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How to File Bankruptcy: A Step-by-Step Guide

Bankruptcy provides protection from creditors and a fresh start for your finances, but there are a number of steps to follow. To file for bankruptcy in Canada, you will need all the information about your financial situation such as credit card statements, bank statements, mortgage records, and loan documents. After that, you will contact a Licensed Insolvency Trustee to either begin the bankruptcy process or consider alternative remedies.

Man reviewing bankruptcy paperwork with a Licensed Insolvency Trustee Man reviewing bankruptcy paperwork with a Licensed Insolvency Trustee Man reviewing bankruptcy paperwork with a Licensed Insolvency Trustee
  • Step 1: Consider Your Financial Situation

    Do you actually need to file for bankruptcy? Would an alternative, less drastic solution be better suited to your needs? Each situation is unique, but the following signs are a strong indicator that some kind of intervention is needed:

    • You have missed mortgage or loan payments.
    • You use credit card cash advances to pay bills—and your credit cards are almost always at their limit.
    • You are receiving threatening calls from collection agencies.
    • You have been given notice of legal action against you to collect your debts.

    If debt is creating a significant issue in your life, it's time to explore debt relief options that may or may not include bankruptcy.

  • Step 2: Contact a Licensed Insolvency Trustee (LIT)

    The next step is to seek advice from a professional authorized to administer government-regulated insolvency proceedings. Only a Licensed Insolvency Trustee (LIT) can stop ongoing and pending legal and collection action, including lawsuits and garnishees. Bankruptcy is just one possible debt solution. An LIT will explain the merits and outcomes of various options available to you. Contact your local MNP LIT for a free consultation to discuss the appropriate life-changing debt solution for your unique situation.

  • Step 3: File the Paperwork

    Your Licensed Insolvency Trustee (LIT) will assist with completion of the required forms to declare bankruptcy. Filing for bankruptcy in Canada will require various forms, such as:

    • An “Assignment”, in which you declare that your bankruptcy trustee is taking control of your property for the benefit of your creditors.
    • A “Statement of Affairs" that lists your assets, liabilities, income, and expenses.

    Supporting documents you will have to provide may include tax returns, proof of income and expenses of you and your family, and proof of any assets owned by you. Your LIT will register your bankruptcy with the Office of the Superintendent of Bankruptcy, a branch of the federal government that supervises this formal process.

    Although your trustee prepares paperwork from the information you provide, the accuracy and completeness of this paperwork is your responsibility. As the process continues, keep copies of notices and all other bankruptcy documents the trustee sends you.

  • Step 4: Bankruptcy Commitments

    As you work through the bankruptcy process, you will be required to complete certain duties.

    • Counselling - your local MNP Licensed Insolvency Trustee (LIT) will help you build better financial habits through budgeting and money management counselling
    • Reports - you must file monthly reports on your income and expenses
    • Payments – you may be required to pay for equity in assets, surplus income and for administrative costs
    • Taxes - your LIT will file your personal income tax return for the year of bankruptcy, although you must still provide the required information
  • Step 5: The Process Finishes

    The final step in bankruptcy is the discharge. Upon completion of your duties you will be eligible for discharge in nine months or longer, depending on your situation. This means that you will be released from the obligation to pay the debts you had when you filed bankruptcy. If your duties are not completed in the requisite time, a court order will outline the remaining steps needed for you to be discharged from bankruptcy.

  • Step 6: Moving On

    With your debt burden relieved you can now work on re-building your credit score; in fact, this will be an important topic of conversation during the mandatory counselling sessions with your Licensed Insolvency Trustee.

Becoming Debt-free with Bankruptcy

Declaring bankruptcy is usually a last resort, but it may be the right debt solution for you to get relief from your debt burden and to help you start living your life again. If you want to learn more about the bankruptcy process—or about the alternative debt solutions available to you—simply contact your local MNP Licensed Insolvency Trustee to book a free consultation.