Corporate bankruptcy in Canada
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What is corporate bankruptcy in Canada?
Corporate bankruptcy is a legal process that helps incorporated businesses in Canada close down when they can’t repay their debts. It’s handled by a Licensed Insolvency Trustee, who takes control of the business’s assets, sells them, and uses the money to repay creditors. Most remaining debts are then wiped out.
It also puts a stop to collection calls, lawsuits, and other creditor action, giving you space to move on.
Bankruptcy isn’t the same as insolvency. Insolvency is when you can’t pay your debts; bankruptcy is the formal step you take to deal with it.
Is corporate bankruptcy in Canada worth it?
Corporate bankruptcy in Canada can be worth it if your business can’t recover from its rising debt. It stops creditor pressure, clears most unsecured debts, and gives you a structured way to shut things down. It can also protect you personally—most directors aren’t held liable for business debts unless you’ve signed personal guarantees.
It’s not always the best fit, though—it can affect your credit and reputation, and it doesn’t wipe out every kind of debt.
The best way to know? Talk to a Licensed Insolvency Trustee. They’ll walk you through your options—including corporate insolvency services and Division 1 Proposals—so you can make the right call for your business.
See how much you could save through business bankruptcy in Canada
Your Potential Debts:
Monthly repayments before and after declaring corporate bankruptcy
Before Help
$386,732.63
After Help (payable over 60 months)
$1930
Monthly payments are determined based on individual financial factors
How Much Could I Save?How does a business become bankrupt in Canada?
A Canadian business becomes bankrupt when it’s unable to pay off its debts and is legally declared bankrupt. There are three main ways this happens:
Option 1. Voluntary assignment
A voluntary assignment is when your business files for bankruptcy on its own. If your company can’t pay its debts and recovery isn’t possible, you can work with a Licensed Insolvency Trustee to begin the bankruptcy process. This stops creditor action, freezes interest, and leads to the legal winding-up of the business. Most unsecured debts are discharged (written off) once assets are dealt with.
Option 2. At a creditor’s initiation
If your business owes at least $1,000 and has defaulted on payments, a creditor can petition the court to force your company into bankruptcy. This is called an involuntary or creditor-initiated bankruptcy. If approved, a Licensed Insolvency Trustee is appointed to manage the process—selling assets and repaying creditors—while protecting your business from further legal action. They’ll control the process but are there to guide you and help you achieve the best possible outcome.
Option 3. Division 1 Proposals
A Division 1 Proposal is an alternative to business bankruptcy in Canada, but if the proposal is rejected by creditors or the court, your company is automatically declared bankrupt. Within a Division 1, your business offers a formal repayment plan to creditors to avoid bankruptcy—but success depends on approval. A Licensed Insolvency Trustee can guide you through the process, handle negotiations on your behalf, and support you at every step.
What’s the cost of business bankruptcy in Canada?
The cost of business bankruptcy in Canada depends on your company’s size, assets, and complexity. Fees are typically paid from the sale of business assets and are regulated by the Bankruptcy and Insolvency Act.
You won’t have to pay upfront if there aren’t enough assets to cover costs, which can include trustee fees, legal fees (if needed), and filing costs. Bankruptcy is often more affordable than continuing to operate with unmanageable debt—and it can stop interest charges, collection efforts, and legal action. For a clear cost breakdown based on your business, speak to a Licensed Insolvency Trustee.
We’ll help you clear the slate with business bankruptcy
We have years of experience in creating strategic, customized business debt solutions in Canada that could remove up to 80% of your corporate debt.
Our team is always on hand to help, providing honest, transparent guidance so that you understand every step of your business bankruptcy in Canada.
Our team of corporate bankruptcy trustees works in nine of the ten provinces—no matter where you’re based, help is never far away.
File for business bankruptcy with Harris & Partners
We’ll start with a simple chat to fully understand your business finances. This will include going over things like your funds, debts, and creditors—these conversations are free and completely confidential.
Once we have a clear picture of your situation, we’ll start making a tailored plan. We’ll look at all the ways you can deal with your debt, going with the options you feel comfortable with and what works best for your business.
Once you’re happy with the plan, we’ll get to work. Whether you move forward with corporate bankruptcy or another debt relief option, our goal is simple: to help you close this chapter and give you the cleanest possible slate to move on.
