Canadians are facing a cost-of-living crisis. Throughout the last year of rampant inflation, many consumers had no choice but to take on more debt to make ends meet. Now with interest rates continuing to spike upward some households are facing the prospect of being unable to pay their debts as they come due and may be considering declaring Bankruptcy for a first, second, or even a third time.
If this sounds like you, don’t worry — many people find themselves in the same situation and it isn’t anything to be ashamed of. Life happens and filing for Bankruptcy or entering into a Consumer Proposal might be the solution you need to relieve your financial stress and give you a fresh start.
We’re here to help you make the best decision for your individual circumstance. This article will look at how often you can declare Bankruptcy, how it will affect your financial situation, and what other options you may have to address your unmanageable debt.
There is no legal limit for the number of times your can file a Bankruptcy. However, the process and consequences do differ considerably for a second or subsequent Bankruptcy.
To file a second or subsequent Bankruptcy, you must:
Filing for Bankruptcy will provide you with relief and protection, but multiple Bankruptcies will have long-term effects on your financial situation. The process also becomes increasingly more restrictive each time it is repeated.
Before you file, review all your options with the support of a Licensed Insolvency Trustee (LIT) to determine if another solution such as a Consumer Proposal might be the right fit for your situation. An LIT will help you make an informed decision — and if you choose to file for Bankruptcy a second time, they will be there to guide you through each step of the process.
There are several differences to consider if you are thinking about filing for a second Bankruptcy. Unlike your first Bankruptcy, you will not qualify for an automatic discharge in nine months. Instead, Bankruptcy will last:
When you file for a second Bankruptcy, an LIT must ask the court to hear your application for discharge. The court will decide the conditions of your discharge — including how long you will be in Bankruptcy and if you will be required to continue making payments into Bankruptcy.
A creditor can also oppose your discharge in situations where you have filed for multiple Bankruptcies. This may result in your Bankruptcy lasting longer and costing more.
Finally, filing for another Bankruptcy will also impact your credit score. A second Bankruptcy will appear on your credit report for up to 14 years in comparison to a first-time Bankruptcy, which only remains on your record for six to seven years.
There are several alternatives to Bankruptcy that will help you regain control of your financial future. Discuss your options with an experienced LIT to determine the best solution for your unique situation. These are a few of the other options that they might suggest:
A Consumer Proposal is the most popular formal insolvency process. Your LIT will review your income and expenses to determine the monthly debt payment you can afford and use that amount to calculate a fair settlement with your creditors. If most of your creditors agree to your Consumer Proposal, the terms are locked in and you will make monthly payments to your LIT, who then pays your creditors throughout the process.
You can take up to five years to repay a Consumer Proposal, but there is no penalty for paying it off sooner. Many people choose this option because it is budget-friendly, flexible, has fewer duties and is less damaging to your credit rating than a Bankruptcy.
Debt consolidation combines all debts into one loan. This makes debt easier to manage, since you’ll make one monthly payment instead of separate payments to each creditor.
Your loan will also have a fixed interest rate, so you won’t have to worry about how different interest rates will affect each debt.
Non-profit credit counselling agencies can help you find solutions to your debt. You’ll work with a credit counsellor better understand your financial challenges. Your credit counsellor will also negotiate with your creditors to help you pay off your debt faster through options like a debt management plan.
You’ll talk to your creditors directly in an informal debt settlement. Call them to ask if they could reduce the interest rate on your debt — you could pay your debt off more quickly if they say yes.
It is important to get any agreement in writing if you choose this debt solution.
Don’t wait to reach out for help if you’re struggling with overwhelming debt and financial stress. Our professionals at MNP Ltd. support people in similar situations every day and can provide knowledgeable advice to help you take control of your financial future.
Talk to our LITs to decide if filing for a second Bankruptcy or entering into a Consumer Proposal is the right debt solution for you – or if another option might work best for your situation. We’ll help you make an informed decision and support you as you work towards achieving a debt-free future.
CIRP, LIT, CPA, CA
Senior Vice President
Servicing: Edmonton (Downtown), Edmonton (North East), Edmonton (South), Edmonton (West), Grande Prairie, Leduc, Sherwood Park, Spruce Grove, St. Albert, Yellowknife
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