How to File Bankruptcy in Canada

Facing debts you can’t repay is a significant source of stress.

Financial worries always appear on top of the list for stress causes in Canada, just behind the work life.

Almost a quarter of Canada residents feel anxious about their financial situation to the point where it affects their wellbeing, mental health, sleep patterns, home life, and personal relationships.

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Stress is also one of the most frequent causes of cardiovascular complications.

Licensed insolvency trustees understand how devastating life in debt can be.

That’s why they help Canada’s residents with objective, professional, and effective debt relief services, among which bankruptcy.

In 2019, 137,178 residents became insolvent in Canada with the help of licensed insolvency trustees.

The process of becoming insolvent consists of filing bankruptcy.

If you are considering bankruptcy to solve your financial situation, we’ve compiled an overview of what the process includes and how to file bankruptcy.

When you get in touch with a licensed insolvency trustee, they will review your finances and individual requirements to make the best recommendation for you.

Who can file bankruptcy?

There is more than one type of bankruptcy.

When a person considers bankruptcy, they need to figure out which type of bankruptcy is right for their situation:


  • Personal bankruptcy, which is for individual finances;
  • Small business bankruptcy, which is similar to personal bankruptcy but refers to small and independent service providers, side hustles, and freelancing businesses. A small business is not incorporated, hence bankruptcy would affect the individual’s assets just like personal bankruptcy;
  • Corporate bankruptcy focuses on legal, incorporated entities. In this constellation, the individual assets are protected, and the bankruptcy only affects the business’s assets.


Once you’ve identified whether your financial situation fits any of the bankruptcy types, you will need to meet other criteria to be able to file bankruptcy in Canada.

Every resident who has been living in Canada for at least a year can file bankruptcy.

You don’t need to be a native Canadian resident, but you should have at least a 12 months history of residency in the country.

When it comes to measuring your debts, you should owe a minimum of $1,000 to creditors.

Debts can have a higher value than your assets, or/and you can’t pay bills when they are due, regardless of your debt/assets value ratio.

Bankruptcy is a legal process in Canada that can only be administered by a licensed insolvency trustee, LIT.

LITs are regulated and authorized by the federal government to administer insolvency proceedings such as bankruptcy but also consumer proposals.

It’s important to mention that you can’t file bankruptcy with any other unlicensed financial advisor in Canada.

What are the advantages of filing for bankruptcy?

Bankruptcy is an effective debt relief program, which makes it an ideal solution for many debtors who struggle to make payments on time.

Bankruptcy also offers immediate stress relief because the process of filing prevents all creditors’ actions.

Successful filing for bankruptcy will have the following results to improve your financial situation:


  • It eliminates most unsecured debts.
  • It stops collection companies from calling you or trying to collect money and/or assets as repayment for your creditors.
  • It stops all legal actions that creditors have started or want to start.
  • It stops wage garnishment proceedings from your creditors.
  • First-time filers can be debt-free within 9 months.
  • It provides you with a clean slate to restart your financial life.


For a lot of debtors, the process can help reduce high stress levels, which would have otherwise affected their health, both mental and physical.

Additionally, as bankruptcy is a legal process in Canada, filing automatically prevents any actions from creditors and collection companies, even if those actions involved legal pursuits.

Where does the bankruptcy journey start?

The first and most crucial step towards financial recovery through filing for bankruptcy is understanding the range of your money problems.

Indeed, bankruptcy is suitable as a debt relief solution, yet it doesn’t apply to all financial situations.

Most individuals who request the support of a LIT with their finances are often too stressed out to gain an objective view of their issues.

Ultimately, it’s hard to think clearly about your debts and assess them when dealing with collection companies.

But there are tell-tale signs you can learn to recognize.