Business bankruptcy: Incorporated, sole proprietorships and partnerships
The bankruptcy process in Canada depends on your business structure. Whether you’re a sole proprietor, in a partnership, or run an incorporated company, the steps and consequences can vary—especially when it comes to personal liability.
1. Sole proprietorship bankruptcy in Canada
With a sole proprietorship, business and personal finances are legally the same. Filing for business bankruptcy means filing for personal bankruptcy. You may lose personal assets to repay debts, but you’ll also get relief from creditor pressure and legal action.
2. Partnership bankruptcy in Canada
In a partnership, individuals can be held personally responsible for company debts. If the business goes bankrupt, creditors may pursue each partner separately. You may need to file both a business and personal bankruptcy, depending on your role and liabilities.
3. Incorporated business bankruptcy in Canada
An incorporated business is a separate legal entity. Filing corporate bankruptcy protects directors from personal liability in most cases—unless personal guarantees or unpaid source deductions exist. A Licensed Insolvency Trustee handles the process and debt discharge.
Alternatives to business bankruptcy in Canada
Business bankruptcy isn’t your only option. Common alternatives include:
- Division 1 Proposal – A formal repayment plan negotiated with creditors.
- Business restructuring – Renegotiating terms or downsizing to cut costs.
- Asset sales or refinancing – Freeing up cash without shutting down.
- Informal creditor arrangements – Private deals to repay debt over time.
Corporate bankruptcy FAQs
Can an incorporated company file for bankruptcy in Canada?
Yes, an incorporated company in Canada can file for bankruptcy through a Licensed Insolvency Trustee if it cannot repay its debts and is insolvent.
What happens when a company files for bankruptcy in Canada?
When a company files for bankruptcy, a Licensed Insolvency Trustee sells its assets, distributes funds to creditors, and discharges any remaining unsecured debts. Legal action and collection efforts also stop.
Does corporate bankruptcy affect personal assets?
It depends on your business structure. If you’re a sole proprietor or in a partnership, your personal assets may be used to repay business debts—because there’s no legal separation between you and the business.
If your business is incorporated, personal assets are usually protected. However, exceptions apply if you’ve signed personal guarantees or owe certain tax debts, like unpaid source deductions.
What is the difference between corporate insolvency and bankruptcy?
Corporate insolvency means a business can’t pay its debts. Bankruptcy is the legal process used to deal with insolvency, usually involving asset liquidation and debt discharge.
What are the alternatives to declaring corporate bankruptcy?
Alternatives to declaring corporate bankruptcy include Division 1 Proposals, refinancing, debt consolidation, restructuring, and informal creditor arrangements.
Meet our Licensed Insolvency Trustees across Canada
We have been helping businesses just like yours since the 1960s. Give our Licensed Insolvency Trustees a call today, and we can help you find the best path forward.
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![Jay harris]( "Jay-150×150-1.png")
Jay T. HarrisFCPA, CIRP, LITLicensed Insolvency Trustee -
![kyle]( "Kyle-150×150-1")
Kyle HarrisLL.B., CIRP, LITLicensed Insolvency Trustee -
![adam]( "Adam-150×150-1 (1)")
Adam FisherCPA, CIRP, LITLicensed Insolvency Trustee -
![Joshua Harris]( "josh-NEW")
Joshua HarrisBCOMM., MIB, CIRP, LITLicensed Insolvency Trustee -
![advisor]( "circle-cropped-150×150-1")
David AdamsLicensed Insolvency Trustee -
![doug]( "doug-1.jpg (1)")
Doug LoiselleLicensed Insolvency Trustee -
![Rob McLernon]( "zz")
Robert McLernonBComm, CIRP, LITLicensed Insolvency Trustee -
![shelley]( "1050_Shelley_Koehli.jpg")
Shelley KoehliLicensed Insolvency Trustee -
![big-Picture]( "big-Picture1 (1)")
Jill StruebyLicensed Insolvency Trustee
Take back control of your business finances today
Looking into business bankruptcy in Canada? Our Licensed Insolvency Trustees are here to help. Give us a call today, and we will help you find the best debt solution for your business. Whether it’s bankruptcy, insolvency, or a Division 1 Proposal, we will support you every step of the way. Take back control—fill in the form below or give us a call.
It's never too late to obtain debt help. Book your free consultation today
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- 800-268-8093
- hello@harrispartners.ca
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Find your corporate bankruptcy service in Canada
We operate across all provinces in Canada, except Quebec. Get in touch with the team today, and we’ll help you find the best debt solution for your business.
