How Long Does Bankruptcy Last in Canada (& Ontario)

A first-time bankruptcy in Canada can last as little as 9 months if you don’t have surplus income, but it can extend to 21 months if you do. The same timeline applies in Ontario and across all provinces.

However, everyone’s situation is unique. The length of your bankruptcy can change depending on factors like surplus income, whether you’ve been bankrupt before, and if you’re able to complete certain duties on time. In this article, we’ll break down the main rules so you can get a clearer picture of what to expect out of the bankruptcy process.

How Long Does Bankruptcy Last in Canada?

Below are the standard timelines set by the Bankruptcy & Insolvency Act. Whether you live in Ontario or any other province, these durations apply:

• First-Time Bankruptcy
  • No Surplus Income: 9 months
  • With Surplus Income: 21 months
• Second-Time Bankruptcy
  • No Surplus Income: 24 months
  • With Surplus Income: 36 months
• Third (or More) Bankruptcy
  • No automatic discharge
  • Often extends beyond 36 months
  • Involves a hearing in bankruptcy court, where a judge decides how and when you’ll be discharged.

How Surplus Income Can Lengthen Your Bankruptcy

Surplus income is one of the biggest factors that can increase how long your bankruptcy lasts. Surplus income is determined by federal guidelines that set a monthly net income threshold for your household.

• If your net income is more than $200 over this threshold, you must pay half of that surplus to your trustee each month for the benefit of your creditors.
• Having surplus income also automatically extends a first time bankruptcy from 9 months to 21 months.

These federal thresholds apply across Canada, including Ontario. While bankrupt, you’ll submit monthly income and expense statements to your trustee, who calculates how much surplus you need to pay.

If you’re concerned surplus income will make your bankruptcy last much longer—or if you’re filing for a second or third time—you may want to explore a consumer proposal instead. A consumer proposal lets you repay only a portion of your debt over a set period (up to five years). You keep your assets, don’t pay surplus income, and have more control over your repayment terms.

Factors That Can Delay Your Bankruptcy Discharge

Even if you don’t owe surplus income, there are other circumstances that might extend how long you remain bankrupt. These include:

Incomplete Duties: To complete your bankruptcy you must fulfill all your bankruptcy duties, which include:

• Attending two credit counselling sessions
• Reporting your household income and expenses each month
• Making all required payments
• Surrendering non-exempt assets
• Cooperating fully with your Licensed Insolvency Trustee

If you don’t complete these tasks, your discharge could be delayed.

Creditor or Superintendent Objection: Though rare, creditors or the Office of the Superintendent of Bankruptcy may oppose your discharge. This could mean going to court, which postpones your discharge.

Large CRA Debts: If your debts to the Canada Revenue Agency exceed a certain threshold (for instance, you owe more than $200,000 and that’s at least 75% of your total unsecured debt), your discharge must be reviewed in court, which can delay the process.

Multiple Bankruptcies: If this is your second bankruptcy (or you have had multiple filings), the duration automatically increases, and it could also require a court hearing.

Following the rules and completing all your duties on time is the surest way to receive your discharge at the earliest possible date.

After Bankruptcy: How Long Will It Affect Your Credit?

A key concern for many people considering bankruptcy is their credit rating. The fact that you filed for bankruptcy will be noted on your credit report. A first-time bankruptcy remains on your credit report for 6 or 7 years after your discharge.

That may sound discouraging, but here’s some reassurance:

• You can begin rebuilding your credit score immediately after you’re discharged.
• Simple habits—like paying all bills by the due date and considering a secured credit card—can help you restore your credit standing over time.

Remember, the purpose of bankruptcy is to help you reset your finances so you can move forward debt free. While there is a credit impact, it provides the breathing room to start fresh.

Get Help Filing Bankruptcy

Personal bankruptcy in Canada is a legal process designed to help individuals who cannot afford to repay their debts. It offers you a fresh financial start by eliminating or reducing most unsecured debts, all while following clear regulations set out in the Bankruptcy & Insolvency Act.

Here’s how the process works:

1. Initial Consultation: You begin by meeting with a Licensed Insolvency Trustee (LIT). The trustee reviews your finances, explains all debt relief options (including bankruptcy and consumer proposals), and helps you decide the best path forward.
2. Filing for Bankruptcy: If you choose bankruptcy, your trustee files the required paperwork under the BIA. This automatically starts a Stay of Proceedings, which prevents creditors from contacting you or continuing any collection actions.
3. During Bankruptcy: You’ll need to complete certain duties (like reporting your income every month, attending counselling sessions, and surrendering non-exempt assets). If you fulfill these requirements on time, you can be discharged when the bankruptcy period ends.
4. Discharge: A discharge frees you from most unsecured debts, giving you a clean slate. The typical length of time before discharge varies depending on several factors, including whether you have surplus income or if this is your first, second, or third bankruptcy.

If you’re worried about how long you might be in bankruptcy, or simply want to know whether bankruptcy is your best option, talking to a Licensed Insolvency Trustee can clarify your next steps.

Every financial situation is different, and you deserve a personalized plan that helps you truly get out of debt. Take the first step toward a brighter financial future and contact Hoyes Michalos for a free consultation.

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1. Do I have to go to court if I file for bankruptcy?
2. Can I File Bankruptcy a Second Time in Canada?
3. Creditor Opposition to Bankruptcy Discharge – Delaying Your Fresh Start
4. The Bankruptcy Process in Canada Explained in 5 Easy Steps
5. Opposing A Discharge From All Points of View: National Insolvency Review