When it comes to actually filing bankruptcy in Canada, it’s confusing for a lot of Canadians. Who do you contact? Where do you start? This is your guide to simplify bankruptcy and help you know where to start.
We’ve helped thousands of Canadians deal with millions and millions of dollars in debt.
But as researching this stuff online can be horrible (especially with government sites and the stack of shallow information), we wanted to create a resource that explains in very simple language the basic questions you likely have about filing bankruptcy in Canada.
So where should you start? As mentioned, we’ve worked with thousands of Canadians are these are the 5 top questions we get asked about bankruptcy.
- Can I file for bankruptcy on my own? (no, you can’t)
- Will I get to keep my house? (you might)
- If I declare bankruptcy, will my spouse or partner need to declare bankruptcy as well (it depends)
- How do I actually hire a bankruptcy trustee?
- What assets do I get to keep if I declare bankruptcy?
Here’s a detailed answer to all those questions, plus a few more we often hear.
ONE: Can I file for Bankruptcy on my own?
No, you can’t.
In Canada, filing for Bankruptcy requires a Bankruptcy Trustee. This is the first step of filing bankruptcy in Canada: contact a bankruptcy trustee.
So how do you select and hire a bankruptcy trustee?
You can select the bankruptcy trustee you want to work with and although you will pay their fees it’s important to understand you don’t technically hire a trustee as they don’t work for you or represent you through the bankruptcy process.
It’s important to remember that bankruptcy trustees are selling their services to you and working to salvage money for the creditor. They make money from your bankruptcy.
TWO: What assets can I keep in a Bankruptcy?
This depends on the Provincial Legislation and will determine which assets are exempt under the Court Order Enforcement Act which will be determined under the Bankruptcy process.
It’s really important to understand this prior to filing Bankruptcy.
Need more help understanding bankruptcy legislation? Talk to us here and a human can answer your questions (for free) as it gets a bit complex and we don’t want to oversimplify a complex bit of law.
THREE: Will I lose my home in a Bankruptcy?
Actually, you might get to keep your home in a bankruptcy.
If you do not have equity in your home or the equity is exempt in your specific Province under the Provincial Legislation you are filing your Bankruptcy under then as long as you maintain your mortgage payments you can keep the house.
FOUR: How long will the Bankruptcy stay on my credit report?
Bankruptcy has the most severe impact on your credit rating and is reported as R9’s on your credit rating for 6 years after you are discharged from Bankruptcy.
If you have to file a 2nd Bankruptcy the Bankruptcy will remain on your credit rating for 14 years.
As we mentioned, while you have a lot of stress right now the financial implications of bankruptcy are far-reaching.
This story (mentioned above) shows how one man in his 50s dealt with an impending bankruptcy.
FIVE: If I go Bankrupt will this affect my partner (wife, husband, spouse)?
It depends.
You’re required to disclose all your personal assets and any assets owned jointly with your partner.
You’re also required to disclose family income from all sources including your partners.
For this reason your partner may be named in the bankruptcy documents, but are not required to file bankruptcy if they are not joint liable on any of the debts.
If a partner is jointly liable on debts then the matter can also be dealt with for the partner individually and outside of the Bankruptcy process.
Other Common Questions and Bankruptcy Resources
Below are a few more common questions we receive about how to file bankruptcy in Canada.
We’ve also written about the best alternatives to bankruptcy here. Other resources include our guide to how the debt industry works, and this inspiring story of a man on the verge of bankruptcy.
Can I still travel while going through Bankruptcy?
Yes, you can.
But you will be required to perform a number of duties during your Bankruptcy to ensure that you can be discharged.
During the Bankruptcy you must do the following:
1. Attend two mandatory counseling sessions
2. Complete and submit between 9-36 income and expense reports to the Bankruptcy Trustee
Can I move while in a bankruptcy?
Yes. But you are required to tell the Trustee of your whereabouts and address at all times.
Can I include debts I owe the Government?
Yes, you can include those as well.
Federal and Provincial tax debt can be included in your Bankruptcy.
If you own a business you need to carefully consider the profitability and any taxes owed by the corporation before you file a Bankruptcy.
In some cases, where the business is losing money, it’s better to shut down the business so the business taxes (GST and Source Deductions) can be included in your personal Bankruptcy.
Does it matter which Bankruptcy Trustee I choose?
We aren’t Bankruptcy Trustees, so we like to believe we have a neutral perspective on this.
The answer is yes, mostly because a Trustee doesn’t act on your behalf in the eyes of the law.
The other piece to remember is there are over 800 Bankruptcy Trustees in Canada and they all have different ways they interpret the Bankruptcy and Insolvency Act which can have a significant impact on how a Bankruptcy is handled.
The role of the Bankruptcy Trustee is to ensure that everything is done within the parameters set by the Bankruptcy and Insolvency Act and that both you and your creditors follow all bankruptcy rules.
The definition of the Bankruptcy Trustees role is as follows:
‘The Trustee is an officer of the court who acts on behalf of the creditors in a fiduciary capacity.’
The fiduciary responsibility is very powerful. A fiduciary is a legal or ethical relationship of trust between two or more parties.
From this we can see responsibilities the Trustee holds and the duty of care they have for the creditors.
Basically, they will determine which assets are exempt and which assets are available to the creditors and the terms the Bankruptcy will be filed on.
Do I have to include all my creditors in a Bankruptcy?
Yes, you’ll have to include each one.
The Bankruptcy and Insolvency Act requires that all creditors are reported in a Bankruptcy.
This is to ensure that it is fair to all creditors and preference is not shown to any creditors.
Will my friends and family find out I filed a Bankruptcy?
Not normally.
When a person files a Bankruptcy no one is notified except for your creditors. There is an online search that can be done but most people don’t know it exists.
Essentially as long as you don’t tell anyone then it’s unlikely they will find out.
Moving forward there are times you will be asked if you have ever been bankrupt.
For example, if you apply for credit, make a rental application for a home, and even certain job applications.
Get a human answer within 48 hours
If you want to know more about Bankruptcy please send us an email at support@4pillars.ca. We have lots of free information we can send your way.
An amazing story about bankruptcy
This is an amazing story of a man who at age 50 lost his business. He faced six figure debt, had a family to take care of, and the world was crashing at his door. Here’s how he got out.
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