Filing bankruptcy in Canada
A legal process under the federal Bankruptcy and Insolvency Act that eliminates most unsecured debts when you can no longer keep up with your obligations.
What bankruptcy is
If you are overwhelmed by debt, filing bankruptcy in Canada can give you a fresh financial start. Bankruptcy is a legal process under the federal Bankruptcy and Insolvency Act that eliminates most unsecured debts when you can no longer keep up with your obligations.
Once you file, most collection calls, wage garnishments and lawsuits must stop, giving you immediate breathing room to regroup.
Only a Licensed Insolvency Trustee can file it
In Canada, only a Licensed Insolvency Trustee is legally authorised to file a bankruptcy or a consumer proposal on your behalf. The LIT is a federally regulated professional who reviews your situation, explains your options and administers the entire process from filing through to discharge.
Bankruptcy is usually considered after exploring alternatives such as a consumer proposal, consolidation or an informal repayment arrangement. Because it has serious effects on your credit and certain assets, it is worth getting advice before you file.
Who can file bankruptcy
To qualify for personal bankruptcy in Canada you must owe at least $1,000 in unsecured debt and be unable to pay your debts as they become due.
This is a general guide, not a determination. Only a Licensed Insolvency Trustee can confirm whether you qualify and file on your behalf.
- You owe at least $1,000 in unsecured debt.
- You are unable to pay your debts as they become due.
- You live in Canada, operate a business here, or own property here.
- You have explored the alternatives, such as a consumer proposal, consolidation or an informal repayment arrangement.
How the bankruptcy process works
Every situation is different, but the process in Canada usually follows the same five steps.
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01
Confidential consultation
You meet with a Licensed Insolvency Trustee, who reviews your income, debts, assets and budget, and explains all of your debt-relief options.
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02
Filing your bankruptcy
If bankruptcy is the right choice, the trustee prepares and files your documents with the Office of the Superintendent of Bankruptcy. Filing triggers a legal stay of proceedings, which stops most collection actions and wage garnishments.
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03
Dealing with assets and payments
The trustee identifies non-exempt assets that may need to be sold for the benefit of creditors, and determines whether you must make surplus-income payments based on government income thresholds.
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04
Monthly reporting and counselling
You complete a simple monthly income and expense report, and attend two mandatory financial-counselling sessions focused on budgeting and money management.
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05
Discharge from bankruptcy
For a first-time bankruptcy with no surplus income, discharge can occur in as little as about nine months, at which point most remaining unsecured debts are legally erased.
How bankruptcy affects you
Bankruptcy offers powerful relief, and it carries real consequences. You should see both before deciding.
What it gives you
- Most unsecured debts, such as credit cards, personal loans and lines of credit, are eliminated at discharge.
- Your monthly debt payments are dramatically reduced or removed entirely.
- Most collection calls, wage garnishments and lawsuits must stop as soon as you file.
- A first-time bankruptcy with no surplus income can be discharged in as little as about nine months.
What it costs you
- You may have to surrender certain non-exempt assets. Essentials like basic household goods and a modest vehicle are often protected, depending on provincial exemption rules.
- You will pay trustee fees and, if required, surplus-income payments based on federal guidelines and your income.
- A first-time bankruptcy is usually reported as the most severe rating and can remain on your credit report for several years after discharge.
- Secured debts such as mortgages and car loans are not eliminated. You keep paying those to keep the asset.
Because these impacts are significant, it is critical to understand every option before committing to bankruptcy. Where a less drastic route can realistically solve the problem, we will tell you.
How Wizdom Financial helps
Only a Licensed Insolvency Trustee can legally file a bankruptcy. Working with Wizdom Financial gives you a dedicated advocate focused solely on your interests, from the first conversation through to rebuilding after discharge.
We begin with a clear, judgment-free review of your entire financial picture: income, debts, assets and monthly obligations. We then compare bankruptcy against a consumer proposal, consolidation and structured repayment, so you can see the trade-offs of each path before deciding.
Our goal is to help you avoid bankruptcy if a less drastic option can realistically solve the problem, and to make sure you know exactly what to expect if it is the right or only choice.
Walking in prepared makes the process faster and far less stressful. We help you:
- Gather pay stubs, tax returns, bank statements, loan agreements and asset information
- Build a realistic household budget and cash-flow plan
- Identify any recent financial transactions that should be clearly disclosed
With that done upfront, your trustee can focus on confirming details and filing, instead of sending you back repeatedly for missing information.
Licensed Insolvency Trustees range from large national firms to small local practices. We help you understand the differences in approach and communication style, select a trustee who matches your needs and location, and walk in with clear questions.
We rely on publicly available information and professional networks to make sure you are working with a reputable, properly licensed trustee.
Provincial exemption rules determine what you keep, such as basic household items, tools of the trade and a portion of vehicle or home equity. We work with you to:
- Clarify what is likely exempt under your province's rules
- Plan how to handle any non-exempt assets before filing
- Show how choices like keeping or surrendering a vehicle affect your future budget
This helps preserve your ability to work, care for your family and keep daily life stable.
Once you file you must track income and expenses, submit monthly reports and possibly make surplus-income payments. We support you by:
- Creating a livable budget that covers both everyday bills and required payments
- Adjusting for variable income if you are self-employed, on commission, or working irregular hours
- Setting up separate bill accounts and automatic transfers
That makes missed obligations far less likely, which helps you reach discharge on time.
Many people finish bankruptcy with no concrete plan for what comes next. After discharge we keep working with you to:
- Rebuild credit with carefully chosen tools and strong usage habits
- Establish an emergency fund and longer-term savings goals
- Plan for larger goals like a vehicle or a home in a way that suits your post-bankruptcy credit profile
The focus is turning bankruptcy from an ending into a structured new beginning.
How this differs from the other two
Bankruptcy is the most complete form of relief and the most severe on your credit. The alternatives trade speed for a lighter mark.
Consumer proposal
Repays a portion of what you owe instead of eliminating it, and you generally keep your assets. Payments stay fixed even if your income rises, and the credit mark is less severe.
How a proposal worksOrderly Payment of Debts
Repays your unsecured debt in full at a fixed low interest rate. The lightest credit impact of the three, but it needs enough income to repay everything, and it exists in four provinces only.
How OPD worksBankruptcy questions
For a first-time bankruptcy with no surplus income, discharge can occur in as little as about nine months. If you have surplus income, or it is not your first filing, the period is longer.
Surplus income is the amount your income exceeds federal thresholds set by the government, adjusted for household size. If your income is above the threshold, you make additional payments during the bankruptcy and the process takes longer.
No. Provincial exemption rules protect certain assets, commonly basic household goods, tools of the trade and a portion of vehicle or home equity. Non-exempt assets may be sold for the benefit of creditors. We map out what is likely exempt in your province before anything is filed.
Most unsecured debts are, at discharge. Secured debts like mortgages and car loans are not, and you keep paying those to keep the asset. Certain obligations, such as support payments and some court-ordered debts, also survive bankruptcy.
Usually, yes. Bankruptcy is normally considered after a consumer proposal, consolidation or an informal arrangement has been ruled out. Our first job is to check whether a less drastic route can realistically solve the problem.
No questions match that search. Try a different word, or just ask us directly.
Let us check the alternatives first
A free 30-minute conversation, no obligation and no judgement. If something less severe will work, we will say so.
Mon to Fri 8:00am to 8:30pm, and Saturdays