How to File Bankruptcy in Canada

What is personal bankruptcy in Canada?

Personal bankruptcy in Canada is a federal legal process under the Bankruptcy and Insolvency Act (BIA). You surrender non-exempt assets, fulfill specific duties over a set period, and in return, your unsecured debts are eliminated when you receive your discharge.

It’s not something people plan for. But debt from job loss, divorce, medical problems or mortgage renewals at higher rates can derail anyone, and sometimes there’s no realistic way to pay it all back.

Who can file personal bankruptcy in Canada?

Personal bankruptcy in Canada has three eligibility requirements.

You must owe at least $1,000, be insolvent (unable to meet your debts as they come due), and either reside in Canada, have property in Canada, or carry on business in Canada.

You cannot file on your own. Only a Licensed Insolvency Trustee (LIT), a federally regulated professional licensed by the OSB, is legally authorized to administer a personal bankruptcy in Canada. No lawyer, credit counsellor, or debt consultant can do it for you.

Source: Government of Canada – Bankruptcy and Insolvency Act, Section 49(1)

What are the steps to file personal bankruptcy in Canada?

Filing personal bankruptcy in Canada involves four stages: a free consultation with a Licensed Insolvency Trustee, signing official documents, your trustee filing with the OSB, and completing your duties over the bankruptcy period.

Your trustee handles most of the paperwork. Here’s how each stage works.

Step 1: Free consultation with a Licensed Insolvency Trustee

The first meeting with a Licensed Insolvency Trustee is free and confidential. Your trustee reviews your income, debts, assets, and monthly expenses to lay out every option available, not just personal bankruptcy in Canada.

Consumer proposals, debt consolidation, and informal creditor negotiations are all discussed. If bankruptcy is the right fit, the trustee explains exactly what to expect, including how long it will take, what it will cost, and which assets are protected in your province.

Step 2: Sign the documents and file with the OSB

You sign an assignment in bankruptcy, along with other required forms, including a statement of affairs listing everything you own and owe. Your Licensed Insolvency Trustee files the assignment with the OSB, and an automatic stay of proceedings takes effect immediately.

That stay stops wage garnishments, collection calls, and most lawsuits from your creditors. Your duties begin right away, including monthly income reporting and attending two mandatory credit counselling sessions.

Sources: Government of Canada – Bankruptcy and Insolvency Act, Section 49 and Government of Canada – Bankruptcy and Insolvency Act, Section 69

How much does personal bankruptcy in Canada cost?

Personal bankruptcy in Canada has a regulated cost structure. There are no hidden fees. Your Licensed Insolvency Trustee’s administration fee is set by a federal tariff under the BIA, and it’s paid from what you contribute during the bankruptcy, not on top of it.

The two main factors that determine your total cost are surplus income and assets. If your net household income exceeds the OSB’s threshold for your family size, you pay 50% of the excess to your trustee each month. As of March 2026, the thresholds are as follows.

Family size	Monthly threshold (March 2026)
1 person	$2,666
2 persons	$3,318
3 persons	$4,080
4 persons	$4,953

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

If you own non-exempt assets (property with equity above the provincial limit, investments, or a vehicle worth more than the exemption), those assets either go to your trustee or you pay the equivalent value into your estate.

How long does personal bankruptcy in Canada last?

The length of your bankruptcy depends on whether it’s your first or second bankruptcy and whether you have surplus income.

For a first bankruptcy with no surplus income, you’re eligible for automatic discharge after nine months. If your average surplus income exceeds $200 per month, it extends to 21 months.

A second bankruptcy without surplus income lasts 24 months. With surplus income, 36 months. A third or subsequent bankruptcy has no automatic discharge, and the court decides when you’re released.

That $200 threshold matters more than people realize. If you earn just $200 above the government limit after deductions, your bankruptcy goes from nine months to nearly two years.

Source: Government of Canada – Bankruptcy and Insolvency Act, Section 168.1

What assets can you keep when you file personal bankruptcy in Canada?

