Bankruptcy
Quick Definition
A legal process for individuals unable to repay debts, offering a fresh financial start.
Full Explanation
Personal bankruptcy in Canada is a legal process governed by the Bankruptcy and Insolvency Act. When declared bankrupt, your assets (with some exemptions like RRSPs contributed more than 12 months ago, basic household items, and tools of trade) are surrendered to a Licensed Insolvency Trustee (LIT) who sells them to pay creditors. Most unsecured debts are discharged after 9–21 months for first-time bankruptcies. Bankruptcy remains on your credit report for 6–7 years. Alternatives include consumer proposals, debt consolidation, and credit counselling.
Related Terms
Consumer Proposal
A legal alternative to bankruptcy where you offer to repay a portion of your debts.
Debt Consolidation
Combining multiple debts into a single loan, typically at a lower interest rate.
Credit Score
A 3-digit number (300–900) indicating your creditworthiness to lenders.
Insolvency
The state of being unable to pay debts as they become due.
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