What does it mean to be insolvent in Canada?
Under the Bankruptcy and Insolvency Act, an insolvent person owes at least $1,000 and either cannot meet obligations as they generally become due, has ceased paying obligations in the ordinary course, or has debts that exceed the realizable value of their assets.
What is the difference between insolvency and bankruptcy?
Insolvency is a financial state — you cannot pay your debts. Bankruptcy is a specific legal process you enter to deal with insolvency. You can be insolvent without being bankrupt, and you can resolve insolvency through a consumer proposal instead of bankruptcy.
Do I have to be insolvent to file a consumer proposal or bankruptcy?
Yes. To file under the Bankruptcy and Insolvency Act, you must be an insolvent person as defined by the Act. A Licensed Insolvency Trustee confirms your eligibility before filing any proposal or assignment in bankruptcy.
What options do I have if I am insolvent?
Formal options administered by a Licensed Insolvency Trustee include a consumer proposal (for debts up to $250,000 excluding a mortgage on your principal residence), a Division I proposal, or bankruptcy. Informal options include debt consolidation loans and debt management plans.