Bankruptcy Newfoundland and Labrador

If you’re living in Newfoundland and Labrador and have overwhelming debts you have no realistic chance of repaying, you may be looking at bankruptcy as a potential solution. In situations where other debt solutions fall short, bankruptcy can offer a structured way to start fresh and work toward a debt-free future. 

In this guide, we’ll walk you through how bankruptcy works, who qualifies, what happens to your assets, and what alternative debt solutions are available in Canada.

What is bankruptcy?

Bankruptcy is a legal insolvency process in Canada, governed by the federal government under the Bankruptcy and Insolvency Act and overseen by the Office of the Superintendent of Bankruptcy (OSB). 

The main purpose of bankruptcy is to give people with overwhelming debts a chance at a fresh start by clearing most of the debts they owe after they meet certain conditions. 

Filing for bankruptcy requires the help of a Licensed Insolvency Trustee (LIT), a certified debt professional who will administer your case and communicate with your creditors.

Am I eligible to declare bankruptcy?

To be eligible, you must be a debtor who resides, has a business, or owns a property in Canada. 

You need to owe at least $1,000 in unsecured debts. These include consumer debts like credit card balances, payday loans, medical bills, or lines of credit.

If you’re unable to pay your debts as they become due, or if the amount you owe is more than the total value of assets like your house, you may qualify for bankruptcy. Speaking with a trustee can help determine if this is the right option for your situation.

How does the personal bankruptcy process work?

Declaring personal bankruptcy in Newfoundland and Labrador involves several important steps:

Working with Licensed Insolvency Trustees

Your journey begins by consulting with a local Licensed Insolvency Trustee (LIT). These professionals are licensed by the federal government and are the only individuals legally authorized to administer a bankruptcy filing. Most LITs offer a free initial consultation where they’ll review your finances and give you a better idea if bankruptcy is the right fit.

Filing bankruptcy documents

With the help of your licensed bankruptcy trustee, you’ll complete and file all necessary legal paperwork. Your trustee will notify your creditors, stopping collection calls, wage garnishments, and most legal actions.

Adhering to the terms of your bankruptcy

Once filed, you’ll be required to follow the terms of your bankruptcy. This typically includes making payments based on your income, reporting your monthly budget, and attending consumer financial counselling sessions to help improve money management skills.

Discharge from bankruptcy

While most first-time bankruptcies in Canada result in an automatic discharge after nine months, prior bankruptcies can increase this term to as long as 36 months. This discharge legally eliminates your eligible debts and marks the end of the bankruptcy process.

What happens to my assets during bankruptcy?

​​Not all of your assets are lost when you declare bankruptcy. In Newfoundland and Labrador, certain exemptions allow you to keep some basic possessions such as household furniture, clothing, and tools of your trade – including a motor vehicle if it’s necessary for your job.

You may also be able to keep your home as long as it’s your principal residence, especially if you have limited equity in the property.

Generally speaking, valuable assets like a second vehicle, second home, or vacation properties may be sold to help repay your creditors. Your Licensed Insolvency Trustee will assess your assets and explain what you may keep or need to surrender.

Do debt solutions like bankruptcy damage my credit rating?

Yes, filing for bankruptcy does have a significant effect on your credit. A first bankruptcy will stay on your credit report for seven years after your discharge, depending on the credit bureau, but can be as long as 14 years for a second bankruptcy. 

Doing things like applying for a credit card, or obtaining property, will be more difficult during and after this period. That said, if you can develop consistent financial habits, demonstrate responsible borrowing, and pay your bills on time and in full, rebuilding your credit is possible.

Does being discharged from bankruptcy mean I’m debt-free?

For most people, yes. Once you receive your official discharge, the consumer debts included in the bankruptcy are legally eliminated, meaning you’re completely free from those obligations. 

Some debts, like child support, alimony payments, court fines, and student loans (under certain conditions) are not eligible to be discharged via bankruptcy, so you will remain responsible for them both during and after the bankruptcy process. 

That’s why it’s important to review your full list of debts with your trustee before filing for bankruptcy. 

Alternatives solutions to bankruptcy in Newfoundland and Labrador

Bankruptcy isn’t your only choice when it comes to debt solutions – there are several others available in Canada that may better suit your needs:

Consumer proposal

A debt solution designed for individuals who can repay a portion of what they owe. You work with a Licensed Insolvency Trustee to offer your creditors a reduced monthly payment for up to five years. If accepted, it allows you to avoid bankruptcy while still settling your debts.

Debt consolidation

This option combines multiple debts into a single loan with one payment and possibly a lower interest rate. It simplifies repayment and may reduce overall costs, but often requires a reasonable credit score in order to qualify.

Credit counselling

Working with non-profit agencies, credit counselling offers you tailored information on budget planning, financial advice, and debt management programs. While it doesn’t eliminate debt, it can help you set up a plan to repay it more efficiently without formal insolvency proceedings.

Is this the best debt help option to secure my financial future?

Bankruptcy may be the right option if you’re in a desperate financial situation with no other viable way to repay your debts. 

It offers a path to a fresh start, but it’s a serious step with long-term consequences. That’s why it’s essential to seek debt advice from a Licensed Insolvency Trustee before making a decision. 

They can walk you through every option available—whether that’s bankruptcy, a consumer proposal, or another form of debt relief—and help you take your first steps toward lasting financial recovery.