Personal bankruptcy in Canada does not mean you lose everything. Every province sets its own exemptions, and most protect the basics you need to live and work.

Across Canada, the general categories are similar. Necessary clothing is exempt. Household furnishings and appliances are protected up to a limit, and so are tools of the trade.

You keep one vehicle if its value is below the provincial cap. RRSPs and RRIFs are exempt under the BIA, except for contributions made in the 12 months before filing.

Home equity exemptions vary widely by province. As of March 2026, the Ontario Execution Act protects up to $12,997 of equity in your principal residence. Alberta allows up to $40,000, and Saskatchewan protects up to $50,000 per owner on title.

If your equity exceeds your province’s limit, you either pay the non-exempt portion to your trustee or the home is sold.

Sources: Government of Canada – Bankruptcy and Insolvency Act, Section 67(1)(b) and (b.3) and Government of Ontario – Execution Act, O. Reg. 657/05 as amended by O. Reg. 393/25

Your Licensed Insolvency Trustee explains the specific exemptions for your province during the initial consultation.

What debts does personal bankruptcy in Canada eliminate?

Personal bankruptcy in Canada eliminates most unsecured debts. Credit card balances, lines of credit, payday loans, medical bills, and most debts owed to the Canada Revenue Agency are all dischargeable.

Some debts survive bankruptcy. The Bankruptcy and Insolvency Act lists debts that are not released by a discharge, including child and spousal support obligations, court fines and penalties, and debts arising from fraud. Student loans survive if you stopped being a student less than seven years before filing.

Personal bankruptcy in Canada also does not eliminate secured debts unless you surrender the secured asset. If you have a car loan or mortgage, you keep making payments on those or give up the asset.

Source: Government of Canada – Bankruptcy and Insolvency Act, Section 178(1)

The student loan rule is non-negotiable. If you have been out of school for six years and eleven months, your student loan remains active. Wait one more month, and it can be eliminated.

What duties do you have during bankruptcy?

You have a set of legal obligations under the BIA during your bankruptcy. Missing any of them delays your discharge.

You must report your income and expenses to your Licensed Insolvency Trustee every month for the entire bankruptcy period. You attend two mandatory credit counselling sessions, the first within 60 days of filing and the second within 210 days.

You surrender any non-exempt assets and hand over your credit cards. If you have surplus income, you make monthly payments. You also assist your trustee with filing any outstanding tax returns.

Source: Government of Canada – Bankruptcy and Insolvency Act, Section 158 and Government of Canada – Bankruptcy and Insolvency Act, Section 170

How does bankruptcy affect your credit report?

Bankruptcy stays on your credit report after discharge. As of 2026, Equifax Canada removes a first bankruptcy six years after the discharge date.

TransUnion removes it after six to seven years, depending on your province. As of 2026, in Ontario, Newfoundland and Labrador, Prince Edward Island, and Quebec, TransUnion keeps it for seven years.

Source: Financial Consumer Agency of Canada – How Long Information Stays on Your Credit Report and Equifax Canada – How Long Does Information Stay on My Equifax Credit Report?

A second bankruptcy stays on your report for 14 years. That’s a long time.

Here’s the thing. Most people considering bankruptcy already have a damaged credit score from missed payments, collections, and high balances. Bankruptcy wipes the slate clean, enabling you to rebuild as soon as you are discharged, using a secured credit card and making on-time payments.

Is a consumer proposal better than bankruptcy?

A consumer proposal is the other main insolvency option under the BIA, and for many people it’s the smarter route. Personal bankruptcy in Canada eliminates debts faster, but a consumer proposal offers more flexibility and protection.

In a consumer proposal, your payments are fixed from start to finish, regardless of changes in income. You keep all your assets, and the credit report impact is shorter, with a consumer proposal removed three years after you finish paying or six years from filing, whichever comes first.

The trade-off is that creditors must accept your proposal, and you repay a portion of your debt for up to five years.

