Your bankruptcy questions answered.

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 income taxes, credit cards, overdue utility bills, lines of credit, and loans. Bankruptcy may be the best course of action once you’ve reviewed all other options for dealing with your debt.

In Canada, only Licensed Insolvency Trustees can administer bankruptcies. Your trustee will walk you through all aspects of filing for bankruptcy, including legally protecting you from collection attempts and garnishments, and becoming the go-between for you and your creditors.

If 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 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 decides the length of your bankruptcy.

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.

No, you can’t be fired simply for filing for bankruptcy. This protection is part of Canadian employment law, which prohibits employers from terminating someone solely because they have declared bankruptcy.

While both bankruptcy and consumer proposals offer a solution to alleviate your debt, they differ in terms of the assets you can keep, repayment structure, duration, filing process, and impact on your credit rating.

A consumer proposal is a great option for those who can afford payments but need a modified arrangement and/or have assets to keep and want a lesser impact on their credit rating. On the other hand, bankruptcy can eliminate overwhelming debt for people struggling to meet their financial obligations in as little as nine months. Our blog explains the differences between bankruptcy and consumer proposals.

Credit counselling is a service that helps individuals manage their debt and improve their financial situation. Credit counsellors can provide advice on budgeting, debt repayment strategies, and financial planning. They can also negotiate with creditors on behalf of clients to reduce interest rates or create manageable payment plans.

The assets you can keep in bankruptcy are determined by the province you live in. Generally, pensions and RRSPs are exempt in all provinces. Other potential exempt assets are equity in your home (up to a certain amount), a vehicle (up to a certain amount), tools of the trade, household furnishings and medical aids. Find out what assets are exempt in your province.

Yes, once a bankruptcy is filed, debt collection on all included debt stops. A stay of proceedings will be issued upon filing, which legally prohibits debt collectors from continuing any collection activity on the debt. This includes wage garnishment. It can sometimes take upwards of 6-8 weeks for creditors to cease calls. Your trustee also takes over communicating with your creditors on your behalf. If a creditor continues to make collection attempts, advise your trustee and they will contact them directly.

Bankruptcy settles nearly all debt, with some exceptions. For example, spousal support, debt with unemployment or social assistance, 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 completed your apprenticeship or stopped being a part- or full-time student.

Typically, both Equifax and TransUnion remove a bankruptcy from your credit report 6 years after the date you’re discharged. TransUnion will remove a bankruptcy from your credit report 7 years after you’re discharged in Newfoundland and Labrador, Ontario, Prince Edward Island and Quebec. If you declare bankruptcy more than once, they will appear on your credit report for 14 years following your discharge date.

Rebuilding your credit after bankruptcy takes time. Start by getting a secured credit card, which requires a deposit. This will help you establish a positive payment history. Make sure to pay all your bills on time and pay off balances in full each month. Keep your credit utilization low by not maxing out your credit card. Regularly check your credit report for errors and dispute them.

You can include tax debts in a bankruptcy, but student loans or apprenticeship loans can only be included if they are more than seven years old.

You may have too much debt if you're struggling to make minimum payments, relying on credit to cover basic expenses, or feeling overwhelmed by your financial obligations. Warning signs include missed payments, maxed-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 varies depending on several factors, like your income, the size of your household, your assets that are subject to seizure, whether it’s your first bankruptcy, etc.

Surplus income is the amount of money you make above a certain threshold set by the government. If you earn more than this limit, you’ll have to pay part of the extra money to your creditors. The limit is based on your family size and living expenses.

The “statute of limitations” refers to the time limit for creditors to collect debts. If no payments are made or the debt isn’t acknowledged within this period, creditors can’t take legal action to collect it. This time limit varies by province. In Alberta 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.

A Licensed Insolvency Trustee (LIT) is a professional authorized by the Canadian government to administer formal debt solutions, like bankruptcy and consumer proposals. LITs are paid through the fees regulated by the government, which are included in the payments you make during your filing.

Yes, Licensed Insolvency Trustees (LITs) are regulated in Canada. They are licensed by the Office of the Superintendent of Bankruptcy (OSB), which is a federal agency responsible for overseeing the insolvency system. The OSB ensures that LITs adhere to strict standards and guidelines to protect the interests of both debtors and creditors.

No, a bankruptcy must be administered by a Licensed Insolvency Trustee (LIT). They are the only regulated professionals who are authorized to administer formal debt solutions like bankruptcies and consumer proposals.

A debt consultant provides advice and strategies to manage and reduce debt, but unlike a Licensed Insolvency Trustee (LIT), they are not regulated by the government. An LIT is a regulated professional authorized to administer formal debt solutions like bankruptcy and consumer proposals.

In Canada, you don’t need a bankruptcy lawyer to file for bankruptcy. Instead, this process is completed by a Licensed Insolvency Trustee, who is authorized by the government to administer formal debt solutions. They will help you navigate the process, ensuring that you meet all legal requirements.

LITs are paid through the fees regulated by the government, which are included in the payments you make during your filing.

To be discharged from your bankruptcy you must complete all the required payments, attend two financial counselling sessions, submit monthly income and expense reports, cooperate with your trustee in filing your income tax returns, pay any surplus income required, and provide any additional information requested by your trustee. In some cases, you may need to attend a discharge hearing in court.

When you are discharged, you are released from the legal obligation to repay the debts included in the bankruptcy. This means you aren’t responsible for those debts, and creditors can’t take legal action against you to collect them. Your credit score will be affected, and it will take time to rebuild.