Bankruptcy and self-employment

Going Bankrupt While Self-Employed: A Comprehensive Guide

Every entrepreneur’s journey is distinct, filled with unique challenges and complexities. Among these, Bankruptcy and Self-Employment is a topic that often raises many questions. This guide aims to provide you with a comprehensive analysis of this issue, and how you can navigate through it.

Understanding Bankruptcy in Self-Employment

Bankruptcy is a legal process that provides relief to individuals or businesses that cannot meet their financial obligations. It’s a complex scenario, especially for self-employed individuals who have invested time, resources, and energy into their businesses.

Deciding Your Entrepreneurial Future

Whether to continue with self-employment or not, after filing for bankruptcy, is a crucial decision that needs careful evaluation. Consumer proposal or personal bankruptcy does not bar you from being self-employed or starting a new venture. However, the feasibility of continuing the entrepreneurial journey depends on several factors.

Profitability of Your Business

Is your business currently profitable? Could your venture become profitable through restructuring? These are some questions that need answers while deciding your future in self-employment.

The Role of Financial Statements and Tax Filings

To weigh your options accurately, it’s essential to review your financial statements and tax filings. These documents provide a realistic picture of your financial health and can guide your decisions. If you don’t have recent financial records or have outstanding tax returns, estimations can be used to assess your situation.

Managing Government Debts

A surprising fact for most people is that government debts, including income tax, HST, and payroll source deductions, can be included and discharged by filing a consumer proposal or personal bankruptcy, just like any other creditor. Government debts are only granted special rights if they are not dealt with.

The Impact of Consumer Proposal or Bankruptcy

Filing a consumer proposal or bankruptcy can halt all government actions and prevent them from taking further action against your assets and income. It’s a legal shield that protects you from enhanced garnishment provisions in the Income Tax Act and Excise Tax Act.

Seeking Professional Help

It’s recommended to consult with licensed insolvency trustees who can provide you with personalized advice based on your specific situation.

Dealing with Government Actions

Government actions such as freezing your bank accounts, issuing a requirement to pay your customers, garnishing wages, or putting a lien on your house can be stopped immediately after filing for bankruptcy or consumer proposal.

The Importance of Consultation

A free consultation with a licensed insolvency trustee can provide a roadmap to navigate bankruptcy and self-employment. You can discuss your situation, assess your options, and make an informed decision.


Bankruptcy and self-employment is a complex issue with many facets. Understanding the implications, assessing your business’s profitability, and seeking professional help are essential steps in this process. Remember, bankruptcy is not the end, but a chance for a fresh start. Don’t let it deter you from your entrepreneurial dreams.

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