Bankruptcy in Canada

Bankruptcy is the process of gaining a fresh financial future by clearing any unsecured debts that you are unable to pay. Spergel is a trusted Canadian bankruptcy firm with over thirty years’ experience of helping over 100,000 individuals gain debt relief. Our experienced Licensed Insolvency Trustees handle bankruptcy with compassion and expertise, and have been helping Canadians gain debt relief for over thirty years.

What is bankruptcy?

Bankruptcy is the legal process of clearing any overwhelming unsecured debts that cannot be paid. It enables you to begin a fresh financial future. When filing bankruptcy, you assign any non-exempt assets over to a Licensed Insolvency Trustee in exchange for the clearance of your debt. Filing bankruptcy prevents creditors from making collection calls or pursuing legal action, like a wage garnishment. While many Canadians think that bankruptcy causes you to lose all your assets, this is far from the reality. In fact, you can keep some essential items depending on your province of residence. Although bankruptcy can seem like an intimidating process, our Licensed Insolvency Trustees will approach your situation with compassion, and help you to gain debt relief. Unlike other bankruptcy firms, you will receive your own dedicated trustee to walk you through each step of the bankruptcy process.

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What are the advantages of filing bankruptcy?

You may be wondering if filing bankruptcy is the right form of debt relief for you, and our Licensed Insolvency Trustees can help you to make this decision, depending on your financial circumstances. There are a number of key advantages of filing bankruptcy. These include peace of mind, and a life free from the stress of unmanageable debt. Thanks to a stay of proceedings, creditors can no longer contact you or pursue legal action against you for owing debt. Another advantage of bankruptcy is that the majority of first time bankruptcies are discharged within nine to twenty months. It allows you to count down to debt freedom. The cost of bankruptcy is also not associated with the amount of debt that you have, instead being attributed to factors including income, assets, and expenses. It is considered the cheapest form of debt relief, no matter how much debt is owed. This is especially so for those with no non-exempt assets or surplus income.

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Why choose bankruptcy over a consumer proposal?

There are a number of reasons why Canadians struggling with unmanageable debts decide to file bankruptcy over other forms of debt relief, including a consumer proposal. The key advantage of filing bankruptcy over other alternatives is that any unsecured debts you have are completely eliminated. Consumer proposals will reduce your debts by up to 80%, but you still need to make your repayments over a period of up to five years. Bankruptcies are also much quicker to complete than consumer proposals, with most first time bankruptcies being discharged after nine months. Ultimately, if you do not have a significant income or many valuable assets that could be seized, bankruptcy may be the best option. If in doubt, you should speak to an impartial Licensed Insolvency Trustee about your available options and what may be recommended for you.

How does bankruptcy work?

Bankruptcy is a legal process under the Bankruptcy and Insolvency Act, and must be filed with a Licensed Insolvency Trustee. Provided a debtor is insolvent (their debt outweighs the value of their assets), they can be declared bankrupt. Once this happens, any of their non-exempt assets are assigned to a Licensed Insolvency Trustee and used towards the repayment of their debts. Exempt assets include household items including a computer and a car, which may be required for a job. Before filing bankruptcy, it is a good idea to discuss your personal financial circumstances with a Licensed Insolvency Trustee to consider alternatives to bankruptcy.

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Who can file for bankruptcy?

Under the Bankruptcy and Insolvency Act, you are eligible to file bankruptcy in Canada if you are insolvent, which means:

  1. You owe at least $1,000 and
  2. You are unable to pay your debts as they come due or
  3. You owe more in debts than the value of the assets you own, and
  4. You either reside, do business, or have property in Canada

If you meet the bankruptcy eligibility criteria, one of Spergel’s Licensed Insolvency Trustees will be able to walk you through the process of filing bankruptcy.

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What happens to your assets when you file bankruptcy?

