Who can file for bankruptcy in Canada?

Understanding bankruptcy: A financial fresh start

Bankruptcy is a legal process designed to help Canadians who are overwhelmed by debt get a financial fresh start when things haven’t worked out as planned. It’s not about losing everything, it’s about second chances. It’s also about giving Canadians hope and a chance to rebuild during uncertain economic times.

When an individual files an assignment in bankruptcy, they work with a Licensed Insolvency Trustee (LIT).  An LIT is the only federally regulated professional who can assist Canadians with formal debt solutions. The goal of bankruptcy is to provide financial relief from the burden of unmanageable debt so individuals can focus on recovery instead of constant stress and financial worry.

What is an assignment in bankruptcy?

Filing an assignment in bankruptcy means an individual is entering into a legal process to extinguish or get rid of their unsecured debts. It’s also a realization that continuing to pay the debts is no longer possible, or that making the minimum payments each month results in more debt accumulating. An LIT will help individuals complete the necessary paperwork and explain the duties and responsibilities throughout the process. Filing an assignment in bankruptcy provides immediate relief from collection calls, wage garnishments, and stops legal action to collect debts, so individuals can turn their mind to moving forward and rebuilding.

Who is eligible to file for bankruptcy?

To file for bankruptcy in Canada, you qualify if you meet some basic requirements:

• Live, work, or own property in Canada: You can file an assignment in bankruptcy if you reside in Canada, operate a business here, or own property, even if you’re not a citizen.
• Owe at least $1,000: Bankruptcy is available if you have at least $1,000 in unsecured debts (e.g. credit cards, personal loans, or unpaid bills) that you cannot continue to pay.
• Be insolvent: You must be unable to pay your debts as they become due and have insufficient assets to pay your debts in full if you were to liquidate your assets.
• No limit on past bankruptcies: Even if you’ve previously filed an assignment in bankruptcy, you can file again if you meet these criteria.

Who is not eligible to file an assignment in bankruptcy?

Certain individuals are not eligible to file an assignment in bankruptcy:

• Individuals with only secured debts: Bankruptcy primarily addresses unsecured debts. Mortgages and car loans secured by property are not included. Exception: if an individual has real property that is facing foreclosure or being sold at a loss, the unsecured balance owing after foreclosure, or the sale of real property, can be addressed in a bankruptcy.
• Less than $1,000 in debt: If your total debt is below $1,000, filing an assignment in bankruptcy is not an option.

When is bankruptcy a good option?

Bankruptcy may be the right solution if you are:

• Missing payments on your monthly bills, your credit cards, or your loan payments
• Receiving harassing phone calls, emails, or legal notices from creditors or collection agencies
• Not able to negotiate a payment plan with your creditors
• Facing wage garnishment or lawsuits from creditors

Are there alternatives to bankruptcy?

Bankruptcy isn’t the only way to deal with debt. Here are some alternatives:

• Consumer Proposal: This is also a legal process. A Consumer Proposal is a new arrangement with your creditors where you offer to pay back a percentage of what you owe, without interest. Only an LIT can assist you with filing a Consumer Proposal.
• Consolidation Loan: Combines all of your debts into one monthly payment. You would need to check with your bank or other financial institution to see if you qualify for a consolidation loan.
• Credit Counselling: Debt management plans with an accredited not-for-profit credit counsellor to help you manage your debts.

To explore these solutions, use our MNP Debt Calculator for a preliminary assessment of your financial situation and options. This tool is a starting point and helps you understand your options, estimate monthly payments, and compare strategies for becoming debt-free. Talking to an LIT at a free financial consultation is another way to start the conversation.

Other frequently asked questions

The thought of filing an assignment in bankruptcy can be overwhelming, but you’re not alone. MNP’s Licensed Insolvency Trustees have answered the most common questions about bankruptcy, including:

• What assets can I keep?
• Does bankruptcy affect my job or my spouse?
• How long does bankruptcy last?
• What is the cost to file bankruptcy?
• Will I qualify for a credit card or mortgage after bankruptcy?

Find answers to all of your questions in our frequently asked questions section on our website: MNP Bankruptcy FAQ page.

Taking the first step

If you think bankruptcy might be right for you, start by speaking with a Licensed Insolvency Trustee. We will answer all of your questions, explain all of your options, and guide you every step of the way. Remember, you’re not alone, help is available to get you back on track financially.

For more information, visit MNP Debt Relief or book a free confidential consultation with an MNP advisor by calling 310-DEBT (3328) or visit us at www.mnpdebt.ca. Taking that first step today can put you on a path toward a more positive financial future.