How Do You Declare Bankruptcy In Canada

2015-11-24   minute read

Grant Bazian


Bankruptcy is a process that releases you from most, if not all of your debt. In other words, bankruptcy lets you erase your debts and put an end to your indebtedness within a few months. But to do this, you must pay a portion of your income and may be required to give up some of your property to repay your creditors. You must also follow every step of the bankruptcy process.

How do you declare bankruptcy in Canada?

  1. Ask for a free and confidential consultation

If you feel overwhelmed by your debts or if you are not convinced that bankruptcy is your only option, you will get all the answers you need during a free and confidential consultation with one of our Trustees. You can find us in your area: we have more than 150 offices across Canada. Click here to find the nearest Trustee to you. During your confidential and free consultation, we will start by carefully evaluating your personal financial situation. We will review your income and expenses and your property value, along with your debts. Your Trustee will then put forward all of the options available to you and will help you choose the one that best meets your needs. With your Trustee, you can decide if filing for bankruptcy is the best option.

  1. Legally filing for bankruptcy (assignment in bankruptcy under the Bankruptcy and Insolvency Act)

In Canada, a person can only declare bankruptcy through a Trustee in Bankruptcy. If you decide to file for bankruptcy, you and your authorized MNP Trustee shall complete all required forms together. The Trustee will file your bankruptcy on your behalf with the Office of the Superintendent of Bankruptcy (OSB) and will directly inform your creditors. The day you file for bankruptcy, all collection actions against you will be suspended, including harassing telephone calls and legal procedures to obtain payment of your debts (such as seizure of property or garnishments against your salary).

  1. Exempt property and non-exempt property

Even in bankruptcy, you are allowed to keep property considered to be “exempt” property under provincial law. Click here to know what property is considered exempt in your province. Your non-exempt property will be subject to sale by the trustee, or you may be given the option to purchase this property from the trustee.

  1. Meeting of creditors

The Trustee will notify your creditors that you have filed for bankruptcy. In exceptional cases, your creditors or the ‘OSB may call a meeting of creditors to consider your affairs and give the trustee directions on administering your bankruptcy.

  1. Responsibilities and payments

During the bankruptcy process, you will be required to do the following:

    • If necessary, make monthly payments to the bankruptcy estate. The amount will be determined based on surplus income guidelines.
    • Submit monthly income and expense statements, accompanied by supporting documentation.
    • Give relevant income tax information so that the Trustee can file your tax returns before and after bankruptcy for the year of your bankruptcy.
    • Attend two counselling sessions to learn effective budget management strategies, ways to improve your financial decisions going forward and ways to gradually re-establish your credit rating. During these sessions, we will examine the causes behind your past financial difficulties and how a life-changing solution to debt problems can be advantageous for you, starting now.
  1. Bankruptcy discharge

The duration of your bankruptcy will depend on your real income, the income of your household, the number of members in your family and if you have ever declared bankruptcy in the past. For a first bankruptcy, the procedure usually lasts from 9 to 21 months following the date of the bankruptcy, depending on whether or not you have surplus income. For a second bankruptcy, this period extends to 24 or 36 months, again depending on whether or not you have surplus income.

After discharge, your unsecured debts at the time of bankruptcy will be discharged (subject to certain exemptions). Click here to learn more about debts which might not be discharged. Before you file for bankruptcy, your Trustee will explain which debts might not be discharged.

Once you have been discharged from your bankruptcy, you are given a fresh start and can begin working towards re-building your credit and achieving your personal financial objectives.

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