Who Can File for Bankruptcy in Canada?

For many debtors, bankruptcy is the most appropriate way of gaining relief from overwhelming debts, allowing them to take on a fresh start financially.

The most important point to consider is whether or not filing bankruptcy is the best option for you. Often the best idea is to contact a Licensed Insolvency Trustee to discuss your own personal circumstances, and bankruptcy alternatives like consumer proposal and debt consolidation should be considered. In terms of eligibility, here’s a guide to who can file for bankruptcy in Canada.

 

Who is eligible for bankruptcy?

In Canada, the eligibility for bankruptcy is relatively straightforward, and is known as a solvency test. To be eligible for bankruptcy, you must be insolvent which means meeting all three of the following bankruptcy criteria:

  • Owe at least $1,000 of debt to creditors, and;
  • Have debts that are worth more than the value of your assets, and;
  • Be unable to pay your debts on time.

When it comes to your assets, this includes the value of your home, mortgage, savings, vehicles, vacation properties, and even RRSPs. All of these need to be considered and compared against the amount of debt that is owed. Learn more about how bankruptcy affects your assets.

 

Can you be refused bankruptcy?

A key advantage of bankruptcy is that if you file for bankruptcy and you meet the eligibility criteria, your application cannot be denied. That said, getting discharged from bankruptcy involves a number of obligations. There is a requirement to complete a number of duties to be discharged from bankruptcy. These include:

  • Making your agreed payments on time;
  • Attending credit counselling;
  • Reporting your income.

Failure to comply with these duties would likely result in your Licensed Insolvency Trustee opposing your discharge from bankruptcy. There is also a possibility that either your creditors or the Office of the Superintendent of Bankruptcy could object your discharge from bankruptcy. Learn more about how to file bankruptcy.

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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.).
A Spergel Consumer Proposal is structured into monthly payments paid over a period of up to 5 years. You will not pay additional interest or fees during that time.

How many times can you file bankruptcy?

In Canada, when it comes to who can file bankruptcy, there are rare occasions when a debtor may file bankruptcy a second time, provided they were discharged from their first bankruptcy. Although legally you are able to file bankruptcy multiple times, the process becomes increasingly restrictive. When filing a second bankruptcy, it is not possible to be discharged from bankruptcy after nine months. Instead, subsequent bankruptcies will last between 2-3 years, dependent on surplus income. The length of a subsequent bankruptcy is also dependent on the court’s decision, and if there are any oppositions from creditors.

Book a free consultation

Use our debt calculator to see if filing bankruptcy is the right option for you, or meet with a Licensed Insolvency Trustee to discover how to gain debt relief. Book your free consultation today.

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