Frequently Asked Questions About Bankruptcy in Canada
Get clear, accurate answers to common questions about filing bankruptcy, Consumer Proposals, keeping your assets, and rebuilding your credit under federal law.
1. Bankruptcy Process & Costs
If you have no surplus income, a first-time bankruptcy typically costs around $215 per month for 9 months to cover administrative court filing costs. If your income exceeds federal threshold limits set by the Superintendent of Bankruptcy, you must make additional monthly Surplus Income payments.
For a first-time filing without surplus income, an automatic discharge is granted after 9 months. If you are required to pay surplus income, the timeline is extended to 21 months.
In a Consumer Proposal, you offer to repay a reduced percentage of your total debt over up to 5 years with 0% interest while keeping 100% of your property and home equity. In bankruptcy, non-exempt asset equity is surrendered to erase your debts.
2. Assets, Property & Vehicles
Not necessarily. Each province sets statutory asset exemptions that protect equity in your primary vehicle, clothing, household goods, tools, and primary residence home equity up to specific limits. If your asset equity exceeds exemptions, a Consumer Proposal allows you to keep all property automatically.
Under federal BIA rules, registered retirement savings plans (RRSPs) are protected from bankruptcy seizure, with the exception of contributions made within the 12 months immediately preceding your filing date. Registered pension plans are completely exempt.
3. Credit Ratings & Rebuilding
A first bankruptcy places an R9 rating on your Equifax and TransUnion credit report for 6 to 7 years post-discharge. A Consumer Proposal places an R7 rating on your report for 3 years after completion.
Yes. By obtaining a secured credit card post-discharge, keeping your balance below 30% of your credit limit, and making consistent monthly payments, many Canadians rebuild their score back above 650 to 700 within 24 months.
4. CRA Tax Debt & Student Loans
Yes. Personal income tax debts, GST/HST remittances, and CERB overpayments are dischargeable unsecured debts. Filing triggers an immediate federal Stay of Proceedings under Section 69 of the BIA, forcing the CRA to halt all wage garnishments and account freezes instantly.
Under the BIA’s 7-year rule, government student loans are completely erased if you filed for bankruptcy or a proposal more than 7 years after the date you ceased to be a full-time or part-time student.
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