Bankruptcy FAQs.

Personal bankruptcy is a solution to debt under the Canadian Bankruptcy and Insolvency Act. It allows you to clear almost all your debt, such as tax debt, credit cards, overdue utility bills, lines of credit, and payday loans. Bankruptcy may be your best option after you’ve explored all other ways to manage your debt.

In Canada, only Licensed Insolvency Trustees (LITs)—formerly known as Bankruptcy Trustees—are authorized to administer bankruptcies. Your trustee will guide you through the entire process and act as the intermediary between you and your creditors.

As long as you don’t have joint debt, your family won’t be affected by your bankruptcy. If your spouse has co-signed or endorsed your debt, they’ll be equally responsible or solely responsible for maintaining payments after you file. 

Children aren’t affected by a bankruptcy, and you’ll continue to receive child benefit payments (if applicable). RESPs, however, aren’t a protected asset in some provinces, and can be seized to pay down your debt.

If you complete your duties and payments on schedule and no creditors object to your discharge, you’ll be eligible for an automatic discharge from bankruptcy in as little as nine months. First time bankruptcies last nine or 21-months—with surplus income—and second time bankruptcies last 24 or 36-months with surplus income. If you have high-income tax debt or a creditor opposes your discharge, the Court will decide the length of your bankruptcy. Learn more about how long bankruptcy lasts in Canada.

When you file for bankruptcy in Canada, it becomes public record. This means that it can be accessed by the public through the Office of the Superintendent of Bankruptcy (OSB). However, it’s not something that’s advertised or widely publicized.

Employers cannot fire you for filing for bankruptcy. Canadian employment law protects you from termination solely because you declare bankruptcy. 

Certain professions—such as insurance, real estate, law, or financial planning—may require you to disclose your bankruptcy to the professional association. In some cases, employers may ask you to disclose your bankruptcy or perform a credit check when you apply for a new role. 

Both bankruptcy and consumer proposals provide a way to alleviate your debt, but they differ in the assets you can keep, repayment structure, duration, filing process, and impact on your credit rating.

Credit counsellors help individuals manage their debt and improve their financial situation. They offer guidance on budgeting, debt repayment strategies, and financial planning.

They can also negotiate with creditors on your behalf to reduce interest rates or set up manageable repayment plans. When you work with a credit counsellor, you typically repay 100% of what you owe.

Provincial regulations determine which assets you can keep during bankruptcy. In most cases, all provinces exempt pensions and RRSPs. In some provinces, you may also keep certain assets such as equity in your home (up to a specified amount), a vehicle (up to a certain value), tools of your trade, household furnishings, and medical aids. Find out what assets are exempt in your province.

Yes, once you file your consumer proposal, all collection efforts on included debt stop. When you file, a “stay of proceedings” is issued, which legally prevents debt collectors from continuing any collection activity—including wage garnishment.

It may take creditors six to eight weeks to stop collection attempts, but your trustee will handle communication with them on your behalf. If a creditor continues to contact you, let your trustee know, and they’ll follow up directly.

Bankruptcy settles nearly all debt, with some exceptions. For example, spousal support, debt to unemployment or social assistance programs, traffic tickets, fraud, etc. must be repaid.

A discharge from bankruptcy can include your student loans or apprenticeship loans if you filed for bankruptcy at least seven years after the date you stopped or completed your apprenticeship or studies.

Typically, both Equifax and TransUnion—Canada's two credit bureaus—remove a bankruptcy from your credit report six years after your discharge date. In Newfoundland and Labrador, Ontario, Prince Edward Island, and Quebec, TransUnion removes a bankruptcy from your credit report seven years after discharge. 

If you file for bankruptcy a second time, the credit bureaus usually reinstate the first bankruptcy on your credit report—even if they had previously removed it. Both bankruptcies then remain on your credit report for fourteen years from the discharge date of the second bankruptcy. 

Rebuilding your credit after bankruptcy takes time. You can start by applying for a secured credit card, which requires a deposit. Using it responsibly will help you establish a positive payment history. Always pay your bills on time and pay off your balances in full each month. Keep your credit utilization low by avoiding maxing out your card. Regularly check your credit report for errors and dispute any inaccuracies.

