How long does personal bankruptcy last?

The duration of a personal bankruptcy depends primarily on 2 factors: 

  1. Whether it is a 1st-time bankruptcy or not. 
  2. If you have surplus income:  

       a) If you don’t have “surplus income,” bankruptcy will last for 9 months for a 1st-time bankruptcy and 24 months for a 2nd-time bankrutcy.  

       b) If you have “surplus income,” the duration will be extended by an additional 12 months. 

What is surplus income? 

Having a net income (after taxes and certain expenses) higher than the minimum set by the federal gouvernement standards for a person in a similar financial and family situation. 

How is surplus income calculated? 

The calculation of “surplus income” is determined based on: 

  • Your net income after taxes. 
  • The number of dependents and if you have a spouse/partner. 
  • Expenses such as childcare, alimony (to be paid), medical condition and expenses related to your job. 

How is the duration of bankruptcy calculated? 

The duration of your bankruptcy is estimated when the bankruptcy is filed and based on the presence a surplus income at that time. Towards the end of your bankruptcy, your advisor will recalculate the actual income earned and the expenses incurred for the entire duration of your bankruptcy and will calculate an average for this period. 

It is this average that will determine whether you have surplus income and that will determine the duration. 

It is therefore possible that you started with a bankruptcy period of 9 months and end up with a 21-month bankruptcy (if your financial situation changes). The opposite is also true: a 21-month bankruptcy can be reduced to 9 months. 

All the information during the 1st consultation 

During your 1st meeting with your advisor, he or she will explain in detail: 

  1. How long the bankruptcy should last. 
  2. The amounts to be paid. 
  3. How the calculation is done. 

Obviously, it’s difficult for anyone to know whether their income will increase or decrease during bankruptcy. Therefore, it’s impossible to guarantee the duration of your bankruptcy from the start. 

By extending or reducing the duration of bankruptcy, the law aims to balance an individual’s right to be discharged from their debts with their creditors’ rights to recover part of their debt when the person has means to do so. 

To find out more about Surplus Income, feel free to contact an advisor at Jean Fortin to schedule an appointment. The consultation can be conducted remotely or in person, according to your preference. It’s free, confidential, and without obligation. 

By Pierre Fortin
Jean Fortin & Associés
Personal Finance Advisor
Licensed Insolvency Trustee