Realization and Distribution of Assets in a Bankruptcy

What does realizing and distributing assets actually mean?

In January 2020, the number of insolvencies in Canada was 10.7% higher than in January 2019.

When you file for bankruptcy in Canada, you appoint a licensed insolvency trustee (LIT) to act on your behalf.

One of the primary roles of the LIT is to realize and distribute the assets.

In basic terms, realizing an asset means selling it.

The assets that are not exempt will be realized and the funds distributed to the creditors involved in the agreement.

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It is important to note that there are exemptions and that creditors are not the first to benefit.

If you take the option to file for bankruptcy, your trustee will automatically notify the CRA (Canada Revenue Agency).

Your tax refund for the year in which you file is forwarded to the trustee along with any refunds you are due from previous years.

In many cases, the tax refund is the only asset subject to realization, as exemption laws enable those who have gone bankrupt to keep the assets they will need to get back on their feet.

The list of exemptions varies depending on where you live, but usually includes household goods, a vehicle and tools up to a certain value.

How does realization and distribution of assets in a bankruptcy work?

Trustees follow a set process when realizing and distributing assets.

This includes:


  • Paying the government filing fee and the trustee’s administration expenses.
  • Paying the trustee’s fee: this charge is calculated according to a government formula.
  • If there are funds still available, the trustee will pay a government levy of up to $200 to the Office of the Superintendent of Bankruptcy. This charge is designed to fund the services provided by the office.
  • The final stage is paying creditors. If there are funds left, they will be distributed to your creditors as a dividend. The creditors will receive a pro-rata payment, which means that larger creditors receive more than their smaller counterparts.
  • In the extremely rare scenario of there being money left over after paying creditors, any remaining funds are allocated to the individual filing for bankruptcy.


The process of realizing and distributing assets is regulated by the federal government.

Which assets could I keep?

Many people assume that you have to surrender everything when you file for bankruptcy, but this simply isn’t the case.

Bankruptcy exemptions are designed to help those who have experienced financial difficulties to get back on track and build for the future.

Exemptions vary in different regions, but the aim is to prevent you from losing everything.

You can keep tools and equipment you need for work, a vehicle to get around, personal items and clothing and financial contributions you have made to savings plans in the previous 12 months.


If you file for bankruptcy in Canada, your appointed trustee will take care of the process of realizing and distributing assets.

In many cases, the only asset that is open to realization is a tax refund.

If you need help or advice, or you have questions about what you can keep, don’t hesitate to get in touch.

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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