How to File Bankruptcy in Ontario

What is personal bankruptcy?

Personal bankruptcy is a legal process under the federal Bankruptcy and Insolvency Act. You assign your non-exempt assets to a Licensed Insolvency Trustee, who distributes them to your creditors. In return, most of your unsecured debts are eliminated when you receive your discharge.

Only a Licensed Insolvency Trustee can administer a bankruptcy. The trustee handles every step, from the initial filing with the Office of the Superintendent of Bankruptcy to your eventual discharge. Once you file, a stay of proceedings stops all collection calls, wage garnishments, and legal actions from your unsecured creditors.

The rules are federal, so bankruptcy works the same way whether you live in Toronto, Ottawa, or Thunder Bay. The one exception is asset exemptions, which are set by provincial law.

Who qualifies for personal bankruptcy in Ontario?

You can file for bankruptcy in Ontario if you meet three conditions.

You must owe at least $1,000 in total debt. You must be insolvent, meaning you cannot pay your debts as they come due. And you must be a Canadian resident or have property or a business in Canada.

There is no maximum debt threshold for bankruptcy. If your unsecured debt exceeds $250,000 (excluding your mortgage), a consumer proposal is not available, but bankruptcy still is. You do not need to prove that you tried other options first.

How does the bankruptcy process work step by step?

Step 1: Initial consultation

A bankruptcy starts with a free consultation with a Licensed Insolvency Trustee. The trustee reviews your income, expenses, assets, and debts. If bankruptcy is a sensible route given your situation, the trustee explains the process, your duties, and what you can expect to keep.

Step 2: Filing the assignment

The trustee files an assignment in bankruptcy with the Office of the Superintendent of Bankruptcy. From that day, a stay of proceedings protects you from creditors. Collection calls stop. Wage garnishments end. Any pending lawsuits from unsecured creditors are halted.

Step 3: Duties during bankruptcy

You have specific duties while bankrupt. You must submit monthly income and expense reports to the trustee. You must attend two mandatory financial counselling sessions. You must surrender your tax refunds and any non-exempt assets. If you have surplus income, you make monthly payments to the trustee.

Step 4: Discharge

For a first-time bankruptcy with no surplus income and no opposition from creditors, you receive an automatic discharge after nine months. If you have surplus income above $200 per month, the discharge extends to 21 months. A second bankruptcy lasts 24 months without surplus income, or 36 months with it.

What does bankruptcy cost in Ontario?

The base cost of a first-time bankruptcy with no surplus income and no non-exempt assets is $1,800 plus HST, paid in monthly instalments over nine months. This covers the trustee’s fees, the two counselling sessions, and the government filing fee.

Source: Moses Advisory Group – Bankruptcy Surplus Income

If you have surplus income, your costs go up. The government sets monthly net income thresholds based on family size. As of 2025, the thresholds are as follows.

Family size	Monthly net income threshold
1 person	$2,666
2 persons	$3,318
3 persons	$4,080
4 persons	$4,953
5 persons	$5,618
6 persons	$6,336
7+ persons	$7,054

Source: Office of the Superintendent of Bankruptcy Canada – Directive No. 11R2-2025, Surplus Income

If your net income exceeds the threshold for your family size by more than $200 per month, you pay 50% of the excess to your trustee each month. A single person earning $3,166 per month has $500 in surplus income, which means a monthly payment of $250. That surplus income also extends a first bankruptcy from 9 months to 21 months.

What assets can you keep in bankruptcy in Ontario?

When you file for bankruptcy, you surrender your non-exempt assets to the trustee. What you can keep is set by Ontario’s Execution Act.

Ontario’s exemption limits are among the lowest in Canada. You can keep household furnishings and appliances with a liquidation value of up to $14,180. You can keep one vehicle with equity up to $7,117. Tools of your trade are protected up to $14,405. Necessary clothing has no dollar limit. RRSPs and RRIFs are protected except for contributions made in the 12 months before filing.

Source: Ontario Execution Act, R.S.O. 1990, c. E.24

The home equity rule

Ontario’s home equity exemption differs from that of most other provinces. Your home is protected only if the total equity is below $10,783. If equity exceeds that amount, there is no partial exemption. The trustee can claim the entire equity, not just the amount above $10,783.

In a province where the average home carries hundreds of thousands in equity, this effectively means most homeowners in Ontario will lose their home in bankruptcy or need to pay the full equity into their estate. If you own a home with equity, a consumer proposal is almost always the better option.

How does bankruptcy affect your credit?

Bankruptcy gives each included account a rating of 9 on your credit report. R9 applies to revolving credit such as credit cards; I9 to instalment loans; C9 to unsecured lines of credit; and O9 to open accounts. For context, a rating of 1 is the best and 9, assigned in bankruptcy, is the worst.

For a first bankruptcy, the record stays on your Equifax credit report for six years after your date of discharge. TransUnion removes it six years after discharge as well.

Source: Financial Consumer Agency of Canada – How Long Information Stays on Your Credit Report

A second bankruptcy stays on your report for 14 years after discharge. That is a long time to carry the worst possible rating.

You can start rebuilding your credit after discharge with a secured credit card. Most people see meaningful improvement within two to three years of consistent use.

