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What does it mean to be bankrupt?

The concept behind bankruptcy in Canada is this: you assign (surrender) everything you own to a trustee in bankruptcy in exchange for the elimination of your debts. Through bankruptcy, a person burdened with debt gets a chance to start fresh.

Personal bankruptcy is a legal process, governed by federal law (the Bankruptcy & Insolvency Act). The law is designed to permit a person to obtain relief from his or her debts while treating creditors equally and fairly.

You may consider personal bankruptcy under the following conditions:

  • You have done everything you can to deal with your debts but you still cannot afford to pay them
  • You have so much credit card debt relative to your income that despite not charging, your debt continues to grow
  • You are about to lose your home or your car
  • A creditor is about to place liens on your property or garnish your wages and you will suffer a significant financial hardship as a result
  • You are about to lose your utility service

Is there a cost associated with filing for bankruptcy?

Filing for personal bankruptcy has many costs associated with the process. Each step of the way there may be a charge you are responsible to pay, for example:

  • Services of the trustee
  • Filing the documentation or court fees
  • Government fees
  • Counselling sessions
  • Discharge of the bankruptcy

Before you take this step ask for an estimate of the costs and determine if you can afford to go bankrupt. Perhaps there are other less costly alternatives available.

Declaring bankruptcy

Bankruptcy in Canada is a legal process that can provide relief to honest but unfortunate debtors. When you are in bankruptcy, no unsecured creditor can garnishee your wages or initiate any other collection action against you.

However, bankruptcies generally do not affect the rights of secured creditors, i.e., those who have a valid security against your property, such as a car or a house.

Personal bankruptcy in Canada can only be filed through a trustee in bankruptcy, an individual licensed by the Office of the Superintendent of Bankruptcy (OSB) to administer the bankruptcy process. Note: Your own bankruptcy does not affect the liability of anyone who guaranteed or co-signed a loan on your behalf. Your spouse, for example, may be accountable for liabilities incurred jointly with you. It is, therefore, important to make the trustee aware of joint liabilities.


Step 1: Contact a trustee and attend a meeting with him or her to talk about your personal situation and your options.
Step 2: Work with the trustee to complete the required forms. The trustee will then file the bankruptcy with the Office of the Superintendent of Bankruptcy (OSB).
Step 3: The trustee sells your assets and you make payments to the trustee.
Step 4: The trustee notifies your creditors of the bankruptcy.
Step 5: You attend a meeting of creditors, if one is called.
Step 6: You attend an examination by an officer at the OSB, if required.
Step 7: You attend two (2) counselling sessions.
Step 8: The trustee prepares a report to the OSB describing your actions during the bankruptcy.
Step 9: You attend the discharge hearing, if required.
Step 10: The bankruptcy is discharged.


It is possible for your financial profile to recover from a bankruptcy but only if you understand how to avoid being in the same situation again. Before filing for bankruptcy, reviewing other alternatives such as credit counseling services should be considered.

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Self-Help Booklets

Buying A Home

The home buying process can be very intimidating especially if you don’t know where to start. This educational booklet is a combination of information from Consolidated Credit and the government of Canada to help get you started on the road to making one of the biggest and most important purchases of your life.

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