Filing for Bankruptcy When Unemployed: What You Need To Know

Debt is nothing to be ashamed of.

After all, the average Canadian homeowner owes over $20,000 in unsecured debt.

If it feels like your debts are piling up, you are far from alone.

However, while debt is a simple fact of life for many, there may come a point at which repayments become untenable, and you are left with no choice but to default on some of them.

This is known as insolvency.

When you become insolvent, it’s important to make contact with a Licensed Insolvency Trustee as soon as possible.

Click Here to find one near you today.

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These federally licensed professionals can help you to understand the options available to you, so that you can make an informed choice.

While filing for Personal Bankruptcy is by no means the only option available to you, it may prove the fastest way to get the financial fresh start you deserve.

You won’t even necessarily lose all of your assets.

However, Bankruptcy is not without cost or consequence.

If you are not currently employed, you may wonder how this will affect your ability to file for Bankruptcy and any outcomes that occur after you’ve filed.

Let’s take a closer look to dispel any fears or misconceptions you may have about Filing for Bankruptcy when unemployed…

Can I file for Bankruptcy if I am unemployed?

The short answer is yes.

If you are out of work when you file for Bankruptcy, there is no real impact in terms of how your application is administered.

However, income from any source will impact a Bankruptcy filing.

Even if you are not in work, there are still numerous other sources of income that will be used to calculate payments that are made in the event of bankruptcy, as well as the length of time for which you are Bankrupt.

So if you have significant income from your assets, you could still incur significant costs even if you are not gainfully employed.

How much will I have to pay?

The payment a Bankrupt makes into their estate is set by the Bankruptcy and Insolvency Act.

Much like Child Support charges, they are calculated on a sliding scale in proportion to your income threshold.

This is why it’s so essential to get in touch with a Licensed Insolvency Trustee as soon as you suspect that you may be insolvent.

They can help you to get a clearer picture of your financial situation and make a better informed choice.

Depending on your income or assets, they may advise that another option like a Consumer Proposal may be more beneficial than Bankruptcy.

Calculations are made based on all kinds of income, whether earned in gainful employment or passive.

So rental income from any properties you may own, as well as dividends on any shares, will be treated just the same as income from wages.

Even money received from your Employment Insurance policy or pension will be included in the calculation.

What if I have no income at all?

If your income is below a certain threshold set under the Bankruptcy and Insolvency Act, the Trustee has the authority to arrange a small, manageable payment.

Click Here to use our Surplus Income Calculator.

However, if your income is found to be above the threshold, the Trustee will be in charge of calculating your final bankruptcy payment.

They will let you know how much it will be, and for how long you will remain Bankrupt.

You can find out more about the costs associated with Bankruptcy here.

How long will I remain Bankrupt?

Bankruptcy is designed to give insolvent Canadians the financial fresh start they need.

As part of the process, you will be expected to undergo two mandatory Credit Counselling sessions that are designed to prevent you from needing to rely on credit in the future.

However, you may reasonably wonder how long your Bankruptcy will last.

Your income will be a factor in determining how long the Bankruptcy lasts, as will whether or not this is your first Bankruptcy.

Timeframes are as follows…


  • First-time Bankruptcy with no surplus income- 9 months.
  • First-time Bankruptcy with surplus income- 21 months.
  • ​Second-time Bankruptcy with no surplus income- ​24 months.
  • ​Second-time Bankruptcy with surplus income- 36 months.


​Fortunately, very few people file for Bankruptcy a third time.

However, in these rare circumstances, costs and length of Bankruptcy are determined by a Bankruptcy Court.

Can creditors take action against me if I am unemployed?

If you’re unemployed, it becomes much harder for your creditors to take action against you.

Non-government creditors cannot garnish pension income in the same way that they can garnish wages.

However, it’s important to meet your obligations within the first 9 months.

This will allow your debts to be automatically discharged and keep your case from going to Bankruptcy Court where creditors may dispute an automatic discharge.

While it’s harder for creditors to take action, it is not impossible.

They can pursue a legal writ against your bank accounts.

Some government creditors like the CRA can seize your pension income at the source without the need to petition the courts.

However, filing for Personal Bankruptcy can put a stop to any and all action against you by creditors, even in the case of CRA or Student Loan debt.

This can significantly mitigate the stress and psychological impact of punitive measures and threatening letters or phone calls from creditors.

It can prevent feelings of stress and anxiety surrounding your debt from reducing your quality of life.

This is why many who are out of work choose to file.

It helps them to move on both financially and psychologically.

Still not sure if Bankruptcy is the right option? We’re here to help!

Even if you are out of work, Bankruptcy can allow you to create a new debt-free life.

But by no means is it your only option.

We can help you understand all of the options available to you, so you can make an informed choice on how to move forward with your life.

Since 1999 we’ve been helping Canadians from all walks of life to find the right debt management solution for their needs.

Want to know more about what we can do for you?

Please don’t hesitate to get in touch today at (877)879-4770.

We’ll be delighted to arrange a free, confidential and 100% zero-obligation callback.

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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