What debts does bankruptcy eliminate?

Bankruptcy eliminates most unsecured debts. That includes credit card balances, personal loans, lines of credit, payday loans, medical bills, and tax debt owed to the Canada Revenue Agency.

Some debts survive bankruptcy regardless. Under Section 178(1) of the Bankruptcy and Insolvency Act, these include child and spousal support obligations, court fines and penalties, debts arising from fraud, and government student loans if you have been out of school for fewer than seven years.

Source: Government of Canada – Bankruptcy and Insolvency Act, Section 178

Secured debts, such as your mortgage or car loan, are not affected by bankruptcy. If you continue making those payments, you keep the asset.

Bankruptcy vs. consumer proposal in Ontario

Bankruptcy and a consumer proposal both fall under the Bankruptcy and Insolvency Act. They solve the same problem, but they work differently. The table below breaks down the main differences for Ontario residents.

	Bankruptcy	Consumer proposal
Assets	Non-exempt assets surrendered	You keep everything
Duration	9 to 21 months (first)	Up to 5 years
Monthly payments	Vary based on surplus income	Fixed for the full term
Surplus income	Applies, extends duration and cost	Not applicable
Credit rating	9 (e.g. R9, I9)	7 (e.g. R7, I7)
Credit report duration	6 years after discharge (first)	3 years after completion or 6 years after filing
Home equity	Exposed above $10,783 (full equity, not partial)	Protected entirely

Bankruptcy is faster. A first-time bankruptcy with no surplus income is finished in nine months. A consumer proposal takes up to five years.

A consumer proposal costs less for anyone with income above the surplus threshold or assets above the exemption limits. If your income fluctuates or you expect a raise, a consumer proposal locks in your payments from day one.

Ontario bankruptcy filings in 2025

As of 2025, 52,838 Ontarians filed for insolvency. Of those, 10,144 were bankruptcies, a decline in share as more people choose consumer proposals instead.

	Ontario (2025)	Canada (2025)
Total consumer insolvencies	52,838	140,457
Bankruptcies	10,144	30,289
Consumer proposals	42,694	110,168
Bankruptcy share of filings	19.2%	21.6%
Year-over-year change (total)	+2.3%	+2.3%

Source: Office of the Superintendent of Bankruptcy Canada – Insolvency Statistics, Q4 2025

The national total of 140,457 consumer insolvencies in 2025 is the highest in 16 years. The median debtor in 2024 was 46 years old with $53,997 in total liabilities and was more likely to cite loss of income or medical reasons than overspending.

Source: Office of the Superintendent of Bankruptcy Canada – Canadian Consumer Debtor Profile 2024

Frequently asked questions

How long does bankruptcy last in Ontario?

A first-time bankruptcy with no surplus income lasts nine months. If you have surplus income above $200 per month, it extends to 21 months. A second bankruptcy lasts 24 months without surplus income, or 36 months with it.

Will I lose my house if I file for bankruptcy in Ontario?

It depends on your equity. Ontario’s Execution Act protects your home only if equity is below $10,783. If it exceeds that threshold, the entire equity is exposed, not just the excess. Most Ontario homeowners would need to pay the equity into their estate or lose the home. A consumer proposal avoids this entirely.

Will I lose my car in bankruptcy?

You can keep one vehicle with equity up to $7,117. If your car is worth more than that after subtracting any loan balance, you pay the trustee the difference or surrender the vehicle.

Can I file for bankruptcy on CRA tax debt?

Yes. The Canada Revenue Agency is treated as an unsecured creditor. Income tax, GST/HST, and other amounts owing to the CRA are included in bankruptcy and eliminated on discharge.

How much does it cost to file for bankruptcy in Ontario?

The base cost for a first-time bankruptcy with no surplus income or non-exempt assets is $1,800 plus HST, paid in monthly instalments. If you have surplus income, you pay 50% of the amount above the government threshold each month. The total cost depends on your income, your assets, and how long the bankruptcy lasts.

Can I keep my RRSP if I go bankrupt?

RRSPs and RRIFs are protected in bankruptcy, except for any contributions made in the 12 months before filing. Those recent contributions are surrendered to the trustee.

What is the difference between a first and a second bankruptcy?

A first bankruptcy lasts 9 months (or 21 with surplus income) and stays on your credit report for 6 years after discharge. A second bankruptcy lasts 24 months (or 36 with surplus income) and stays on your credit report for 14 years after discharge. A second bankruptcy also requires a court hearing for discharge.

Can I file for bankruptcy more than once?

Yes. There is no limit on the number of times you can file for bankruptcy. However, each subsequent filing carries longer timelines, higher costs, and a mandatory court hearing for discharge.

Is bankruptcy or a consumer proposal better?

It depends on your situation. Bankruptcy is faster but comes with surplus income rules, asset surrender, and a worse credit impact. A consumer proposal keeps your assets, fixes your payments, and has a shorter impact on your credit report. A Licensed Insolvency Trustee can walk you through both options.

Talk to a Licensed Insolvency Trustee

If your debts have become unmanageable and you need to understand your options, talk to a Licensed Insolvency Trustee. The initial consultation is free, confidential, and comes with no obligation.