Let’s face it. No one wants to go bankrupt once, let alone for a second time. But it happens and more often than you think.

Sure there are those that fall into the category of living beyond their means over and over again. However, most people who file for bankruptcy a second time are overextended as a result of a series of unfortunate events such as unexpected car repairs, fluctuating income, low income, health issues, relationship splits or job loss. Many know how to budget but the debt keeps revolving and there is no end in sight. They tried other debt options like consolidating debt, liquidating assets or borrowing from family or friends but nothing has helped. Monthly income doesn’t rise and yet the monthly cost of living does. Payments get missed, creditors start calling and stress levels increase. You google search “debt help” and plan to meet with a Licensed Insolvency Trustee to consider bankruptcy number 2. But how different is it from bankruptcy #1?

The federal law is there to give an honest but unfortunate person the chance to start over. It is the “fresh start” and “new beginning” that many need in their lives to jumpstart their future, pay monthly living expenses on time, reduce debt anxiety and eliminate stress.

Bankruptcy begins by meeting a Licensed Insolvency Trustee which is the only professional who can administer bankruptcy matters in Canada under the Federal law. The meeting is free and there is no obligation to do anything when you meet. The trustee will ask many questions about your income, expenses, debts and assets to get a clear picture of what your situation. They will analyze this information and discuss the pros/cons of filing for a second bankruptcy based on your individual circumstances. If you decide to proceed after this meeting, the trustee will assist you with completing the necessary paperwork and net file it with the Federal Government. Once this is done, a Stay of proceedings happens which is a legal protection to stop payments, interest, garnishments and collection calls.

The bankruptcy process is a period of time lasting 24-36 months from start to finish. You will be required to keep the trustee advised of your income during this period. The trustee will provide you with two counselling sessions which are designed to educate you on money management, addresses the causes of your debt situation and teach you about credit rebuilding. Depending on your income and family circumstances, you may be required by law to make monthly payments to the trustee for your creditors. Income tax refunds for the year of the bankruptcy and any year’s prior will be provided by CRA to the trustee for your creditors. If you complete these duties, you will be eligible for a discharge (a legal release) of the debts and your responsibilities. As an officer of the Court, the trustee issues this certificate in most cases.      

The credit bureaus will report your second bankruptcy for a period of 14 years after your discharge. This does not mean that you cannot apply or obtain credit during that time. Remember, creditors only make money if they take the risk on you again. In fact, most people who file for bankruptcy get credit too easily and often find themselves over-extended again later on down the road. It’s important to keep it all in perspective. Having a good rating is important but the focus during this time should be on living within your means and rebuilding your future stress free.