What are the Types of Bankruptcy in Canada?

what are the Major Types of Bankruptcy?

What are the types of bankruptcy in Canada?Unlike in the USA which has chapter 7 bankruptcy and chapter 13 bankruptcy for individuals, there are only two main types of bankruptcypersonal and business.

There can be two types of bankruptcy considered under the business type – small business bankruptcy and corporate bankruptcy.

The equivalent of American chapter 13 bankruptcy in Canada is a consumer proposal, and is administered under the Bankruptcy & Insolvency Act but it is not a type of bankruptcy.

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We have all of the information that you need to know about filing bankruptcy, whether it is personal bankruptcy or business bankruptcy.

Personal Bankruptcy Canada

The most popular type of bankruptcy in Canada is personal bankruptcy.

Our Licensed Insolvency Trustees (LIT) offer a free consultation if you are thinking of declaring personal bankruptcy so you can get all the information on bankruptcy you need to make an informed decision about whether personal bankruptcy is the right choice for you.

The LIT, formerly known as a bankruptcy trustee, can discuss with you the cost of bankruptcy, assets you can keep, and will point out any possible alternatives to bankruptcy that might be available to you.

For some debtors, personal bankruptcy will be the only choice, although you can always trust the advice of your trustee as they are ethically required to tell you how you can avoid bankruptcy if possible.

Small Business Bankruptcy in Canada

If a small business is set up as a partnership or sole proprietorship and it ends up insolvent it will be treated like a personal bankruptcy.

The reason for this is that a sole proprietorship or partnership is legally the same as the individual that runs the business.

The assets of the business are not separate from the owner’s personal assets.

However, when a business is incorporated the business bankruptcy process will be quite different, and can become quite challenging.

An incorporated business and its assets and liabilities are their own legal entity and are separate from the business owner.

If your business is incorporated or a sole proprietorship / partnership we can help you find the trustee for filing bankruptcy who has extensive experience handling business bankruptcies in Canada.

Types of Bankruptcy Discharge in Canada

When you complete your bankruptcy, whether personal or business, you will also receive a different type of bankruptcy discharge, depending on certain factors.

There are four types of bankruptcy discharge of your debts that you might receive:

Absolute Discharge – This is the type of discharge from bankruptcy you want to receive, which happens automatically in most bankruptcies.

When you receive an absolute bankruptcy discharge you will be released from any legal obligation to repay the debts that existed at the time you filed bankruptcy, with certain types of debts not being discharged in bankruptcy (such as fines or child support or alimony payments).


Conditional bankruptcy discharge – If you receive a conditional discharge from your bankruptcy you will have to complete certain conditions before you can receive your absolute discharge.


Suspended discharge – If you receive a suspended bankruptcy discharge you will receive your absolute discharge at a future date.


Discharge refused – In very rare cases the court has the right to refuse a discharge and you will have to work with your trustee to find out how to receive your discharge.

You might also need the assistance of an insolvency lawyer.