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Personal Bankruptcy

Canadians who are thinking about relieving their debts by declaring bankruptcy need to understand how their creditors will be paid and what else they are required to do during the bankruptcy process.

Explore this page to learn more about the bankruptcy process to determine if it’s the right course of action for you, what other debt management alternatives are available, and discover resources to support you along the way.

Table of Contents

What is bankruptcy?

Bankruptcy helps a person with unmanageable debt get a financial fresh start. The rules and requirements for bankruptcy are set out in the “Bankruptcy and Insolvency Act” of Canada. Bankruptcy can be the best course of action when you have reviewed all other options for dealing with your debt.

Bankruptcy releases you from the legal obligation to repay the debts you had as of the date you filed for bankruptcy, except for specific types of debts that are excluded by law. If you decide to declare bankruptcy, your wages are protected from your creditors, as well as some assets that are protected by provincial law, which are called “exempt assets.” Your trustee will then recover any non-exempt assets and distribute their value to your creditors in order to repay your debts.

What are the pros and cons of declaring bankruptcy?

Some of the benefits of bankruptcy include:

  • You will have immediate protection from your creditors and they’ll stop harassing you
  • Your wages will no longer be garnished
  • All interest payments freeze
  • Some of your assets are protected, like your home or your car, depending on the province you live in
  • Your unsecured debt is eliminated
  • If you declare bankruptcy seven or more years after the date on which you ceased to be a full or part-time student, your student loan debts will be eligible for discharge, together with your other debts, in some cases
  • A financial fresh start

Some of the disadvantages of bankruptcy include:

  • Some debts will remain, such as child support and court-imposed fines, and in some cases, student loans
  • Your credit rating will be negatively affected and your bankruptcy will be attached to your credit report for a certain period of time after you have been discharged (6 or 7 years depending on the province)
  • You must turn over all non-exempt assets to the trustee
  • All of your credit cards will be cancelled
  • You are required to submit monthly statements showing money received and spent in your household, and you are required to make monthly payments to your trustee

Should I file for bankruptcy?

If you owe at least $1,000 and are unable to pay your debts, then bankruptcy may be your best path to financial freedom. Only Licensed Insolvency Trustees (LITs) can administer bankruptcies and you do not need to go to a debt consultant to see one.

Filing for bankruptcy should be a last-resort option once all other debt solutions have been exhausted. If you are still examining what options are available to help you manage your debt, explore this list of 6 options for resolving your debt.

Will my bankruptcy affect anyone else?

Learn about how your bankruptcy will impact your spouse or partner and how they will participate in the process.

Video transcript: Unless your spouse or partner has co-signed or guaranteed a debt, they are not responsible for that debt. During your initial meeting with a Licensed Insolvency Trustee, they will discuss with you the effect your bankruptcy might have on your spouse and it’s important for your spouse or partner to understand it before you collectively make a decision about filing. Sometimes the non-bankrupt spouse or partner chooses not to participate in the process. It is the duty of the bankrupt spouse to disclose all income in the household, however, the trustee can’t compel or force your partner to release that information and that’s their right to keep that information private.

A trustee will notify only your creditors; they do not notify your employer or family members. You can rest assured that your trustee will keep your bankruptcy as confidential as possible.

Will anyone know if I declare bankruptcy?

When a bankruptcy is filed it is a public record with the Office of the Superintendent of Bankruptcy and it will appear on your credit report for up to seven years after you have been discharged.

Additionally, your creditors are notified by regular mail, fax, or email. Your employer is not notified of your bankruptcy unless the trustee has to send a notice to them to stop a wage garnishment.

What are some resources for considering bankruptcy?

If you want to get started with managing your debt, explore how a LIT can help you navigate the best solution for your financial situation.

Video transcript: If you are unable to pay your bills and unsure about what to do, you can contact a Licensed Insolvency Trustee. They are licensed by the Office of the Superintendent of Bankruptcy Canada to handle bankruptcies, but they can also offer information about other possible options:

  • Reworking your budget
  • Consolidating your debts
  • Selling your assets
  • Offering a proposal to your creditors

Want to get started on a debt solution? Locate a LIT in your area or explore more bankruptcy resources.

Get started with personal bankruptcy

If you’re considering bankruptcy to relieve your debt, explore these pages to learn more about the bankruptcy process, who qualifies, what assets you can keep in bankruptcy, and more.

How bankruptcies work in Canada

Learn how declaring bankruptcy in Canada impacts your assets, your bank account, your student loans, and anything you owe to the Canada Revenue Agency.

Click here to learn more about how bankruptcies work in Canada.

How to file for bankruptcy

Learn about the bankruptcy filing process, how much it costs to file for bankruptcy through a LIT, and key responsibilities you must complete in order to be discharged from bankruptcy.

Click here to learn more about how to file for bankruptcy.

What assets can I keep in bankruptcy?

Discover what assets you get to keep in bankruptcy and learn about specific exemptions that apply to each province.

Click here to learn more about assets you get to keep in bankruptcy.

How long does bankruptcy last in Canada?

Depending on whether it’s your first bankruptcy or your second, your bankruptcy could last between 9 to 36 months.

Click here to learn more about what factors impact how long bankruptcy might last for you.

What are the alternatives to bankruptcy?

From debt consolidation loans to consumer proposals, there are many alternatives to dealing with your creditors that don’t involve filing for bankruptcy. Explore your options and learn how a LIT can help you make the best choice for your financial situation.

Click here to learn more about alternatives to bankruptcy.

Read more about bankruptcy

How to know when bankruptcy is the right debt solution for you

Explore this list of 6 considerations to determine if you have exhausted all other debt solutions prior to filing for bankruptcy. If you are ready to file for bankruptcy, review a list of things you should know before you file.

How a Licensed Insolvency Trustee can help during COVID-19

Many Canadians are dealing with an overwhelming amount of debt during the pandemic. If you are considering bankruptcy, learn how a LIT can help you review your options.

When to consider a Consumer Proposal or Bankruptcy during COVID-19

The pandemic has created financial hardship for many people, but it also has created a lot of stress and anxiety that can prompt us to rush into decisions. Review this step-by-step list of financial options before considering formal proceedings to deal with your debt.

Relief begins with a solutions-focused, free consultation.

Set up a confidential, free, no-obligation chat with a Grant Thornton debt professional near you to discuss your financial situation. Based on your unique situation, they will explain—in everyday language—what your debt solution options are.

Contact a Debt Professional
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