Insolvency and credit reporting timelines

Two questions come up whenever someone is weighing a formal insolvency route: what it does to a credit file, and who is legally allowed to run it. The second has a clear answer. The first has an answer that is published by the regulator and the credit bureaus, and this page links to them rather than restating a number that changes.

Who may administer a formal insolvency

Only a licensed insolvency trustee may administer a consumer proposal or a bankruptcy in Canada. Trustees are licensed and regulated by the Office of the Superintendent of Bankruptcy Canada, which publishes the register of licensed trustees. Anyone else offering to file a proposal or a bankruptcy for you is not able to do it, whatever the service is called.

What a consumer proposal is

A consumer proposal is a formal offer to creditors, filed with a licensed trustee, to settle unsecured debts for less than the full amount over a set period. It is a legal proceeding with a stay of proceedings, which stops most collection activity while it is in force. Creditors vote on it, and a majority by value is required for it to bind the rest.

What bankruptcy is

Bankruptcy is an assignment of assets to a trustee for the benefit of creditors, with a defined process for discharge. It carries more consequences than a proposal and it is not available as a solution for every kind of debt: secured debts and some others survive it. The OSB publishes the process and the duties of a bankrupt, and those publications are the authoritative account.

How long it stays on a credit file

Insolvency information is recorded by the two national credit reporting bureaus and removed after set periods that depend on the event and, in some cases, on the province and the outcome. Because those periods are published by the bureaus and by the regulator, and because a figure stated from memory is exactly the kind of number this site refuses to print, the table below carries the source and leaves the value to the publisher. Both bureaus must give you a free copy of your own credit report, and that report is the definitive record of what is on your file.

What to weigh

A formal insolvency is a legal remedy with lasting consequences, not a product to be shopped for. It is also not the only route: consolidation, informal settlements and debt management plans all exist, have different costs and different effects, and our comparison of debt relief options sets them side by side. Anyone considering a proposal or a bankruptcy should speak to a licensed insolvency trustee, and that consultation is normally free.

Watch for

Firms that advertise debt relief and are not licensed to file a proposal or bankruptcy, fees charged before any work is done, and any suggestion that a negative credit record can be deleted. Nobody can remove accurate information from a credit file, and anyone who says otherwise is selling something else.

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