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Bankruptcy in Canada: Understanding the Process

Although filing for bankruptcy can be a difficult and stressful experience, it can also provide people the chance to start over and improve their financial life. It's essential that you understand the procedure and steps involved if you're thinking of filing for bankruptcy in Canada.
An outline of the bankruptcy procedure in Canada, including eligibility requirements, filing, and discharge, will be given in this article.

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Eligibility Requirements

To apply for bankruptcy in Canada, you must first fulfill certain eligibility requirements. They consist of:

  1. You must be a Canadian citizen or have assets or property there.
  2. You must have unsecured debt of at least $1,000.
  3. You must be unable to pay your obligations when they fall due, which is known as being insolvent.
  4. You ought to have tried your best to pay off your debts.

If you fulfill these eligibility requirements, you could be allowed to declare bankruptcy in Canada.



Filing Process

Filing the necessary documents with the Office of the Superintendent of Bankruptcy (OSB) is the first step in the bankruptcy procedure in Canada. The steps in the filing procedure are as follows:

  • Get credit counseling: You must attend two sessions with a certified credit counselor before you can declare bankruptcy. The counselor will assist you in exploring your financial situation, identifying viable solutions, and deciding whether bankruptcy is the right course of action for you throughout these sessions.

  • Hire a licensed insolvency trustee (LIT): If you choose to file for bankruptcy, you have to hire one (LIT). A licensed professional with permission to manage bankruptcy and other insolvency processes is known as a LIT. Your LIT will assist you in completing the required documentation, filing your bankruptcy claim, and serving as a mediator between you and your creditors.

  • Complete the paperwork: Your LIT will assist you with completing the required papers for bankruptcy filing. Included in this is a Statement of Affairs, which lists your assets, liabilities, and other financial data.

  • The paperwork must be submitted: Your LIT will send the paperwork to the OSB once it is finished. The bankruptcy procedure is therefore formally launched.


  • Attend a creditors’ meeting: You will be compelled to appear at a creditors’ meeting within a few weeks of filing for bankruptcy. Your creditors may interrogate you at this conference regarding your financial situation and bankruptcy claim. At this meeting, your LIT will be there to support you and assist with any questions you may have.

  • Assets must be surrendered: If you own any non-exempt property, you must give your LIT possession of it. Assets that are not exempt under Canadian bankruptcy law, such as a second car or a recreational property, are known as non-exempt assets.

  • Make payments: You can be compelled to pay your LIT monthly installments if you have surplus income (i.e., income that exceeds a certain level). Your creditors will get these payments.



Discharge Process

In Canada, the bankruptcy process ends with the discharge process. It is the procedure through which your bankruptcy is over and your debts are dismissed. The steps in the discharge process are as follows:

  • Complete the bankruptcy process: Many factors, including your income, assets, and obligations, affect how long the bankruptcy process will last. The bankruptcy process typically lasts nine months. You have to finish your bankruptcy during this period, which includes attending credit counseling sessions and paying any necessary payments.

  • Get a discharge order: Your LIT will apply to a discharge order on your behalf when the bankruptcy term has ended. This is a court order that cancels your obligations and extricates you from bankruptcy.

  • Attend a discharge hearing: In some circumstances, you could be obliged to do so. A judge will analyze your bankruptcy during this hearing and determine whether to grant your discharge. You will be freed from bankruptcy and have your debts dismissed if the court grants your discharge.

  • Update to credit record: Your credit report will be updated to reflect your new financial situation after your bankruptcy has been dismissed. After the date of discharge, your bankruptcy will still be included on your credit record for a period of six years.
  • Rebuilding your credit: Bankruptcy might provide you with a new start, but it can also seriously affect your credit rating. After filing for bankruptcy, it’s critical to take action to rebuild your credit. This might involve obtaining a secured credit card, paying your bills on time, and not exceeding your credit limit.




