In this guide
How long does bankruptcy last?
For most Canadians, a bankruptcy lasts 9 to 21 months, though this can vary based on your income and whether you’ve been bankrupt before.
You will be eligible for an automatic discharge if you perform all your bankruptcy obligations.
Source: Government of Canada – Office of the Superintendent of Bankruptcy, Bankruptcy Discharge
| Bankruptcy | No surplus income | With surplus income |
|---|---|---|
| First | 9 months | 21 months |
| Second | 24 months | 36 months |
| Third | No automatic discharge | No automatic discharge |
A first bankruptcy ends in nine months with no surplus income, or 21 months if your surplus income is $200 or more a month. A second extends this to 24 months, or 36 months with surplus income.
A third bankruptcy is treated more seriously. There’s no automatic discharge. It takes at least 36 months, and a court decides if and when you’re released. A judge will look at why the earlier bankruptcies didn’t fix the problem before setting any terms.
A Licensed Insolvency Trustee (LIT) can explain what to expect based on your income, assets, and past filing history.
Not sure which applies to you? A Licensed Insolvency Trustee can tell you exactly how long your bankruptcy would last and whether a consumer proposal might be a better fit. Get a free consultation
If your income is steady or you have assets you want to keep, a consumer proposal may be a better alternative.
It allows you to settle your debts through fixed monthly payments for up to five years, without filing for bankruptcy or surrendering assets.
Many people who would otherwise face a longer bankruptcy choose a consumer proposal instead.
See Consumer Proposal vs Bankruptcy
How surplus income changes the length of your bankruptcy
Surplus income is the amount a household makes above the levels set by the government. If you are required to pay surplus income, your bankruptcy will take longer and cost more.
If your surplus income is $200 or more a month, you pay half of it into your estate, and that’s what extends a first bankruptcy from nine months to 21. The threshold changes each year with family size.
What can delay your bankruptcy discharge in Canada?
Most bankruptcy discharge delays stem from a few key issues.
If you still owe surplus income when your discharge is due, you may go through mediation with your trustee to set out a formal payment agreement. This agreement lets you pay the remaining balance to complete your discharge.
A creditor, your Licensed Insolvency Trustee or the Office of the Superintendent of Bankruptcy can object to your discharge. That sends it to a court hearing, where a judge decides whether you’re discharged and on what terms.
Not finishing your duties stops an automatic discharge. If you haven’t filed your reports, attended counselling or handed in income statements, your case goes to court, and a judge decides what happens next. The court can give you more time to finish what’s left before granting your discharge.
A large tax debt triggers a mandatory court review. If you owe $200,000 or more in tax debt and that’s at least 75% of your total unsecured debt, the court has to review your discharge before you’re released. The judge will look at your situation, your cooperation with the process, and your repayment ability before setting a discharge date.
Source: Government of Canada – Bankruptcy and Insolvency Act, Section 172.1
Multiple bankruptcies mean court hearings and potential delays.
What are your bankruptcy duties?
There are steps you must follow, called bankruptcy duties, to be officially discharged from bankruptcy.
You make your payments, send proof of income and expenses each month, and give up any non-exempt assets. You hand your credit cards to the trustee, provide documents like your tax returns, and attend two financial counselling sessions.
If your trustee or a creditor asks, you also attend an examination to answer questions about your finances.
Once you complete your duties, the debts included in your bankruptcy will be discharged, meaning you’ve successfully completed the bankruptcy process and no longer need to repay your debts.
What happens if you’re not discharged from bankruptcy?
Failure to get discharged from your bankruptcy can result in your trustee closing your file without a discharge certificate.
Without a discharge, you lose creditor protection. The collection calls, garnishments, and lawsuits can resume on the original debts. Any payment arrangements made during bankruptcy no longer apply.
You also can’t borrow $1,000 or more without telling the lender you’re an undischarged bankrupt. Most lenders will decline applications from undischarged bankrupts, making mortgages, car loans, and credit cards difficult or impossible to obtain.
Source: Government of Canada – Bankruptcy and Insolvency Act, Section 199(b)
Your credit report also keeps showing an active bankruptcy indefinitely, instead of falling off six to seven years after a discharge. Completing your bankruptcy duties is the only path to discharge and financial recovery.
How long does bankruptcy stay on your credit report in Canada?
A first bankruptcy stays on your credit report six to seven years after discharge, and a second stays 14 years. The exact figure depends on your bureau and province.
You can start rebuilding the day you get your Certificate of Discharge. A secured credit card and on-time payments are the quickest ways to rebuild your credit after bankruptcy, since payment history is the biggest part of your score.
Source: Equifax Canada or TransUnion Canada
Talk to a Licensed Insolvency Trustee about bankruptcy for free
A Licensed Insolvency Trustee can tell you how long your bankruptcy would take, whether surplus income applies, and whether a consumer proposal would suit you better.
The first consultation is free, by video, phone or in person.
Frequently asked questions
How long does a first bankruptcy last?
For a first bankruptcy, it typically lasts nine months if you have no surplus income and complete your duties. If you have a surplus income of $200 or more per month, it extends to 21 months.
How long does a second bankruptcy last?
A second bankruptcy lasts 24 months if there is no surplus income and 36 months if there is surplus income. A second bankruptcy does not qualify for the nine-month discharge.
How long does it take to be discharged from bankruptcy?
In a typical first bankruptcy case, a discharge is automatically granted after nine months. Delays may happen if you owe surplus income, miss responsibilities, have a significant tax debt, or if a creditor objects.
Can bankruptcy last longer than 21 months?
Yes, a second bankruptcy lasts up to 36 months. A third bankruptcy has no automatic discharge and takes at least that long. Additionally, any bankruptcy can be extended if you fail to complete your duties or if a creditor objects.
What’s the fastest way to get discharged from bankruptcy?
The quickest way to get discharged from bankruptcy is to complete all your duties on time and make your payments on time. If you do this for a first bankruptcy, you’ll receive an automatic discharge after nine months.
