How Long does Personal Bankruptcy Last?
Personal bankruptcy is not a one-off solution that is done in minutes. Instead, it is a process that takes time and effort. When you decide to file for personal bankruptcy, you do so through a trustee in bankruptcy. This person will sit down with you and review your financial situation. He or she will discuss your situation with you, review all relevant details and provide you with the options that are available.
One of these options may be filing for personal bankruptcy.
If that is the choice that you decide to make, the trustee will help you fill out the required paperwork and submit it. Once this paperwork has been filed, you receive protection from your creditors. This is one of the major advantages of bankruptcy. Any legal action that your creditors have taken against you stops as soon as you file for bankruptcy. Any wage garnishments that have started against you also stop. You will no longer receive calls from creditors or collection agencies. In fact, your bankruptcy trustee will be responsible for all communication with your creditors from this point onward.
In most cases, if it is your first bankruptcy, you will be automatically discharged nine months after filing.
However, you will need to ensure that you complete your required duties during the bankruptcy process in order to be discharged without issue.
Duties after Filing for Personal Bankruptcy
You have several responsibilities after you file for bankruptcy. You will need to ensure that you successfully complete these duties so that you will be discharged without issue. If you fail to complete what is required of you, your discharge could be opposed by the Office of the Superintendent of Bankruptcy, a creditor or your bankruptcy trustee.
Your trustee will inform you of the duties that are required of you as a result of filing for personal bankruptcy.
• When you file for bankruptcy, you may be required to attend a meeting of your creditors. However, this process is quite rare in personal bankruptcy cases and a meeting will likely not be held.
• You will be required to attend two financial counselling sessions as a part of your bankruptcy. The goal of these sessions is to teach you financial management and budgeting skills so that you avoid ending up with money troubles and debt issues in the future.
• You will need to report your income and expenses to your trustee on a monthly basis and provide proof of this income.
• You may be required to make payments to your trustee that will be distributed to your creditors.
• If you have surplus income (if you make more money than the level that is considered required to maintain a reasonable standard of living during the bankruptcy process) you may need to make surplus income payments to your trustee. Surplus income will be calculated by your trustee when you review all the specifics of your situation.
Surplus income payments can result in the length of your bankruptcy being extended. In a first bankruptcy, the bankruptcy is extended by 12 months if you are required to make surplus income payments. This means that it will be 21 months from filing before you are discharged rather than nine.
Once You Have Been Discharged
Once you have been discharged from personal bankruptcy, you will receive a certificate of discharge in the mail within approximately 30 days. You will then need to mail a copy of this letter or fax it to the two major credit bureaus in Canada: Equifax and TransUnion. This will inform them that you have been discharged from bankruptcy.
It’s important to note that, once you have been discharged from bankruptcy, a note is made on your credit report. This note remains on your report for six years if it is your first time filing for personal bankruptcy. While this note can make it more difficult to access credit in the future, you likely already would have had difficulty doing so since you were in a situation where filing for personal bankruptcy was an option. This likely means that your credit report was already damaged by late payments, missed payments or having too much debt.