Bankruptcy in Canada

Canadian bankruptcies and bankruptcy law are regulated by the Bankruptcy and Insolvency Act. Before you dive into the laws surrounding bankruptcies in Canada, its important to first understand what bankruptcy means in Canada. Lets start with the basics of bankruptcy.

Personal Bankruptcy in Canada

In Canada and many other countries bankruptcy is a form of financial protection for people (or businesses) that can no longer afford to pay their bills as they become due. When an individual can’t keep up with their bills and that debt amounts to $1000 or more, they are considered insolvent.

In order to file bankruptcy in Canada, you must be considered insolvent.

Once you file bankruptcy, your creditors are legally prohibited from contacting you to collect payments. That is what people refer to when they use the term bankruptcy protection.

Along with the forfeiture of some assets, a bankrupt is required to attend counselling sessions and make a regular payment to their trustee in bankruptcy.

For a more detailed definition of bankruptcy, read our definition of Bankruptcy in Canada.

The Bankruptcy and Insolvency Act of Canada

Bankruptcy Law in Canada is governed by federal law and the federal act entitled The Bankruptcy and Insolvency Act.

The Bankruptcy and Insolvency act applies to both Canadian businesses and individuals.

Filing a Consumer Proposal

There are many ways to avoid bankruptcy in Canada, including a number of bankruptcy alternatives.

One of the more common bankruptcy alternatives is the consumer proposal.

A consumer proposal can be described as a combination of credit counseling and personal bankruptcy. Please read our editorial: Consumer Proposal to learn more.