Some Thoughts On Expected Changes In Bankruptcy Laws

Now that the changes relating to Student Loans, RRSPs and the Wage Earner Protection Act have been proclaimed, it might be appropriate to consider what other changes might be coming. There are a number of other changes to the Act that have not yet been proclaimed, but which likely will be soon. One of the major changes expected is that, for many prospective bankrupts, the process will last a lot longer that it currently does.

The proposed changes state that firstly, a second time bankrupt will receive an automatic discharge (like a first time bankrupt currently does), but not until after two years from the date of bankruptcy. Currently, in Saskatchewan, a second time bankrupt typically gets a six month suspended discharge, meaning the whole process typically lasts around 15 months, a much shorter time frame than the 24 months proposed.

Secondly, it is proposed that a bankrupt with Surplus Income (that is monthly net income in excess of certain guideline amounts) will not receive an automatic discharge until an extra year is passed. That would mean a first time bankruptcy with surplus income would take 21 months, and second time bankruptcy would take 36 months. It is not yet clear at what point the determination of whether there is surplus income would be made, or what would happen if an individual's income changed during these time periods. It is also expected that the individual bankrupt will make the appropriate payments into the bankruptcy (usual one half of the amount of the surplus income) during these newly extended periods.

Different provinces treat second time bankruptcy, and surplus income differently, and you should consult an MNP trustee in your province if you are considering bankruptcy as an alternative.