Several factors affect the length of you being bankrupt in Canada. Your bankruptcy ends when you receive a discharge, the event that actually cancels your debts.

If it is the first time that an individual has been bankrupt, then they may be eligible for discharge after as little as nine months.

Here are situations that could prolong your bankruptcy:

Do you have “surplus income”?
If your income is higher than the “Standard” set by the government, then your eligibility for an automatic discharge will be delayed by 12 months.

Have you had a previous bankruptcy?
If you have been bankrupt before, your eligibility for an automatic discharge will be extended to at least 24 months. If you have been bankrupt more than once before, then your discharge terms will be set by a Judge or Registrar in bankruptcy court.

Have you completed all your duties as a bankrupt person?
If you have failed to complete one or more of your duties in bankruptcy, then your discharge will be delayed. The delay will depend on the seriousness of the failure and how soon you complete the missing duties.

Is your discharge opposed?
The discharge is usually granted if you are earning only enough income to keep yourself and your dependants reasonably provided for, and if you have received credit counselling.

Occasionally, creditors, the trustee, or the Superintendent of Bankruptcy oppose a bankrupt’s discharge. When this happens, the matter goes to mediation or is heard before a Registrar or a Judge.

Filing for bankruptcy in Canada does not directly affect your spouse. Your debts are your debts; only you are responsible for them. If you go bankrupt, your debts are discharged. Your husband or wife or common-law spouse is NOT responsible for your debts.

Many people believe that because you are married, your spouse is automatically responsible for your debts. This is not true. Often collection agents, when they are trying to collect from you, tell you that if you don’t pay they will get the money from your spouse. This is a collection agency scare tactic; they can only go after you for your debts.

The only exception is if your spouse has co-signed or guaranteed your debt. For example, if you took out a loan and your spouse co-signed for it, it is also legally their loan. If you both have a credit card on the same account, the credit card debt legally belongs to both of you.

Remember, your spouse is liable for the debt, not because they are your spouse, but because they have signed for the debt.

It depends on the type of debt, and in some cases on your payment status. There are actually some debts that stay, even in bankruptcy.

The concept behind a personal bankruptcy in Canada is relatively simple. When you file for bankruptcy, you surrender your assets in return for the discharge of your debts. Just as there are some bankruptcy exemptions from losing all your assets, there are some exceptions to the discharge of all your debts. Both are affected when debts are secured by assets, as in a mortgage.

In principle, bankruptcy discharges only unsecured debts, because the creditor in a secured debt has a special right to the security, which is your asset. If your mortgaged asset is worth more than the amount outstanding on the mortgage, the excess (your equity) must be surrendered.

Unsecured debts

In general, bankruptcy will discharge all your unsecured debts, but the law makes exceptions for these debts that stay:

• Student loans less than 10 years old.
• Child and spousal support.
• Fines and most court ordered restitution payments.
• Court awarded damages for sexual assault or intentionally inflicting bodily harm
• Debts that arose as a result of fraud or theft.

Certain government overpayments. Overpayments are a complicated area, so if you have received overpayments from the government, you should discuss this with your Canada Licensed Insolvency Trustee.

In a bankruptcy, here are some examples of debts that go away:

• Credit card balances
• Lines of credit (if unsecured)
• Personal loans (if unsecured)
• Arrears of income taxes and municipal house taxes
• Unpaid utility bills
• Retail store accounts
• Insurance premiums past due
• Medical bills
• Payday loans
• Secured debts

Other debts that stay may possibly be your house mortgage, or other secured debts.