Take Action Against Debt

It is clear after reading this thorough guide to the bankruptcy procedure in Canada that taking charge of your financial life can be a difficult but necessary move. It’s essential to speak with a Licensed Insolvency Trustee (LIT) if you’re thinking of declaring bankruptcy in Canada in order to discuss your alternatives and thoroughly comprehend the procedure or if there are other better solutions available for you like Debt Settlement Programs in Canada.
You may get the help you need from National Debt Relief to get back on solid financial ground and repair your credit. To find out more about our debt relief services and to begin your journey toward financial independence, get in touch with National Debt Relief right away. 
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I was lost ... single mom... off due to Covid for 3 months .. did what it took to pay bills and look after my kids... and left with nothing but a tonne of debt I could not keep up with 😢. And then ....I met Connie.. Connie gave me my life back. The entire experience was like talking to my mother. She was full of compassion and knowledge and took me under her wing for this entire process. She turned tears into smiles and hope . She reassured me.. and made me feel like it was Going to be ok. I can’t thank her and the team (Paul) enough for helping me through this . I highly recommend National Debt Services to anyone looking for help with their debt . Start living again ❤️. Thanks Connie Jen
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I would just like to thank Suma for really making feel comfortable throughout this entire process. Everyone tells you to watch out for gimmicks, quick fixes, and everything else that comes with Debt. Ive had other companies who had made promises and under delivered. However Suma and her team are quick to provide the right answers and guide everyone in a way towards better credit. She has made it seamless with great communication and availability. I have personally referred her to several of my closest friends and i would recommend her to anyone else looking for consolidation.

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Frequently Asked Questions

A Debt Consolidation is a negotiated debt settlement offer made between you and your creditors with the help of a Debt Relief Agency in Ontario. Some key benefits of Debt Consolidation are interest-free program, no upfront fee required, combined monthly payment into one affordable amount, no lawsuits, and many more.

Yes, your assets are safe from creditors. A licensed debt relief agency in Ontario will help you come up with an offer to your creditors that will make sure your assets will be out of the paper.

No, in fact, this is one of the great advantages of a Debt Consolidation Program. All wage garnishment will stop from the day you filed the proposal.

The effect on your credit score is not going to be severe. Your credit score will most probably go to R7 Rating and will remain in your credit report for another 3 years after you completed the program. This means that it will not be permanent and you will still be able to rebuild your credit score.


This varies depending on the proposal you will be discussing with the help of a certified debt relief agency. It is also worth noting that debt consolidation cannot exceed more than 5 years.

If a debt is shared, you need to file a joint debt consolidation offer to your creditors. However, in most cases, in which the debts are individually incurred will have no impact on your spouse.

After three missed payments, your debt arrangement with creditors will be broken and you will end up getting chased again for the original debt amount plus interest.

A debt consolidation offer can be paid off earlier if you can. In this way, you receive your “Certificate of Completion” sooner and you can immediately start rebuilding your credit score. 

National Debt Relief Services Ontariois a certified Canadian Debt Relief Agency that offers FREE CONSULTATION to your debt consolidation needs. We value the trust given to us by our clients by making sure your personal information is confidential and private. Our personalized plans are designed to tailor fit your financial capacity. Our specialists will get in touch with you by simply answering a few questions thru the link provided below.

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Today I had a wonderful experience with Rachael, she was Very professional I was very happy with what we talked about today she was very Caring I highly recommend national debt relief services hundred percent😃
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Joel has made this so simple and effortless he made sure i was well informed and making the right decisions for my situation i would recommend joel at national dept Relief to anyone in hardship with there bills thanks alot joel i really appreciate everything you have done for me thanks!! 5 stars for sure! and its chad ball not my mom lynn lol
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Let’s Just Put It Simple....... Not All Hero's Wear Caps........I spoke with Suma over a fairly lengthy period of time because of my busy schedule and lack of free time on my part, and she was not only extremely patient and understanding, but also beyond helpful And informative. Any question I had and no matter how many times she had to explain it to me she took her time to make sure I completely understood every single step and process before she moved on to the next thing. I have been so stressed out and worked up about my debt and trying to figure out how to fix it all since I know I will not be returning to work at all in the future because of medical issues and being 26 with that realization makes things just that more stressful but Suma made everything so easy and my payments are $100 a month for less then 5 years with no interest or penalties for early pay off. I’m so glad that I didn’t settle with some other place that was asking for $350 + a month for 7-12 years and paying off early would cost you more.
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Caroline F. was phenomenal, she was so helpful, understanding and compassionate. Caroline did not make me feel bad for my mistakes, she was supportive and caring, she helped me through this dark time in my life I'm so incredibly happy I crossed paths with her. Thank you Caroline for being so wonderful to me! <3

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