Filing bankruptcy a second time

Posted on 19 April 2023

Written by Graeme Hamilton

Bankruptcy is the legal process of gaining a fresh financial future, and is ideal for Canadians struggling with overwhelming debt. It is the process of assigning any non-exempt assets you might have over to your Licensed Insolvency Trustee. Your Licensed Insolvency Trustee will then sell these assets for the proceeds to go towards the repayment of your creditors, and in exchange you will be cleared of your unsecured debts. If you have landed on this page, you may well be wondering if filing bankruptcy a second time is a possibility, and how it all works. The primary difference between a first and second bankruptcy is that during a second bankruptcy, it is not possible to be automatically discharged in as few as nine months, unlike a first time bankruptcy. Second bankruptcies take longer. Second bankruptcies in Canada do happen, and it still presents a fresh start – the rules are just stricter. In this article, we share all you need to know about filing bankruptcy a second time.

Is filing bankruptcy a second time possible?

Provided you received a bankruptcy discharge from your first bankruptcy, you can absolutely file bankruptcy twice in Canada. In fact, you can even file for bankruptcy three times in Canada. If you have not been discharged from your first bankruptcy, you will need to petition the Bankruptcy Court for a discharge from your first bankruptcy in order to file a second bankruptcy. The primary difference with a second bankruptcy is that it will be more complex than a first bankruptcy, more expensive, and will take longer. Filing bankruptcy a second time in Canada will likely result in discharge in two years instead of nine months. For most Canadians, filing bankruptcy will only happen once, although there are scenarios in which filing a second time may be necessary. Although filing bankruptcy means you need to comply with some duties including attending courses on money management and budgeting, financial problems can arise still leading to filing bankruptcy a second time. It may be more common than you think – roughly 10% of bankruptcies are a second time filing. At Spergel, we have been helping Canadians file bankruptcy for over thirty years. We know the way to approach second bankruptcies, and we are here to help you.

What are the consequences of filing bankruptcy twice in Canada?

Second bankruptcies are generally more complex than filing a first bankruptcy. Here are the main consequences of filing a second bankruptcy:

  • It takes longer – you will be eligible for discharge from bankruptcy in 2 years, instead of 9 months
  • If you have surplus income during a second bankruptcy, it could take as long as 3 years to get discharged
  • It is more expensive – as you need to make monthly payments for a longer period of time, the cost of bankruptcy increases in a second bankruptcy
  • Your credit report will be affected for twice as long in a second bankruptcy. For first time bankruptcies, this is typically for 7 years; for a second bankruptcy this is more like 14 years

Can you file bankruptcy a third time?

You are able to file bankruptcy for a third time in Canada, although you will not be able to have an automatic discharge from bankruptcy which you may have done in your previous bankruptcies. You will also need to attend a hearing for your bankruptcy discharge. This means that the court will make a decision on whether or not you are discharged and free to enjoy life after bankruptcy. Filing for a third time means you will face questions on why you had to file again. The court will also place stringent conditions around you being discharged – if, that is, you are discharged at all. Filing a third bankruptcy is something you probably want to avoid at all costs, and at Spergel we can help you to avoid this.

What are the alternatives to filing bankruptcy a second time?

Although it is possible to file bankruptcy more than once in Canada, you might want to consider bankruptcy alternatives instead. When it comes to a second time bankruptcy, it can be much more expensive and lengthy, where an alternative may prove cheaper and quicker for you. A popular bankruptcy alternative is a consumer proposal which allows you to avoid bankruptcy while reducing your unsecured debt by up to 80%. A consumer proposal is the legal process of putting forward an affordable monthly repayment figure to your creditors. Working with a Licensed Insolvency Trustee, they will help to negotiate with your creditors on your behalf. Your creditors are more likely to accept because they will receive more via a consumer proposal than they would through a bankruptcy. If your proposal is accepted, you will only need to make your affordable monthly payment for a period of up to five years maximum. Consumer proposals have a number of advantages. As well as a large reduction in your debt, they enable you to keep your assets, and offer protection from your creditors via a stay of proceedings. Before deciding on a second bankruptcy, we highly recommend you speak to a reputable Licensed Insolvency Trustee about your options as well as the implications and alternatives available.

If you are considering filing bankruptcy a second time, speak to Spergel first. Our Licensed Insolvency Trustees treat every individual with understanding and compassion, and will review your financial circumstances to walk you through your available debt relief options. Book a free consultation with Spergel today – you owe it to yourself.

Graeme Hamilton

Graeme Hamilton

Graeme Hamilton is a Chartered Insolvency and Restructuring Professional with over 10 years’ experience as an LIT (Licensed Insolvency Trustee). He is also Spergel's resident expert on bankruptcy and debt relief in the Ontario region. Prior to establishing his career in the insolvency industry, Graeme lived in Cambodia doing volunteer work with NGO's.

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