Bankruptcy

Bankruptcy is a legal process by which you may be discharged from most of your debts. The purpose is to permit an honest, but unfortunate debtor to obtain a discharge from most debts, subject to reasonable conditions.

There are three different ways to go into bankruptcy:

• voluntary assignment - where insolvent persons make an assignment of all their assets for the general benefit of all creditors;
• involuntary assignment - when a creditor files a petition in a provincial court for a receiving order against the debtor's assets, known as being petitioned into bankruptcy; and
• deemed bankruptcy - when a debtor, who has commenced the insolvency process, has failed to meet the requirements for filing a Division I proposal in bankruptcy under the Bankruptcy Insolvency Act or has failed to adhere to the provisions provided within the proposal after it has been filed and accepted by the creditors/court.

You or your representative (trustee/administrator) may have to send a copy of the court-issued Assignment in Bankruptcy, a Bankruptcy Notice, or a document titled First Meeting of Creditors to your tax services office.

Usually, the business number (BN) of a bankrupt client will be closed after discharge.

Rights of a bankrupt

The bankrupt has the right to earn a living. For this purpose, the bankrupt is allowed to engage in or continue a taxable business activity outside of the estate, after a bankruptcy.

For more information on how bankruptcy will affect your business, see Bankruptcy - Business structures.

Related topics

• You are deregistering your GST/HST account because you are closing your business
• Canada Business
• Related provincial and territorial government sites
• Industry Canada
• Canadian Consumer Information Gateway

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