Deciding to file for personal bankruptcy can be an emotional experience. But for many Ontario residents, it’s the best way to achieve debt relief. As you learn more about the bankruptcy process, you might be wondering how long it lasts. Below is a detailed guide of timeline expectations for a bankruptcy filing.
In most cases, someone who files for bankruptcy the first time will be eligible for discharge after nine months. How long your bankruptcy will last can be extended if you have been bankrupt before or if you are required to pay surplus income.
The length of bankruptcy in Ontario is as follows:
- If you’re filing bankruptcy for the first time with no surplus income payments, you’ll be bankrupt for 9 months.
- If you’re filing bankruptcy for the first time with surplus income payments, you’ll be bankrupt for 21 months.
- A second-time bankruptcy filing with no surplus income payments will get an automatic bankruptcy discharge after 24 months.
- A second-time bankruptcy filing with surplus income payments will get an automatic discharge after 36 months.
- If this is your third bankruptcy, you are not eligible for an automatic discharge. Your Licensed Insolvency Trustee will need to apply to the bankruptcy court for an application for discharge hearing.
The above timelines are based on your discharge not being opposed by your creditors, the trustee or the Office of the Superintendent of Bankruptcy. This is rare but can happen.
How Does Surplus Income Affect Length of Personal Bankruptcy?
Surplus income is one potential cost of bankruptcy. The federal government has set net monthly income thresholds for a person to maintain a reasonable standard of living. This threshold is then used to determine how much you must pay if you file for bankruptcy.
For example, (using 2018 guidelines) if you have a family size of 3 people, your net income threshold would be $3,293. If you have a net income of more than $200 over the government allowed income threshold, the length of your bankruptcy will be extended for a further 12 months. You’ll also be required to continue to pay that surplus income into your bankruptcy estate for your creditors.
A longer bankruptcy means extra payments, which increases the cost of bankruptcy. You can use our free Surplus Income Calculator to help you determine what your potential surplus income payments might be.
What Other Factors Impact Bankruptcy Length?
The length of time before a bankruptcy discharge also depends on whether you have completed your duties under bankruptcy law. Some of the most important duties include:
- Disclose all property (assets) in your possession and delivering non-exempt assets to the Licensed Insolvency Trustee
- Surrender all credit cards to the Trustee for cancellation
- Report your household income and monthly expenses to your Trustee
- Make all of your required payments, which include surplus income
- Attend two mandatory credit counselling sessions
You can find a complete list of duties here. Failure to complete them will increase how long you will be bankrupt. If you have any problems in completing your duties, you should speak to your Trustee for advice as soon as possible.
While this is rare, if one of your creditors opposes your bankruptcy discharge, a court hearing will be held. It will then be up to the court to decide whether you will be discharged. If you face this process, it would extend the length of your bankruptcy.
But, as mentioned earlier, if it’s your third bankruptcy, you’re required to go to court to be discharged.
Is There an Alternative to Bankruptcy?
If after using our surplus income calculator, you realize you have to make payments over a longer period of time, talk to us about alternatives to personal bankruptcy. A popular debt relief option for many Ontario residents is the consumer proposal because it allows financial freedom while avoiding bankruptcy.
To find out more about which debt relief method is best for you, speak to one of our debt professionals today for a free initial consultation. We’ll carefully review your income, and explain how surplus payments will be calculated in your situation to allow you to estimate the cost and actual length of your bankruptcy.