge before you can receive a discharge for a third Bankruptcy. The Court may grant your request or may not. In addition, the Court can add extra conditions or penalties that you must take care of before they give a discharge from Bankruptcy.

Filing multiple bankruptcies can result in the Court refusing to grant a discharge from Bankruptcy to you—another option is to consider a Consumer Proposal before filing for a second or third Bankruptcy.

Consumer Proposals and Other Options

If you’re overwhelmed by debt payments, filing a Consumer Proposal could be a better option. A Consumer Proposal has the following benefits:

  • It can reduce your debt by 50% or more.
  • You keep your assets.
  • It is less damaging to your credit rating than a Bankruptcy.
  • You will have one payment that should be manageable.

You’ll need a Licensed Insolvency Trustee to file a Consumer Proposal. At Adamson and Associates, our team will work with you to find the best solution for your debt.  We offer credit counselling and filings for Consumer Proposals and Bankruptcy. Please don’t hesitate to contact us at 519-310-5646 for a free consultation. We will put together a plan to get rid of your debt so you can get a fresh start.

John Adamson, Licensed Insolvency Trustee Ontario

John Adamson, CPA, CMA

John is a Licensed Insolvency Trustee (1994), a Chartered Insolvency and Restructuring Professional (CIRP – 1994), and a Chartered Professional Accountant with a Certified Management Accounting designation (CPA, CMA – 1992). His experience includes more than 25 years of helping individuals, small businesses, their owners and even lenders, find solutions to their debt problems.

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