What is Bankruptcy?

Sometimes things can become too much. Long hours at work spent just to become overwhelmed by a tidal wave of debt and financial constrictions that leave you unable to live normally. It seems like there is no way out, so you decide to opt for bankruptcy.

Bankruptcy isn’t a universal solution. For some it makes sense, and for others it leaves them worse off.

In order to legally file for bankruptcy, Winnipeg residents must:

  • Owe $1,000 or more.
  • Have debts more than the sale value of their assets.
  • Be unable to fully pay off the debt on their due date.

It’s simple math. Just add up all of your current debts, and if they exceed $1,000, then you can declare for bankruptcy.

  • Can you pay off debts as they come?
  • And can you pay your monthly payments on time?
  • Are you only able to make the minimum payments on your card and don’t have the income to pay anymore?

This is another simple requirement that makes it clearer if you’re eligible to file for bankruptcy. The amount of time you have to pay what you owe compared with your monthly expenses and income paints the larger picture of your financial future.

The last requirement can be simple or difficult, depending on what you currently owe and if you’re still making payments. For instance, if you don’t owe anything, then you don’t have any assets that could be used to help pay for debts.

But if you have a home with some equity, then the situation might be a bit more muddled. If you have multiple cars, savings, RRSPs, or vacation property, they can be considered, and the value might be compared to your overall debt.

To be eligible to file for bankruptcy in Winnipeg, you need to meet these three requirements. They are taken together with a solvency test. To be able to qualify for bankruptcy, you will have to be insolvent, meaning that you meet all three of the requirements.

How Do I File for Bankruptcy?

To file for bankruptcy, the debtor gives the Licensed Insolvency Trustee a list of assets and debts. The bankruptcy proceedings start when you file electronic bankruptcy documents to the Canadian government via the Superintendent Bankruptcy Office in Canada.

Within five days, the LIT will send out the bankruptcy paperwork so that the claims can be filed.

Licensed Insolvency Trustees

First, you should speak to a Licensed Insolvency Trustee. Canada’s Bankruptcy law requires that only federally licensed trustees can help you file for bankruptcy. If you’re planning to declare bankruptcy, you should speak directly to speak to a trustee about your available options.

Your trustee’s role is to decide if you should declare bankruptcy. By asking you questions based on your total budget and much you owe, trustees can provide you advice on all of the available debt relief options.

Complete Your Bankruptcy Documentation

If you’re deciding to file a consumer proposal or bankruptcy, you’ll have to work with your trustee to provide the necessary paperwork and file the required government forms. Here’s what you’ll need to include.

  • Assignment of Affairs: This document assigns all of your assets to the benefit of your creditors.
  • Statement of Affairs: This form lists all of your assets, debt, income, and expenses. Also, it provides information about your marital status, household size, disposition of assets, and your address.

File Your Documents and Notify Creditors

After signing your documents, they are electronically filed by trustees within the federal government. You are declared bankrupt once the forms are filed via the Official Receiver. After the bankrupt paperwork has been filed, your trustee will gain a notification and you’ll be assigned a file or estate number.

The main reason to file for bankruptcy (instead of informal arrangements to deal with creditors) is because all creditors’ actions stop immediately once the form is filed.

Once the trustee has received confirmation that you filed for bankruptcy, they will start the process by notifying your creditors. Most of the notices are sent electronically, and the remainder are sent via fax, and only a few are contacted by mail.

This means that creditors find out that you’ve filed for bankruptcy and the collection calls are legally required to stop. If they continue, speak to your trustee to find out how to proceed.

Additional Bankruptcy Laws

Property and Bankruptcy

With specific exemptions, such as bankruptcy exemption, the property rights that’s owned by the insolvent on the right day of bankruptcy for creditors. The trustee will liquidate this property and give the remaining proceeds to the creditors based on the distribution priorities that’s under the BIA.

Creating Creditors Claims

In order to file a claim, the creditor has to file a proof of claim to a trustee. The trustee can evaluate the claim and accept or deny it. If the claim isn’t accepted, then the creditor can appeal the trustee’s decision. But, if a creditor has an allowable claim, the creditor can share the recovery of funds of any property that has gone bankrupt.

Creditor’s Order of Payment

Generally speaking, this is the order of payment priorities amongst creditors:

  • Secured creditors
  • Certain cases of preferred creditors
  • Unsecured creditors

Secured Creditors

Secured creditors are people who have taken collateral for a loan. Some examples are loans provided for the purchase of a car or home. Secured creditors aren’t affected by the Bankruptcy Order because they are entitled to possess the secured asset so they can be reimbursed. If there isn’t enough money to pay what is owed, secured creditors, can file a claim to be an unsecured creditor.

Secured loans like a car loan or mortgage, will stay in place as without any impact to the debtor as long as they can up to date on their payments.

Preferred Creditors

A creditor who is first to claim available funds. Some examples are employees that are currently owed in wages. In some cases, the debts can be filed under support obligations.

Unsecured Creditor

An unsecured creditor is someone who has credit, but doesn’t have any security for the total amount that’s owed to them.

Now that you know how to file for bankruptcy, we suggest speaking to a financial advisor before doing so. You might find alternative solutions to your situation that might help you recover from your debt. If filing for bankruptcy is the only choice, then come with a clear plan, and you’ll be able to get those creditors off your back.

Please note this is not legal advice. If bankruptcy is a consideration, speak to lawyer who specializes in bankruptcy.


  1. https://www.hoyes.com/blog/step-step-guide-bankruptcy-process/
  2. https://bankruptcy-canada.com/how-to-file-bankruptcy-canada/eligible-for-bankruptcy/


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