Individuals who file bankruptcy have some of the following traits in common:


  • They’ve maxed up their credit cards.
  • Many rely on credit cards for essential payments they wouldn’t be able to make otherwise.
  • They take more credits or use payday loans to repay bills, which can create additional debts.
  • They fail to make payments on time on utility bills, mortgage or loan agreements, or monthly rent.
  • They’re receiving calls from collection agencies, who are acting on behalf of their creditors.
  • They have been notified that their creditors are taking legal actions or are already engaged in a legal pursuit.


Find a LIT to assess your situation

The Canadian Superintendent of Bankruptcy licenses licensed insolvency trustees.

They are the only licensed finance advisors who are authorized to administer bankruptcies and consumer proposals.

You can’t declare bankruptcy without working with a LIT to assess your situation and define the best solution.

Trustees offer objective information about bankruptcy and other debt relief solutions in order to find the most suitable debt management program for your unique situation.

As such, while you may want to declare bankruptcy, your LIT can help you find the most effective approach to protect your assets and rebuild your finances, which may be another debt settlement program.

Your consultation with a trustee is free of charge and regulated by the federal government.

Ideally, you want a licensed insolvency trustee you can meet face-to-face.

With over 430 trustee offices in Canada, ensures you can find a local trustee.

Alternatively, if you can’t travel, your trustee can also offer video call, email, text message, or call catchups.

You should always confirm that your LIT is fully licensed by the Superintendent of Bankruptcy.

All trustees at are licensed and regulated.

Finally, it will make a huge difference to your mental health to find a LIT you can trust and build a comfortable relationship with.

The decision to file for bankruptcy is yours

Your LIT will review your situation and ask questions to gain a better understanding of your priorities, assets, and creditors during the free initial consultation.

It is helpful to bring evidence of your financial situation, such as income, assets, debts, and expenses.

During this step, the trustee will review your options and explain the different debt relief alternatives.

Therefore, you might find out that, even if you wanted to file for bankruptcy, a consumer proposal could better protect your interests.

It’s the LIT role to highlight your options and help you decide the best path towards debt freedom.

As a result, the bankruptcy process doesn’t start until you explicitly decide so.

If you are ready to begin the process and you’ve decided with your trustee that bankruptcy is the best solution, here’s how to file bankruptcy.

You will need three things:


  • Your personal data: address, name, and date of birth
  • The list of your creditors and the money you owe them
  • A list of your assets and their value


The LIT will then prepare the bankruptcy paperwork. You can still change your mind at this point.

The bankruptcy is official once you sign the document.

What happens next in the bankruptcy process?

Once you’ve declared bankruptcy with your trustee, the next step is called a ‘stay of proceeding’.

The stay of proceeding immediately stops all creditors and collection companies from harassing you, contacting you, arranging legal pursuits, demanding wage garnishments, or contacting you.

The trustee has then five days to send a copy of the bankruptcy paperwork to all your creditors.

Your LIT will also file outstanding tax returns and government debts, as bankruptcy can also settle government debts.

Most first-time filers can become debt-free in under a year.

What is my responsibility in the bankruptcy process?

As an insolvent, you have obligations to fulfill when you file bankruptcy.

The bankruptcy cost is typically set at $1,800, which is paid over 9 months at $200 per month.

At the end of the nine months, if you’ve met all payments, you are debt-free.

However, the bankruptcy will remain on your credit report for at least 6 years after its discharge.

You are expected to attend credit counselling sessions and provide monthly income statements during the bankruptcy process.

At the start of the process, you will also surrender your unprotected assets – when relevant – and your credit cards to your trustee.

The ‘judgment proof ‘certifies that you have no asset that creditors could seize if they were to sue you for individuals who can’t pay for their bankruptcy costs.

But your LIT can help you understand how to file bankruptcy according to your situation.

How LIT can help

We are Canada’s bankruptcy experts, with over 430 trustee offices across the country.

We’ve been online since 1999 and have helped 200,000 Canadians deal with debts and financial problems.

Licensed insolvency trustees are committed to helping you get a fresh financial start.

Get in touch with a LIT to start your bankruptcy journey and find peace at (877) 879-4770.

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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