Tax debts are included in a bankruptcy, but student loans or apprenticeship loans are only included if you graduated or stopped your program more than seven years ago.

You might have too much debt if you struggle to make minimum payments, rely on credit to cover basic expenses, or feel overwhelmed by your financial obligations. Common warning signs include missing payments, maxing out credit cards, or borrowing from one source to pay another.

The federal government's Bankruptcy and Insolvency Act determines the cost of personal bankruptcy. The amount you pay depends on several factors, including your income, the size of your household, the assets you may need to surrender, and whether you've filed for bankruptcy before.

Surplus income refers to any earnings that exceed the federal government's threshold for maintaining a reasonable standard of living. If your income is above this limit, you must pay a portion of the surplus to your creditors in addition to trustee fees. The government determines the limit based on your family size and living expenses.

The “statute of limitations” is a law that determines the length of time creditors have to take legal action against you for any unpaid debt. If you haven't made any payments or acknowledged the debt within this period, creditors can no longer take legal action to collect it.

The length of time varies by province. In Alberta, British Columbia, Nova Scotia, Saskatchewan, and Ontario, the statute of limitations is two years, and in Quebec it’s three. In Manitoba, New Brunswick, Newfoundland and Labrador, Prince Edward Island, and the three territories it’s 6 years. Some debts—including secured debts, student loans and government debts—aren’t affected by these limitations.

Collection activities like phone calls and letters can resume after the statue of limitations has passed, but you can no longer be taken to court.

Licensed Insolvency Trustees (LITs) are the only professionals in Canada who can administer formal debt solutions, such as bankruptcy and consumer proposals. The Office of the Superintendent of Bankruptcy Canada (OSB) and the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) regulate LITs and hold them to a strict code of ethics and professional conduct.

To become an LIT in Canada, candidates must complete an academic program and written exam administered by CAIRP. They must also pass an oral board examination with the OSB and complete insolvency counselling training. Only after candidates meet all educational, testing, and character requirements are they licensed to practice as LITs.

Yes, two organizations regulate Licensed Insolvency Trustees in Canada. The first is the Office of the Superintendent of Bankruptcy (OSB), the federal agency that oversees the Bankruptcy and Insolvency Act and the insolvency profession. The second is the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), which serves as the professional standards organization for insolvency professionals in Canada. Both the OSB and CAIRP ensure that LITs follow strict standards, ethics, and guidelines to protect the interests of both debtors and creditors.

No, in Canada, individuals can file for bankruptcy only with the help of a Licensed Insolvency Trustee—the only professional authorized to administer formal debt solutions such as bankruptcies and consumer proposals.

Similar to a Licensed Insolvency Trustee, a debt consultant offers advice and strategies to help manage, repay, and potentially reduce debt. However, their debt management plans, fees, and standards aren’t regulated by the government, and they can’t guarantee the same protections against collection activities.

A Licensed Insolvency Trustee doesn’t charge upfront fees, can stop collection activities, reduce debt by up to 80%, and is the only professional authorized to administer both bankruptcies and consumer proposals.

In Canada, bankruptcy lawyers can’t administer bankruptcies or consumer proposals. That process is handled by a Licensed Insolvency Trustee—an individual authorized by the Canadian government to oversee formal debt solutions. They’ll guide you through the entire process, making sure you meet all legal requirements from start to finish.

A Licensed Insolvency Trustee’s fees are included in your monthly bankruptcy or proposal payments. These fees are set and regulated by the Office of the Superintendent of Bankruptcy Canada—the federal agency that oversees the Bankruptcy and Insolvency Act and the insolvency profession.

You'll receive your discharge from bankruptcy once you've made all required payments, attended two financial counselling sessions, submitted your monthly income and expense reports, cooperated with your trustee in filing your income tax returns, paid any surplus income, and provided any additional information your trustee requests. In some cases, you may also need to attend a discharge hearing in court.

When you're discharged from bankruptcy, you're released from the legal obligation to repay any debts included in the process. That means you're no longer responsible for those debts, and creditors can't take legal action against you to collect them. Your bankruptcy will remain on your credit report for six or seven years, and your credit score will be affected. However, with your discharge, you can begin to rebuild your credit and establish new positive financial habits.