Wednesday, April 8, 2026
Learn what debts bankruptcy can eliminate in Canada, including credit cards, payday loans and tax debt, and which debts remain after filing for bankruptcy.
Filing for bankruptcy in Canada gives people a legal way to eliminate debts they can no longer afford to repay. It helps individuals wipe out certain types of debt quickly so they can begin the process of rebuilding their finances and moving toward a debt-free future.
When you file for bankruptcy, certain debts are fully discharged, meaning you no longer have any legal responsibility to repay them. However, it’s important to understand that not every debt qualifies for discharge. Some are still your responsibility even after declaring bankruptcy. Let's examine which debts bankruptcy eliminates and which it does not.
Bankruptcy eliminates most unsecured debts. An unsecured debt is money you owe that isn’t tied to any asset. For example, credit card debt is unsecured. A car loan, on the other hand, is secured because the lender can repossess the car if you miss payments.
Here’s some of the most common debts that bankruptcy can wipe out:
Student loan debt can also be removed through bankruptcy, but you need to have completed your studies more than seven years before filing bankruptcy.
This is seven years from the last date you were a student, not the date you took out the loan.
While bankruptcy eliminates many debts, it can't remove them all. These debts continue regardless of your bankruptcy status.
Here are some common debts that bankruptcy cannot remove:
Speaking to a licensed Insolvency Trustee can help you understand what debts can and can’t be removed for your situation. They can determine if bankruptcy is the right option or if something else might be better for your circumstances.
Bankruptcy is a legal process that eliminates most of your debts.
You must work with a Licensed Insolvency Trustee to file for bankruptcy. The Licensed Insolvency Trustee guides you through every step of the bankruptcy process.
During bankruptcy you’re forced to surrender some assets/possessions to your Licensed Insolvency Trustee. The Trustee then oversees the sale of these assets and then distributes the money to your creditors.
You may also be asked to turn over investments from accounts such as a tax-free savings account.
Declaring bankruptcy doesn’t mean you will lose everything, though. Each province protects certain assets that you can keep. These usually include basic household items, tools you need for work, and a car up to a certain value.
Each province also has rules governing when a home can be seized as part of a bankruptcy. A Licensed Insolvency Trustee can help you see what declaring bankruptcy would mean for your home.
We have a list of assets and possessions that can’t be taken in each province during bankruptcy here if you’d like further information.
To complete the bankruptcy process, you must attend two credit counselling sessions and file monthly income reports to your Licensed Insolvency Trustee.
You receive a discharge that removes most of your debts as long as you complete all your duties during the bankruptcy process.
Filing for bankruptcy immediately triggers a ‘stay of proceedings,’ which stops debt collectors from calling you or sending mail to your home.
It also prevents creditors from taking most types of legal action against you for the debt.
It even completely stops wage garnishment, even if creditors have already started taking money from your paycheck.
A first-time bankruptcy can last as little as 9 months, though it can extend to 21 months if your income exceeds a government-set amount.
This amount is not a set number, it depends on a variety of factors, such as the number of dependents you have. A single person will have a lower income threshold than a family of four.
We can help if you’re facing an overwhelming amount of debt and struggling to afford your payments.
One of our Licensed Insolvency Trustees can review your situation and explain all your options for debt relief in Canada, including bankruptcy and alternatives that allow you to keep all your assets, like a consumer proposal.
Your first consultation is free, confidential, and always judgment-free.
Speaking with one of our Trustees can give you the help you need to make a fresh start and take control of your finances.
Wednesday, April 8, 2026
Learn what debts bankruptcy can eliminate in Canada, including credit cards, payday loans and tax debt, and which debts remain after filing for bankruptcy.
