Should I file a second bankruptcy?

In Canada, most people file for bankruptcy once in their lives.

Most people come out the other side stronger and better equipped to manage their finances.

However, a small minority may need financial assistance again, which is more common than you think.

If this occurs, you can file a second bankruptcy, but it takes longer and will cost more.

How long does a second bankruptcy last?

If you file a second bankruptcy and have no surplus income, it lasts 24 months. If you have surplus income, a second bankruptcy lasts 36 months.

In the next section, we’ll look at surplus income and how it affects the cost of a second bankruptcy.

How long does a second bankruptcy cost?

A second bankruptcy costs more because it lasts longer. It can take 24 months if you have no surplus income and 36 months if you do.

Surplus income is when you make more money than the government-set threshold for your family size. If you earn more than the threshold, you make surplus income payments to your creditors during the bankruptcy process.

If your income increases during your bankruptcy, you may have to pay more into your bankruptcy. If your income decreases, you will pay less.

Surplus income affects the length of your bankruptcy, and it will take longer to be discharged.

If your monthly surplus income payments are $100 or more, your bankruptcy is automatically extended to 36 months. As a result, you must pay surplus payments during your bankruptcy period.

This is one of the most significant disadvantages when filing a second bankruptcy.

Alternative to a second bankruptcy

If you want to avoid filing for bankruptcy for a second time, a popular alternative is a consumer proposal.

In a consumer proposal, the payment is fixed and will never change. You will never have to pay extra, even if your income increases.

Although a consumer proposal will cost more than bankruptcy, you can spread out the payments over five years, giving you more time than bankruptcy gives you.

This means that your payments are affordable, and you can pay off the proposal in a shorter time if your income increases (in a consumer proposal, payments are fixed, regardless of income changes).

Creditors cannot oppose your discharge once the consumer proposal is accepted and your credit score is impacted for a shorter period.

How long does a second bankruptcy stay on my credit score?

When you file for bankruptcy for a second time, it stays on your credit score for longer.

While a first bankruptcy remains on your credit report six to seven years after discharge, a second bankruptcy will stay on your credit report for fourteen years.

Can I file a second bankruptcy if I haven’t been discharged?

You must be discharged from your first bankruptcy to file a second one.

If you haven’t been discharged, you will have to apply to the court to have it discharged.

Your discharge can be opposed by your creditors, your Licensed Insolvency Trustee or the OSB.

See also: How do I get discharged from bankruptcy?

Can I file a third bankruptcy?

You can file bankruptcy a third time, but you are not eligible for an automatic discharge. A discharge hearing in bankruptcy court will decide if you should be discharged and when.

The court can also apply additional penalties based on the time elapsed between each of your previous bankruptcies.

For example, if your bankruptcies occurred within a short time, the court may look unfavourably towards you and apply a fine.

Conclusion

Filing for bankruptcy for a second time will cost more than the first because it lasts longer.

Surplus income payments can further extend your second bankruptcy, which will increase the cost even more. It also appears on your credit report for fourteen years, which is double the time of a first-time bankruptcy.

You should discuss a second bankruptcy with a Licensed Insolvency Trustee who will advise you further and discuss alternatives that could be less drastic.

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