How Bankruptcy Works in Canada – FLM 2021

With many people taking on additional pandemic debt - how much do you know about how bankruptcy works in Canada?

November is Financial Literacy Month and the perfect opportunity to share knowledge about Canada’s federal debt free programs.

Let’s begin with a few of the most common terms and phrases that come up when researching bankruptcy in Canada.

What is the Bankruptcy and Insolvency Act (BIA)?

The Bankruptcy and Insolvency Act is the federal law that regulates all consumer proposals and bankruptcies in Canada.

What is the Office of the Superintendent of Bankruptcy (OSB)?

The OSB is a branch of Industry Canada that is responsible for overseeing the administration of Canada’s Bankruptcy and Insolvency Act. The OSB is led by a federally appointed official called the Superintendent of Bankruptcy.

What is a Licensed Insolvency Trustee (LIT)?

A Licensed Insolvency Trustee is an officer of the court who ensures that you follow the law when seeking creditor protection. The Superintendent of Bankruptcy licenses LITs to administer proposals and bankruptcies. Trustees provide you with information from the BIA about bankruptcies and proposals. During the process, an LIT has a duty to the court to protect the rights of both debtors and creditors.

What is a Statement of Affairs (SOA)?

Whether you choose to file a bankruptcy or a consumer proposal, a document called a “Statement of Affairs” will be required. The SOA document is an affidavit that is sworn to be accurate and truthful. The document discloses important financial factors to your creditors from information that you provide about yourself and your finances on the date of filing. The SOA includes:

  • A complete list of your assets, their declared values and whether they are secured by a creditor.
  • Personal info such as your full legal name, employment details, marital status and family size.
  • Your responses to specific questions dealing with recent relevant financial transactions. Questions such as, have you sold any assets or houses or come into any large sums of money.

Your statement of affairs will also include a brief description of the events that have contributed to your debt problem in your own words and why you’ve chosen to file. We help you answer these questions, and we prepare this document for your review. When you sign your bankruptcy paperwork, we go through each page with you one by one to help you check for accuracy.

You're Not Alone

You may or may not be surprised to hear that the bankruptcy process can be very emotional for many people. No one wants to begin a bankruptcy, but many are relieved and feel at peace with this decision once it has been made. Our team will support you on this journey and because an LIT is required to complete this process, it means no bankrupt person goes through this alone.

"It's true that no one really wants to file a bankruptcy, but it can be a lifesaver at a time when you really need it most,” explains LIT Elliot Rotfarb. “If bankruptcy is your best option, there is no shame in that and almost every person who has made this decision with us eventually tells us that they're glad they did. Some even wish they hadn't waited so long to do it. Choosing bankruptcy is never a question of whether or not it's a good idea to file a bankruptcy, it's a question of whether or not it's a good idea for YOU to file a bankruptcy – and sometimes the answer is yes."

How Does Bankruptcy Work in Canada?

Bankruptcy typically lasts a minimum of 9 months but can last up to a maximum of 21 months. Every bankruptcy is different and requires a case-by-case review.

“As an LIT, it is my job to review the financial information that you provide me with and guide you with regard to how the BIA applies in your specific circumstances,” adds Elliot. “On the day that you sign your bankruptcy paperwork, you’ll be reminded of the forecasted length and cost anticipated for your bankruptcy – you’ll be given a date in the future to expect to receive a discharge from this process and you’ll be reminded of the duties that are required of you to complete this process.”

To be eligible for a bankruptcy discharge there are specific duties in the BIA that you must complete. Your LIT will review all of them with you at your consultation, and again when you sign your documents. Our team will also be here to remind you of your obligations every step of the way to help you cross the finish line and obtain your fresh financial start.

How to Become Eligible for Your Bankruptcy Discharge

Your duties as a bankrupt person are very straightforward, but you should make sure that you fully understand them before you sign your bankruptcy paperwork. To complete the bankruptcy process you will be required to:

  • Complete two financial counseling sessions with one of our registered counselors.
  • Submit a monthly income and expense report for the duration of your bankruptcy.
  • Disclose any changes in your financial or contact information while bankrupt.
  • Make all payments required of you.
  • Submit your personal income tax information to your LIT to have your pre and post bankruptcy income tax returns filed before your bankruptcy can be officially closed.


Starting Over - Free From Debt Today

Once you’ve been discharged from bankruptcy you can begin the process of starting over. Your bankruptcy will remain on your credit bureau report for approximately 7 years if you’ve never been bankrupt before. If this will be your second bankruptcy, please contact us to learn more about the additional time it will take to obtain a bankruptcy discharge and clear your credit report.

During our counseling sessions with you we will provide you with tips to help make starting over easier. We will discuss budgeting, how to avoid debt problems in the future, and how to fix your credit score when the time is right.

If you think that you need help dealing with your debt, please connect with us to review your options, free of charge.

Are you ready to be free from debt today?