Question: How to Declare Bankruptcy

in Canada 🇨🇦

Filing for bankruptcy in Canada is a legal process that can provide individuals or businesses with relief from overwhelming debt. Keep in mind that bankruptcy should be considered as a last resort, and it's important to explore other options first, such as debt consolidation, credit counselling, or negotiating with creditors. If you've determined that bankruptcy is the best option for your situation, here's a general guide on how to file for bankruptcy in Canada:

1. Seek Professional Advice: Before proceeding with bankruptcy, it's crucial to consult with a licensed insolvency trustee (LIT). LITs are professionals licensed by the government to administer bankruptcy and proposal proceedings. They will assess your financial situation and provide advice on the most suitable options for your circumstances.
2. Pre-Bankruptcy Counseling: Before filing for bankruptcy, you are required to undergo credit counselling from an approved credit counselling agency. The goal is to explore alternatives to bankruptcy and ensure you fully understand the implications of filing.
3. Initial Meeting with LIT: If bankruptcy is still the best option, you will work closely with the LIT to complete the necessary paperwork and gather information about your debts, assets, income, and expenses. This information will be used to prepare the necessary documents for filing.
4. Filing the Assignment in Bankruptcy: Once you've decided to proceed, your LIT will help you complete the required forms, including the "Assignment in Bankruptcy." This document legally transfers your assets to the trustee for distribution to your creditors.
5. Stay of Proceedings: Once the Assignment in Bankruptcy is filed, an automatic stay of proceedings is in effect. This means that creditors are prohibited from taking legal action against you to recover debts.
6. Examination of Affairs: You will be required to attend a meeting with the LIT to examine your financial affairs. Creditors may also attend this meeting to ask questions, although it's not common for them to do so.
7. Surplus Income Payments: If your income is above a certain threshold, you may be required to make surplus income payments during the bankruptcy period. The surplus income is the amount by which your income exceeds the government-established guidelines for a reasonable standard of living.
8. Discharge from Bankruptcy: After completing the required duties and obligations, you will be eligible for discharge from bankruptcy. The discharge releases you from most of your debts, with some exceptions such as certain taxes, alimony, and student loans (if less than seven years have passed since you ceased to be a student).



It's crucial to note that the process may vary depending on the specifics of your situation, and bankruptcy laws are subject to change. Always consult with a licensed insolvency trustee for the most up-to-date and personalized advice.