Chapter 11 bankruptcy: can I file it?

Posted on 7 April 2023

Written by Chris Galea

If you have landed on this page, you have likely come across the term ‘chapter 11 bankruptcy’ before. Chapter 11 refers to a chapter of the US Bankruptcy Code, which provides bankruptcy guidance for businesses, partnerships, and proprietorships. The US Bankruptcy Code has many sections, each called Titles, and within each Title is a number of different Chapters. Chapter 11 enables you to suggest a plan to keep your business running by paying your creditors over a period of time if you run your business primarily in the United States of America. In this article, we explore the term Chapter 11, who it is appropriate for, and share Chapter 11 bankruptcy alternatives for individuals based in Canada.

What is Chapter 11 in bankruptcy?

To be explicit, Chapter 11 is part of the American bankruptcy system and does not relate to bankruptcy in Canada. Chapter 11 is typically used by businesses and enterprises, although some individuals with a large amount of debt will also file a Chapter 11 bankruptcy. Chapter 11 offers restructuring, allowing a corporation or individual time to try and get their finances back in order. In order to file Chapter 11 of the US Bankruptcy Code, you must have a residence, business, or property situated in the United States. If you do not live or run business in the US, you likely heard of Chapter 11 bankruptcy in popular culture or the media. If you reside in Canada but think that Chapter 11 would be appropriate for you or your business, thankfully there is an equivalent in Canada.

What is the Canadian alternative for Chapter 11 in bankruptcy?

If you are interested in a Chapter 11 bankruptcy but run business or live in Canada, there is an equivalent option – the Companies Creditors Arrangements Act (CCAA). This Canadian statute handles companies facing insolvency. Much like Chapter 11, the CCAA enables you to propose a plan for reorganizing your business’ finances and to keep your business running by paying your creditors over a period of time. The CCAA is most often used for complicated circumstances. In order to file a plan via the CCAA, your business or enterprise must owe over $5 million in debt, and you must have assets or run business in Canada. Another Chapter 11 equivalent available to Canadians with an insolvent business is to file a consumer proposal in line with the Bankruptcy and Insolvency Act.

What is a consumer proposal?

A consumer proposal is a form of debt relief appropriate for individuals and smaller businesses facing less complex debt situations. Requiring a Licensed Insolvency Trustee, a consumer proposal is the process of putting forward a suggested, affordable repayment amount to your creditors. Your Licensed Insolvency Trustee will negotiate with your creditors on your behalf. If accepted, you will only need to make your manageable monthly payment to your creditors for a time period of up to five years. Your remaining debt will be cleared, which in many cases can be up to 80% of the original debt. At Spergel, we have a 99% acceptance rate on any consumer proposals we file. As well as having a number of advantages, a consumer proposal is a structured way for you to keep your business on track while repaying your creditors over time. It is also less expensive than a CCAA restructuring.

How to get support with your debts

When you are looking for support with your debt problems, you should be careful not to confuse bankruptcy laws between the USA and Canada. If you are researching bankruptcy and are struggling with your financial situation, you will be relieved to know there is plenty of support available to you. No matter what your circumstances, Licensed Insolvency Trustees are your best go-to. The only professionals in Canada legally able to file all forms of debt relief, they will work with you to review your financial situation and recommend a pathway to a fresh financial future. From consumer proposals to bankruptcy, they can inform you as to your options. At Spergel, unlike other bankruptcy firms, you will be assigned your very own Licensed Insolvency Trustee from the beginning of the process instead of being passed from person to person.

If you are struggling with your debts and considering bankruptcy, book a free consultation with an experienced Licensed Insolvency Trustee at Spergel. We can help answer any questions about your debts and help you to decide if bankruptcy is a good option for you. We can discuss your other options, and make sure you make an informed decision. Reach out today – you owe it to yourself.


Chris Galea

Chris Galea is a Chartered Accountant and Insolvency and Restructuring Professional with over 20 years’ experience as an LIT (Licensed Insolvency Trustee). He is also our resident expert on tax debt, COVID debt, and the region of Saskatchewan, Canada. When he’s not at the office educating people about bankruptcies and consumer proposals, Chris is playing pick-up hockey with his friends, spending time with his family, and learning Spanish!

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