Who can file a bankruptcy?

There are certain requirements that must be met:

  • Individuals or companies owing more than $1,000
  • Unable to pay their debts as they become due
  • Discharged from previous bankruptcy
  • Reside, carry on business or have property in Canada
Who will find out if I file a Bankruptcy?

Bankruptcy is public knowledge however it can only be discovered if an insolvency search is performed through the Office of the Superintendent of Bankruptcy or an information package is mailed to the creditor by the Trustee’s office. The Trustee’s office does not release information to individuals who are not creditors of the file. The Trustee is only required to publish the notice of bankruptcy in the newspaper for Ordinary Bankruptcies. 

How much does it cost to file a personal bankruptcy?

Bankruptcy fees are stipulated in the Bankruptcy and Insolvency Act however it will depend on the individual’s situation. The Trustee will discuss the fees with you.

What happens to a debt that someone cosigned for me?

You are able to include that debt in your bankruptcy however, the creditor will continue to pursue the individual that cosigned the debt for payment. The bankruptcy only protects the individual that filed it.

Will I lose my assets if I file Bankruptcy?

In Ontario you are allowed to keep the following items:

Personal Effects valued up to $5,650
Household Furniture and Effects valued up to $11,300
Tools of the Trade valued up to $11,300
Motor Vehicle valued up to $5,650
Farm Equipment (used to earn a living) valued up to $28,300

  • You are able to keep your RRSPs except for any contributions that were made in the year prior to the filing of the Bankruptcy as they will be submitted to the Trustee for your creditors
  • If you have any assets that are not included on this list or have values that exceed these amounts you will have to discuss with your Trustee how to value and/or methods to keep them.
What is surplus income?

The portion of the bankrupt individual’s total income that exceeds that which is necessary to enable the bankrupt individual to maintain a reasonable standard of living. The standards of living have been generated by the Office of the Superintendent of Bankruptcy and not by the Trustee.

What about my credit report/score and how do I rebuild my credit?

Once you have received a Discharge from your Bankruptcy or a Certificate of Full Performance regarding your Proposal, check with the Credit Bureau to make sure all your debts  included in the Bankruptcy or Proposal  are included on the  report.  If there are any errors or ommissions, contact the Credit Bureau and have them corrected immediately.

Using a secured credit card is a quick way to rebuild your credit rating.  Your payment history is reported to the credit bureaus each month. As you make regular payments your credit history looks better and better and you will start to rebuild it.

How long will I be bankrupt?
  • A first time bankrupt that has no issues will receive a discharge in 9 months. However a first time bankrupt with no issues but with surplus income will receive a discharge in 21 months.
  • A second time bankrupt that has no issues with no surplus will receive a discharge in 24 months. However a second time bankrupt with surplus income will receive a discharge in 36 months.
  • If an individual has debt to Canada Revenue Agency of over $200,000 and the debt is more than 75% of the total proven debt, a Court hearing will be scheduled to determine the discharge date.
  • Any discharge that has been opposed by a creditor or by the Trustee will result in a court discharge hearing and the discharge will be dictated by the court.
What happens to my income tax refunds?

The Trustee is responsible for filing prior year’s returns that have not yet been completed and any refunds will be distributed to your creditors. The Trustee must also file your tax return for the year you filed the bankruptcy.

When will creditors stop contacting me via mail and by phone?

Once the Bankruptcy has been filed and the Superintendent of Bankruptcy has issued an estate number, the Trustee will be able to discuss your file and deal directly with your creditors. Once the creditors have received the bankruptcy paperwork and updated their records they usually stop phoning and sending statements to you.

Are there any debts that cannot be included in a Bankruptcy?
  • Court fines, penalties and restitution orders
  • Alimony, child support and maintenance
  • Any award by the Court for intentional bodily harm, sexual assault or wrongful death
  • Any debt or liability arising out of fraud, embezzlement, misappropriation or misconduct while acting in a fiduciary capacity
  • Any debt or liability for obtaining property under false pretences or fraudulent misrepresentation
  • Liability for any dividend a creditor would have been entitled to receive when you fail to disclose the creditor to your trustee
  • Student loans in certain circumstances (less than 7 years old)
How many meetings will I have with the Trustee?

There will be at least four scheduled meetings – initial consultation, signing the paperwork, and two mandatory counselling sessions.


How is a proposal different from a bankruptcy?

A proposal is filed when the individual is able to pay all or a portion of their debt to their creditors. You are able to keep all of your assets including your tax refunds and R7 rather than R9 rating will remain on your credit report for an additional 3 years after the completion of the proposal.

What is the difference between a Division 1 and a Consumer Proposal?

If your total debts excluding the mortgage on your principal residence exceed $250,000 you would file a Division 1 Proposal as you would not be eligible to file a Consumer Proposal. Division 1 Proposals can be filed by individuals and by corporations and there is a mandatory meeting of creditors held in order for the creditors to vote for or against the Proposal. If the Proposal is rejected by the creditors or by the Court then an automatic bankruptcy occurs.

What happens to my assets if I file a Proposal?

Unlike a Bankruptcy, you are generally able to keep all of your assets as long as you continue to make monthly payments to the secured creditors and you are not in arrears.

How long will a Proposal last?

The maximum time frame for a consumer proposal is 60 months (five years). At any time during the proposal you are able to completely pay off the amount that is owing rather than continue to make the monthly payments. Once the total amount has been paid you will receive a Certificate of Full Performance stating that you have completed the Proposal.

What happens if my financial situation changes during the Proposal?
  • If you are unable to continue to make the proposed monthly payments due to a change in your individual or your family’s financial situation you can file an amended Proposal and request that the creditors vote and hopefully accept the amended terms. You must file an amendment prior to missing three payments because once that occurs your Proposal will be annulled.
  • Alternatively, if your income increases you can pay off the remaining amount sooner than originally stated in the Proposal.
How much does it cost to file a Consumer Proposal?

The Trustee’s fees are stipulated in the Bankruptcy and Insolvency Act and will be included in your monthly payments. There are no additional fees or costs that must be paid in addition to your monthly Proposal payments.

What happens to my debts if I cannot finish my Proposal?

If you miss any three payments throughout the term of the Proposal and you do not file an amendment with your Trustee, the amount you have paid to your Trustee will be distributed to your creditors. Your Proposal will be deemed annulled and the creditors are then able to come after you for the remaining amount of your debt to them as you are no longer protected by the Bankruptcy and Insolvency Act.

Credit Scores? How to rebuild it

One of the first steps is to check your Credit report. The two main agencies, Equifax and Trans Union, should be contacted to make sure all debts are included and your Discharge or Certificate of Full Performance has been noted.  If there are any errors, a form needs to be completed and have the corrections made.  This report can be ordered once a year for free and can be mailed to you directly.

Once you have a clean credit record you can begin to rebuild your credit score.  One step is to get credit again.  This can be in the form of a secured credit card from your bank or a small loan.  It is important to make payments on a regular basis as the credit agencies will track these towards your credit rebuilding process.