Please also refer to our blog: Bankruptcy – What is a Discharge.
While you are bankrupt, your position is that of an “undischarged bankrupt.” This means that you have to continue to supply budgets, tax returns and other information to the trustee on an ongoing basis. You are not allowed to apply for a loan, line of credit, bank overdraft, mortgage, etc. for an amount over $500 without disclosing that you are an undischarged bankrupt. The chances of being approved are very poor. If you come into an inheritance or win a lottery while you are still bankrupt, your trustee will have a talk with you about who gets the money. The trustee will explain that an “after acquired asset” is an asset acquired by the bankrupt person between the date that you filed the bankruptcy and the date you are discharged from your bankruptcy. You will not be happy with what you hear. Mortgage companies may renew an existing mortgage (usually at a higher than normal rate) but they will rarely allow you to increase the mortgage nor will they issue a new mortgage to an undischarged bankrupt.
Your discharge from bankruptcy is the start of your recovery and rebuilding of your financial life. You will be able to apply for a credit card or line of credit with a reasonable chance of success. Your trustee will assist you in this process. The credit bureaus (Equifax Canada and Trans Union of Canada) both keep a record of your bankruptcy for 6 years after you are discharged (14 years if it is a second time bankruptcy). The faster you get your discharge from bankruptcy, the faster it will disappear from your history. Translation – it will be easier, faster, cheaper to get a credit card or borrow money for the purchase of a car or house after you are discharged from bankruptcy than it is while you are still in the bankruptcy process.
For a definition of discharge, please refer to our blog: Bankruptcy – What is a Discharge.
If you are filing an Assignment in Bankruptcy for the first time, there is a period of time that is allowed for the trustee to complete their administration of your bankruptcy. The earliest time that you can be discharged from your bankruptcy is 9 months from the date that you originally filed the bankruptcy. Surplus income (if it applies) will extend your discharge date from 9 months to 21 months. Other problems may result in your trustee, a creditor or the Office of the Superintendent in Bankruptcy opposing your automatic discharge date to a future undetermined date. This future date is determined by your trustee only after all of the original problems are resolved. When your trustee requests you to supply information or answer questions that may arise during the administration of your bankruptcy, “failure to cooperate” with the trustee is the most common reason why your trustee will oppose your automatic discharge.
Technically, there is no limit to the number of times that you can file an Assignment in Bankruptcy. The practical issue is that after the first bankruptcy, it gets harder to get discharged from the bankruptcy. In a second bankruptcy, you are still entitled to an automatic discharge but the minimum period of time is increased from 9 months in a first bankruptcy to 21 months. If you have surplus income, the minimum period until you are discharged is 36 months. Simply stated, the second bankruptcy takes longer to finish and is more expensive than the first bankruptcy.
If there are any circumstances in the second bankruptcy that causes the trustee, a creditor or Office of the Superintendent to oppose you automatic discharge, the court will not look kindly on the fact that this is a second time bankruptcy. This is especially true if both bankruptcies have a similar cause. It is for this reason that your trustee (for your 2nd bankruptcy) will ask you for copies of the documents from your first bankruptcy. Your trustee will want to be very explicit in describing the cause of your 2nd bankruptcy. It may be a hassle for you to find your old papers, but your trustee is only trying to help you. About two months before your discharge, your trustee is required to write a report* in which he describes what he has found during his administration of your file. In this report, the trustee must recommend that you receive an automatic discharge or he is required to oppose your discharge which may result in an appearance in court by yourself.
* Report on the Bankrupt’s Application for Discharge is required under Section 170 of the Bankruptcy and Insolvency Act. It is often simply called the “170 report.”
What do I do if I have Canadian debt but now live in a foreign country?
In order to file bankruptcy in Canada, you must have debts in Canada, or live in Canada, or have assets in Canada. If you feel that the best solution for your debt situation is bankruptcy or a consumer proposal, you may need to return to Canada to meet with a trustee. There are several parts of a bankruptcy administration that require in-person meetings. In some cases, permission from the Office of the Superintendent of Bankruptcy may be granted to conduct meetings by teleconference. Email a trustee to find out what your options are.