Bankruptcy in Canada: how it works, what you keep and when it ends
Quick summary
Bankruptcy is a legal process for people who cannot repay their debts. A Licensed Insolvency Trustee handles your case. For a first bankruptcy, the government says automatic discharge comes 9 or 21 months after filing, depending on your surplus income. Not sure it is your only option? Compare it with a consumer proposal.
Checked November 3, 2026. Main source: Office of the Superintendent of Bankruptcy: Considering bankruptcy (page modified Mar. 26, 2018). See all 1 source.
What bankruptcy is
Once you file, you are formally declared bankrupt. A Licensed Insolvency Trustee (LIT) completes the forms with you, files them with the Office of the Superintendent of Bankruptcy (OSB) and deals with your creditors for you.
The OSB says payments to unsecured creditors, wage garnishments and lawsuits from creditors stop when you are declared bankrupt.
Source: Office of the Superintendent of Bankruptcy: Considering bankruptcy (page modified Mar. 26, 2018).
What is included
- Your assets are sold by the trustee, including assets you get during the bankruptcy. For jointly owned assets, only your share is included.
- Assets that provincial and federal laws exempt are not sold.
Source: Office of the Superintendent of Bankruptcy: Considering bankruptcy (page modified Mar. 26, 2018).
What is not included
- Secured creditors' rights are generally not affected. A house or car loan can often be handled through an arrangement with the secured creditor.
- Your wages are not taken, but you must report your income to the trustee.
- A co-signer stays responsible for the loan.
- Discharge does not release alimony, child support, certain student loans, court-ordered fines or penalties, or debts from fraud.
Source: Office of the Superintendent of Bankruptcy: Considering bankruptcy (page modified Mar. 26, 2018).
How long it lasts
Automatic discharge needs these: no one opposes it, you attend the mandatory counselling sessions, and it is your first or second bankruptcy. Otherwise a court holds a discharge hearing.
Surplus income is the part of your earnings above what your family needs for a reasonable standard of living. The OSB sets the amounts each year, and they rise with family size. If it is more than $200 a month, you must contribute 50% of that amount. The page we read gives no dollar limits, so ask a trustee for the current ones.
| First bankruptcy, automatic discharge | Time after filing |
|---|---|
| Surplus income under $200 a month | 9 months |
| Surplus income over $200 a month | 21 months |
Source: Office of the Superintendent of Bankruptcy: Considering bankruptcy (page modified Mar. 26, 2018). This page is from 2018, so confirm the numbers with a Licensed Insolvency Trustee.
What it does to your credit report
Read how long negative items stay on your credit report, and how a consumer proposal compares.
Questions people ask
How long does bankruptcy last in Canada?
For a first bankruptcy with automatic discharge, the OSB says 9 months if your surplus income is under $200 a month and 21 months if it is over $200 a month. A court hearing may be needed if the discharge is opposed or you skip the counselling.
Who handles a bankruptcy?
A Licensed Insolvency Trustee, who files your forms with the OSB and deals with your creditors.
Do I keep my house or car?
The OSB says secured creditors' rights are generally not affected, and a house or car loan can often be handled through an arrangement with the secured creditor. Ask a trustee about your case.
Is student loan debt erased?
The OSB says discharge does not release certain student loans. Ask a trustee which ones.
Does bankruptcy stop wage garnishment?
The OSB says wage garnishments stop when you are declared bankrupt.
Try it with your numbers
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