Contrary to popular belief, bankruptcy does not mean you will lose everything! In Canada, secured debt including a mortgage and car loan are unaffected by bankruptcy as long as a debtor can make their monthly payments. You can also keep the majority of your personal belongings, trade related property, and a vehicle valued below the provincial limit when filing bankruptcy. Any RRSPs, except the past year’s contributions, can also be kept. Any non-exempt assets will be assigned to a Licensed Insolvency Trustee in order to go towards your debt repayment. Discover more about Ontario bankruptcy exemptions to see which assets are included.

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Which debts are covered by bankruptcy?

Bankruptcy clears most unsecured debts, including credit card debts, bank loans, payday loans, bills, lines of credit, and tax debts. Government student loans can also be included in a bankruptcy provided a debtor has been out of school for seven years. Debts that are not covered by bankruptcy include spousal and child support payments, debts relating to fraud, court fines, and secured debts like secured liens on property. During the process of bankruptcy, you will need to provide a list of creditors and the estimated amount owed, although ultimately creditors will be responsible for making claims and proving debts.

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Why do people declare bankruptcy?

Bankruptcy can be declared for a number of reasons – it can be a sudden realisation of incremental debt that would be extremely challenging to pay back without support. Other common reasons for bankruptcy include recurring calls from creditors, or a difficulty in obtaining more credit. It could come about from a life event like a divorce, extortionate medical bills, or a job loss, which makes it difficult to pay back debt. Discover the advantages of filing bankruptcy with a trusted Canadian bankruptcy firm like Spergel.

How do you file bankruptcy?

The process of filing bankruptcy involves a number of steps, beginning by meeting a Licensed Insolvency Trustee. At Spergel, unlike other bankruptcy firms, a dedicated trustee will walk you through the entire process instead of passing you from person to person. Initially, paperwork will be filed, and it may be necessary to sell some assets if required. It will involve contacting creditors, and attending credit counselling services before debts are legally cleared. Once you are discharged from bankruptcy, you are free from the obligation to repay the debts owed, resulting in solvency once again. Book a free confidential consultation with a member of our compassionate team to discuss the best path forward for you and your finances.

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Does filing bankruptcy help?

For many debtors, filing bankruptcy is a huge relief. As soon as you are declared bankrupt, there is no longer an obligation to repay the debts you filed. This means creditors can no longer contact you, and the pressures and stress of overwhelming debts are released. It’s also possible to keep some non-exempt assets including a car that may be required for work. Of course, bankruptcy does also impose some restrictions on borrowing money, and it will have an impact on your credit report but it is possible to rebuild. Discover more about life after bankruptcy.

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Debt Repayment Calculator

Reduce your debt by up to 80%

At Spergel, we have helped Canadians begin a fresh financial future for over 30 years, and we are here to help you too.

We’re having trouble calculating your options. For further assistance, you may request a call or use the LiveChat function to contact a Spergel representative who will be able to assist you immediately.

Enter your total unsecured debt. Unsecured debt means debt that is not tied to an asset or collateral like credit cards. Do not include any secured debt (like mortgages, car payments, etc.).
The debt relief calculator works out how much you will need to repay depending on the timeframe you choose.

Book your free phone consultation with our caring team to discuss your options and start your journey towards financial freedom.

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For easy to understand debt solutions, contact Spergel to begin rebuilding your financial future. With locations across Canada, our experienced trustees will help you choose the best debt repayment plan and walk you through the process each step of the way.

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Frequently Asked Questions


What is surplus income?


In a bankruptcy surplus income is a calculation established by the government based on household income and the number of people within that household. The trustee must use this calculation to determine if you are required to make payments into your bankruptcy and what that amount will be. You will be required to provide proof of income monthly for the trustee to ensure the appropriate amount is paid. Learn more about surplus income in a bankruptcy.


Will filing a bankruptcy affect my spouse or common-law partner?


Often people are apprehensive that filing a bankruptcy will have a negative affect on their spouse or common-law partner. In most cases, there is no affect at all. When you take on debt, that debt is yours and yours only unless you co-sign any debt with a spouse, common-law partner, or anyone else. When you file a bankruptcy, any co-signed debt is the full responsibility of other co-signer. He or she now must pay 100% of the debt.