Filing Bankruptcy in Canada: Complete Guide to the Process & Your Options

Short Answer: What Does Filing Bankruptcy Mean in Canada?

Filing bankruptcy in Canada is a formal legal process that you start with the help of a Licensed Insolvency Trustee (LIT). You cannot file bankruptcy on your own. When you file:

• A stay of proceedings generally stops most collection actions and wage garnishments.
• Your unsecured debts are grouped together and dealt with in one proceeding.
• You make payments based on your income and assets and complete certain duties.
• At the end, you can receive a discharge that erases most unsecured debts.

The process is governed by the federal Bankruptcy and Insolvency Act and overseen by the Office of the Superintendent of Bankruptcy (OSB).

What Does Filing Bankruptcy Mean in Canada?

Filing bankruptcy is the formal step where you sign legal documents, prepared by your Licensed Insolvency Trustee, assigning your non-exempt assets (if any) for the benefit of your creditors and committing to certain duties in exchange for debt relief.

Key points:

• You must use a Licensed Insolvency Trustee (LIT) — the only professionals authorized to file bankruptcy under Canadian law.
• Your bankruptcy is registered with the OSB and your creditors are formally notified.
• The filing triggers a legal stay of proceedings, which usually stops most collection actions and wage garnishments.

For a deeper explanation of personal bankruptcy itself, see our guide: Personal Bankruptcy in Canada.

Who Can File Bankruptcy and When Should You Consider It?

You may be eligible to file bankruptcy in Canada if:

• You owe at least $1,000 in unsecured debt.
• You are insolvent — meaning you cannot pay your debts as they come due and your total debts exceed the value of your assets.
• You live in Canada, do business here, or own property here.

You might consider filing bankruptcy if:

• Your debts are so large you cannot reasonably repay them within a few years, even with reduced interest.
• You face wage garnishments, lawsuits, or aggressive collections.
• Consolidation loans or Debt Management Plans are either unavailable or not enough to solve the problem.

If you are still gathering basic information, the non-profit Credit Counselling Society has a helpful overview of the process: Bankruptcy Process Steps – NoMoreDebts.org.

Step-by-Step Process for Filing Bankruptcy in Canada

Here is a typical process when you are filing bankruptcy in Canada:

Step 1: Free Consultation with a Licensed Insolvency Trustee

You start by meeting (in person or virtually) with a Licensed Insolvency Trustee. This consultation is usually free and includes:

• A review of your debts, income, expenses, and assets.
• An explanation of all your options: budgeting changes, debt consolidation, credit counselling, Debt Management Plans, consumer proposals, and bankruptcy.
• Answers to questions about how filing bankruptcy would affect your life.

Step 2: Decide Whether to File Bankruptcy

With your LIT, you compare filing bankruptcy to alternatives. You should understand:

• The cost of bankruptcy vs other options (see Bankruptcy Cost in Canada).
• The impact on your assets, credit, and employment.
• Whether a consumer proposal could give you similar relief with a less severe credit impact.

Step 3: Gather Required Information and Documents

If you choose to move ahead with filing bankruptcy, your LIT will ask for documents (see Documents needed).

Step 4: Review and Sign Bankruptcy Forms

Your LIT prepares the official forms:

• Assignment in Bankruptcy — your formal declaration.
• Statement of Affairs — detailed list of assets, liabilities, income, and expenses.

Once you review and sign these, your LIT files them electronically with the OSB.

Step 5: Filing Bankruptcy & the Stay of Proceedings

When the documents are filed:

• Your bankruptcy is officially recorded with the OSB.
• The stay of proceedings usually stops most wage garnishments and collection actions.
• Your creditors are notified and must deal with your LIT instead of you directly.

Step 6: Complete Your Bankruptcy Duties

After filing bankruptcy, you have legal obligations, such as:

• Making required monthly payments (including any surplus income if applicable).
• Filing monthly income and expense reports with your LIT.
• Attending two financial counselling sessions.
• Providing requested information or documents as needed.

Step 7: Discharge and Fresh Start

If you complete your duties, you receive a discharge from bankruptcy, which releases you from most unsecured debts. For many first-time bankruptcies with no surplus income, this is after about 9 months. Repeat bankruptcies or surplus income cases last longer.

For a visual overview of the bankruptcy process, see RBC – Understanding the Bankruptcy Process.

Documents Needed When Filing Bankruptcy

To file bankruptcy efficiently, it helps to gather:

• Recent pay stubs or proof of income for you (and your spouse, if applicable).
• Bank statements for all accounts.
• Credit card, line of credit, loan, and mortgage statements.
• Recent tax returns and Notices of Assessment from the Canada Revenue Agency.
• Information on assets: home, vehicles, RRSPs, RESPs, investments, life insurance, etc.
• Any legal or collection documents (garnishment orders, lawsuits, demand letters).

Your LIT will provide a specific checklist and help you prioritize what is needed to get started.

Cost and Timeline When Filing Bankruptcy

The cost and length of a bankruptcy after filing depend on:

• Your income (and whether you exceed OSB surplus income thresholds).
• Your family size.
• The value of non-exempt assets (for example, home equity, second vehicles).
• Whether this is your first or a subsequent bankruptcy.

In general:

• First-time bankruptcy, no surplus income: Often lasts 9 months with basic monthly payments.
• First-time bankruptcy, with surplus income: May last 21 months with higher payments.
• Second or subsequent bankruptcy: Typically longer, with more serious credit implications.

Your payments include your LIT’s fees, which are regulated and paid from the money you contribute into your bankruptcy estate. For more detail, see our full guide: Bankruptcy Cost in Canada.

What Protections You Get When You File (Stay of Proceedings)

One of the most immediate effects of filing bankruptcy is the stay of proceedings, which:

• Usually stops wage garnishments in place at the time of filing.
• Stops most unsecured creditors from starting or continuing lawsuits or enforcement actions.
• Reduces or eliminates collection calls and harassment from creditors.

There are some exceptions (for example, child/spousal support enforcement), but for most unsecured debts, the stay provides powerful legal protection. Our page on the Effects of Claiming Bankruptcy explains these protections in more detail.

What Happens After You File Bankruptcy?

After you file:

• You begin making your scheduled payments and completing monthly reports.
• You attend mandatory financial counselling sessions to help you budget and plan.
• Your LIT administers your estate, deals with creditors, and monitors your progress.

Once you are discharged:

• Most unsecured debts included in the bankruptcy are legally eliminated.
• Your credit report will show the bankruptcy for several years, but you can start rebuilding credit using tools like secured credit cards and careful budgeting.

For the big picture of what bankruptcy changes in your life, read: Effects of Claiming Bankruptcy in Canada.

Alternatives to Consider Before Filing Bankruptcy

Before you decide to file bankruptcy, it’s wise to review all your options:

• Consumer proposal: A legally binding settlement where you repay a portion of your unsecured debt, often with lower monthly payments and less severe credit impact than bankruptcy. Learn more: Consumer Proposal in Canada.
• Debt consolidation: A single new loan or line of credit to pay off multiple debts at a lower interest rate. See Debt Consolidation in Canada.
• Credit counselling & Debt Management Plans: Non-profit agencies can reduce interest and consolidate payments; you typically repay 100% of the principal. See Credit Counselling and Debt Management.
• Informal settlements: Directly negotiating with creditors for reduced interest or modified payment terms.

Our Debt Relief in Canada hub compares these options side by side, including filing bankruptcy.