Do I Qualify for Bankruptcy?

Understanding Bankruptcy Eligibility in Canada

Bankruptcy can serve as a viable solution for individuals struggling with overwhelming debt. However, it’s essential to understand that not everyone qualifies for this financial fresh start. This article will explore the criteria that determine if you qualify for bankruptcy in Canada.

What is Bankruptcy?

Bankruptcy is a legal proceeding providing relief to individuals and businesses who cannot meet their financial obligations. It’s governed by the Bankruptcy and Insolvency Act and is administered by the Office of the Superintendent of Bankruptcy (OSB).

Who Can Declare Bankruptcy?

To be eligible to declare bankruptcy in Canada, you must meet certain criteria:

  1. You should reside in Canada, have a business in the country, or own property here.
  2. You should owe at least $1,000.
  3. You should be unable to pay your debts as they come due.
  4. The value of your debts should exceed the value of your assets.

If you satisfy these conditions, you may file for bankruptcy. However, if you don’t, you’ll need to seek another debt relief solution.

Who Determines Bankruptcy Eligibility?

A Licensed Insolvency Trustee (LIT) decides if you’re eligible for bankruptcy. LITs are professionals licensed by the OSB. During a free consultation, they’ll assess your financial situation to ensure you meet the minimum requirements.

Understanding the Bankruptcy Eligibility Criteria

1. Connection to Canada

You don’t need to be a Canadian citizen to file for bankruptcy in the country. You only need to meet one of these criteria:

  1. Live in Canada.
  2. Conduct business in Canada.
  3. Own property in Canada.

2. Minimum Debt

This is a straightforward requirement. If your total debt (loans, credit cards, lines of credit) exceeds $1,000, you meet this criterion.

3. Insufficient Income

This criterion assesses your ability to meet your debt obligations. If you cannot afford to pay your debts, the trustee may conclude that you have insufficient income. However, if your budget contains discretionary expenses that you can cut, you may not meet this requirement.

4. Value of Assets

This is the most complex requirement. The trustee will compare your total debts to your total assets. If your debts exceed your asset value, you qualify for bankruptcy.

What If I Don’t Qualify for Bankruptcy?

If you don’t qualify for bankruptcy, the LIT may suggest a consumer proposal. This is an arrangement where the trustee determines what portion of your debt you can afford to repay. Then, they set up a repayment plan that both you and your creditors must follow.

Other Debt Relief Options

Before contacting a LIT, explore all other options for debt relief. Consider:

  1. Debt consolidation
  2. Credit counselling
  3. Debt settlement

These options could lower your monthly payments, reduce or eliminate interest charges, or allow you to settle your debt for less than you owe.

Impact of Bankruptcy

Bankruptcy can significantly impact your life. It can lead to the liquidation of your assets and damage your credit score. Therefore, it’s crucial to consider other debt relief options before deciding to file for bankruptcy.


Understanding whether you qualify for bankruptcy is the first step towards addressing your debt problems. If you meet the eligibility criteria, bankruptcy can provide a fresh financial start. However, it’s essential to explore all other options before making a decision. This will ensure you choose the best solution for your unique situation.


If you need help understanding your debt relief options, you can use online resources like debt calculators and debt relief blogs. You can also contact a debt relief professional for personalised advice.

Start Your Journey Towards Debt Freedom

If you’re struggling with debt, remember that help is available. By understanding your options and seeking professional advice, you can take the first step towards financial freedom.

Remember, bankruptcy is not the only solution. There are other options available that can help you manage your debt more effectively. Explore these options, seek advice, and make an informed decision that will put you on the path to financial stability.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.