In 2025, roughly 78% of consumer insolvency filings in Canada were consumer proposals, not bankruptcies. And that number has been climbing for years.

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

	Personal bankruptcy	Consumer proposal
Duration	9 or 21 months (first time)	Up to 5 years
Assets	Non-exempt assets surrendered	Keep everything
Payments	Depends on surplus income (can change)	Fixed (doesn’t change)
Credit report	6 to 7 years after discharge	3 years after completion or 6 years from filing
Creditor approval	Not required	Required (majority in dollar value)

A Licensed Insolvency Trustee can calculate both options side by side during a free consultation, so you know exactly what each one costs.

Frequently asked questions

Can I file personal bankruptcy in Canada on my own without a Licensed Insolvency Trustee?

No. The Bankruptcy and Insolvency Act requires a Licensed Insolvency Trustee to administer every personal bankruptcy in Canada. You cannot file directly with a court or through any other type of professional. The initial consultation with a trustee is free.

Will I lose my house if I file personal bankruptcy in Canada?

It depends on how much equity you have and where you live. Each province sets an exemption limit. As of March 2026, Ontario protects equity up to $12,997. If your equity exceeds the limit, you pay the difference to your trustee or the home is sold. A consumer proposal protects your home regardless of equity.

How much does it cost to file personal bankruptcy in Canada?

The administration fee is set by a federal tariff. If your net income exceeds the surplus income threshold for your family size, you also make monthly surplus income payments equal to 50% of the excess. For 2025, the threshold for a single person is $2,666 per month.

What happens to my wages during personal bankruptcy in Canada?

Your Licensed Insolvency Trustee does not garnish your wages. You report your income monthly, and if your average income exceeds the surplus income threshold, you make payments to your trustee.

The stay of proceedings that takes effect at filing stops existing wage garnishments from creditors.

Can personal bankruptcy in Canada eliminate tax debt?

Yes. Most income tax debt owed to the Canada Revenue Agency is discharged through personal bankruptcy in Canada. If the CRA has already registered a lien against your property, the secured portion of that debt is not eliminated.

Any tax refunds owed at the date of filing go to your trustee.

How long does personal bankruptcy in Canada stay on my credit report?

As of 2026, Equifax Canada removes a first bankruptcy six years after discharge. TransUnion removes it after six to seven years, depending on your province. A second bankruptcy stays for 14 years with both bureaus.

Can I keep my car if I file personal bankruptcy in Canada?

In most cases, yes. Each province sets a vehicle exemption amount. Currently, Ontario allows you to keep one vehicle with equity up to $8,578. If the equity exceeds the limit and you want to keep the car, you pay the difference to your trustee.

What is surplus income and how does it affect my bankruptcy?

Surplus income is the amount your household earns above the government’s threshold for your family size. You pay 50% of the excess to your Licensed Insolvency Trustee each month. If your average monthly surplus income exceeds $200, a first bankruptcy extends from 9 months to 21 months.

Can I travel during personal bankruptcy in Canada?

There’s no legal restriction on domestic travel. For international travel, tell your Licensed Insolvency Trustee in advance, particularly if court dates are scheduled or if the trip affects your ability to fulfill your duties.

What is the difference between personal bankruptcy in Canada and a consumer proposal?

Personal bankruptcy in Canada eliminates most unsecured debts, but you surrender non-exempt assets and make surplus income payments if your income is above the threshold.

A consumer proposal lets you keep all assets, make fixed monthly payments, and repay a portion of your debt over up to five years. Both are administered by a Licensed Insolvency Trustee. Your trustee calculates both options so you can compare them.

Talk to a Licensed Insolvency Trustee

A free, confidential consultation with a Licensed Insolvency Trustee covers all your options, whether that’s personal bankruptcy in Canada, a consumer proposal, or something else entirely. No obligation. No pressure. Just a clear picture of where you stand and what makes sense for your situation.