How Bankruptcy Works

How Bankruptcy Works

How does Bankruptcy work?  It’s a common question that we here every day.  While the legislation regulating bankruptcy is lengthy, the typical process is actually quite straightforward.  We’ve outlined the main aspects of the bankruptcy process for your reading pleasure below.

The process begins when an insolvent debtor meets with a licensed Trustee in Bankruptcy who assesses their situation.  If the debtor decides to go bankrupt they sign legal documents that assign the majority of their assets for the benefit of their unsecured creditors. Most, but not all, debts are erased and most, but not all, assets are assigned.

After signing the paperwork the Licensed Insolvency Trustee notifies the bankrupt’s creditors.

Every creditor is then required to cease collection efforts and deal only with the bankrupt’s Trustee.  Garnishments are stopped, and creditors are no longer able to take the bankrupt to court or contact them in any way.

The bankrupt reports their income and expenses on a monthly basis to the Trustee so that Surplus Income can be calculated.

The bankrupt attends two free credit counselling sessions provided by the Trustee.

After 9 to 21 months the first-time bankrupt is discharged and the majority of their debts are erased.  At this time the bankrupt can begin rebuilding their credit and getting on with their new debt free life.

To determine if bankruptcy is right for you, contact our Licensed Insolvency Trustee who will provide a free, no-obligation consultation where he’ll review what you owe, own, and earn before explaining your options to you so that you can make an informed decision.

If interested in more of the particulars concerning bankruptcy, please read our bankruptcy FAQ here or the additional information provided below.


Steve Welker and Company’s minimum fee is $1,800.  Every Licensed Insolvency Trustee gets paid based on a formula outlined in the general rules of the Bankruptcy and Insolvency Act.  This means that ever Trustee charges the same government regulated fee.  That said, each Trustee may provide a unique assessment and require different payment structures depending on each individual’s situation.


The length of a bankruptcy is based on two factors:

1) Whether it is the bankrupt’s first or second time making an assignment in bankruptcy, and
2) whether or not the bankrupt earns surplus income.

# of Bankruptcies Without
Surplus Income
Surplus Income
First Time 9 Months21 Months
Second Time 24 months36 Months
 Credit Rating

An R9 credit rating is attached to debt erased by a bankruptcy.  The credit bureau includes a first-time bankruptcy on a credit report for 6 years after the date of discharge and a second-time bankruptcy for 15 years after discharge.

Which debts aren’t erased?
  • Student debt relating to studies completed within seven years of the date of bankruptcy.  Read more here.
  • Unpaid spousal or child support
  • Debt obtained by fraud
  • Fines, penalties, and restitution orders imposed by a court in respect of an offence
  • Any debt arising out of a recognizance or bail
  • Any award of damages by a court in a civil proceeding in respect of bodily harm intentionally inflicted, sexual assault, or wrongful death therefrom
  • Any debt or liability for alimony or alimentary pension
  • Debts not disclosed to the Trustee in Bankruptcy
Which assets can I keep?
  • Clothing worth less than $5,650,
  • Cars worth less than $5,650,
  • Tools of the trade worth less than $11,300, and
  • Furniture and appliances worth less than $11,300

If you’re interested in understanding your options further, don’t hesitate to give us a call.  We’re always happy to hear from you and are able to meet with you via telephone or in person at any one of our many conveniently located offices throughout Ontario.  Experience the relief that a free consultation can bring.  Call now.