How Often Can You File For Bankruptcy (MNP 3 Minute Debt Break)

Canadians are facing a cost-of-living crisis. With rampant inflation, many have taken on more debt just to make ends meet. With interest rates still high, some households might be considering declaring Bankruptcy for the first, second, or even a third time.

If this sounds like you, don’t worry — many people are in the same situation, and it isn’t anything to be ashamed of. Filing for Bankruptcy or entering a Consumer Proposal might be the solution you need to relieve financial stress and get a fresh start. 

There’s no legal limit to the number of times you can file for Bankruptcy. However, the process and consequences differ for a second or subsequent Bankruptcy.  To file again, you must have been discharged from your first Bankruptcy, owe more than $1,000 and not be able to repay your debts as they come due. 

Filing for Bankruptcy provides relief, but multiple Bankruptcies have long-term effects and become more restrictive each time. Review all your options with a Licensed Insolvency Trustee, or LIT to determine if a Consumer Proposal might be right. An LIT will help you make an informed decision and guide you through each step if you file again.

There are differences to consider if filing for a second Bankruptcy. Unlike your first, you won’t qualify for an automatic discharge in nine months. Instead, Bankruptcy will last 24 months if you have no surplus income, or 36 months if you have surplus income. 

An LIT must ask the court to hear your application for discharge, and the court will set the conditions. A creditor can oppose your discharge, potentially extending and increasing the cost. Additionally, a second Bankruptcy will impact your credit score for up to 14 years, compared to six to seven years for a first-time Bankruptcy.

There are several alternatives to Bankruptcy to regain control of your financial future. Discuss options with an experienced LIT to find the best solution. They might suggest things like a Consumer Proposal. This is where your LIT deals  with creditors to settle your debts based on what you can afford. 

Other options are debt consolidation. This is when you combine all debts into one loan, making it easier to manage with a fixed interest rate.  Credit counselling is another solution that uses non-profit agencies to help with  financial counselling and budgeting assistance . Or maybe Informal debt settlement is the answer where you negotiate directly with creditors for lower interest rates or settlements.

It’s important to not wait to seek help if you’re struggling with debt and financial stress. Talk to MNP Limited and our LITs to decide if filing for a second Bankruptcy, entering a Consumer Proposal, or another option is right for you. We’ll help you make an informed decision and support you toward a debt-free future.

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