Length of Bankruptcy in Canada: How Long Will You Be Bankrupt under the New Rules?

NOTE: These rules come into effect on September 18, 2009. Please Contact us for more information.

Under the old rules, a first time bankrupt is eligible to be discharged after nine months. Under the new rules, effective for anyone who files bankruptcy on or after September 18, 2009, the length of bankruptcy is as follows:

• a first time bankrupt with no surplus will be bankrupt for 9 months (unless opposed)
• a first time bankrupt with surplus will be bankrupt for 21 months (unless opposed)
• a second time bankrupt with no surplus will get an automatic bankruptcy discharge after 24 months (unless opposed)
• a second time bankrupt with surplus will get an automatic discharge after 36 months (unless opposed)

What does this mean? If you have net income of more than $200 over the government allowed threshold (which for a single person is $1,870 in take-home pay per month in 2009), the length of your bankruptcy process will be extended for a further 12 months, and you will be required to continue to pay that surplus income into your bankruptcy estate for your creditors.

At Hoyes Michalos & Associates we believe that people who can pay a portion of their debts feel better about themselves if they can make payment arrangements with their creditors. These new provisions will no doubt cause more people to avoid bankruptcy by filing a consumer proposal, which for many people is the best solution.

We recommend that you contact our bankruptcy trustee offices for more information on Bill C-12 and the bankruptcy period in Canada, and to help you decide whether or not bankruptcy is the correct option for you.

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