Personal bankruptcy

Bankruptcy pursuant to the law on bankruptcy and insolvency

Under the provisions of the Bankruptcy and Insolvency Act, an insolvent debtor has the right to declare bankruptcy.

The debtor must fill out the necessary forms at a trustee’s office to set the bankruptcy in motion.

Once the bankruptcy is filed, all the creditors are notified by the trustee and must immediately stay all procedurs against the debtor, whether it involves civil action, seizures etc.

In the case of a first bankruptcy, the debtor has the right to automatic release at the end of nine (9) months providing the creditors do not oppose. If said debtor wishes a release in less than nine (9) months, or the creditors are opposed, it then falls into the hands of the court.


This release frees the debtor from debt, except for the following :

  • Debts of a criminal nature (speeding ticket)
  • Alimony
  • Debts arising from fraud
  • Debts accumulated by the acquisition of goods under false declaration. Example : ( obtaining a loan by knowingly declaring collateral that does not belong to you).


An insolvent debtor is by definition, a person who:

  1. Owes at least $1000 to creditors;
  2. Cannot meet their obligations on time.

Throughout the bankruptcy, the debtor is obliged to pay by voluntary deposit, based on net salary and personal and family obligations.


The debtor must also submit all seizable assets to the tustee for the benefit of the creditors, with these exceptions.

  • Personal belongings
  • Furniture and furnishings
  • Automobile, if needed for work or of little value.
  • All work related material.

What to expect if you file for bankruptcy

After talking with a Licensed Insolvency Trustee, you decide that bankruptcy is the most appropriate option to handle your debts. The trustee explains the way your creditors will be paid and what you will need to do during the bankruptcy process.


Costs and how long in bankruptcy

Bankruptcy Discharge Rules:
– 9 month automatic discharge for 1st. time bankrupts who fulfill all their duties and who do not have excess income. (Required monthly payment of less than $100.00 per month)
– 21 months (or more at the court’s discretion) for 1st. time bankrupts who fulfill all their duties. and who have excess income. (Required monthly payment of $100.00 per month or greater)
-24 months for 2nd time bankrupts who do not have excess income.(Required monthly payment of less than $100.00 per month)
-36 months for 2nd time bankrupts who have excess income. (Required monthly payment of $100.00 per month or greater)-Bankrupts with personal income tax debt of $200,000.00 or more representing 75 percent or more of total unsecured claims, are not eligible for an automatic discharge. They must go to court for an adjudication

Fiscal debt

Yes! They will accept a settlement for unpaid taxes and income taxes.Most lawyers and accountants, at one time or another, have tried to negociate, on behalf of their clients, with Revenue Canada or the Minister of Revenue  for Quebec on partial payment of fiscal debts, thus avoiding bankruptcy. It was not a viable plan to help people settle with Revenue Canada since it was limited to those with health problems or similar cases. The professionals who tried to settle with Revenue Canada were not successful because it is not at the discretion of Revenue Canada personel to reduce income and asset taxes. The same applies to the Minister of Revenue for Quebec.However, if a company or a person makes an proposal pursuant to the Bankruptcy and Insolvency Act, even with Revenue Canada or the Minister of Revenue for Quebec as the major creditors, the fiscal authorities will consider the case on its own merit. If the proposal is reasonable, they will accept. 

Understanding the bankruptcy discharge

You decide to file for bankruptcy. Your Licensed Insolvency Trustee outlines what debts will be discharged in a bankruptcy and how long the process takes.

Informative video: Government of Canada


Bankruptcy questions

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