Bankruptcy Chapters 7, 11 & 13 Apply to USA Not Canada (2024)

FAQs

Bankruptcy Chapters 7, 11 & 13 Apply to USA Not Canada? ›

When you're looking for information to solve your debt problems, it is important to not mix up bankruptcy laws from the USA and Canada. Chapters 7, 11, 13 don't apply to Canadians. Contact the OSB for more information and help with distinguishing which laws apply to you as a Canadian.

Differences in Bankruptcy Proceedings

U.S. proceedings are held in court, while the CCAA process is less litigious. The U.S. offers constitutional protections for property rights, where Canada does not provide the same type of protection. Chapter 11 cases take longer than CCAA cases and are typically more expensive.

Can you file for bankruptcy in the United States if you live in Canada…or England…or Japan? The answer, at least in Maryland, is “Yes.” With the increased mobility of people and the ease of transportation around the world, it is quite common for someone living outside the US to want or need to file for bankruptcy here.

Chapter 7 is like filing personal bankruptcy in Canada, and Chapter 13 is like a consumer proposal. In Canada, the Bankruptcy and Insolvency Act defines the legal options for a person or a company to be relieved of their debts. I'm Doug Hoyes, a Licensed Insolvency Trustee with Hoyes Michalos.

Once you file for bankruptcy, your creditors must halt all collection attempts, including things like foreclosure, repossession and wage garnishment. That said, only certain types of debt can be included in bankruptcy—more on that in a minute.

It is, however, not the same as going bankrupt. In the States, a Chapter 13 petition is a form of bankruptcy, and the term “Chapter 13” does not apply in Canada.

Typically, both Equifax and TransUnion remove a bankruptcy from your credit report 6 years after the date you're discharged. TransUnion removes a bankruptcy from your credit report 7 years after you're discharged in the following provinces: Newfoundland and Labrador. Ontario.

You can file bankruptcy upon returning state-side. Another option is to file bankruptcy when you're still outside the country. In this case, you will file in the bankruptcy district where the majority of your assets are located.

The credit reporting system is not shared between Canada and the US. While Equifax may exist in both countries, they do not share reporting information. Your Canadian bankruptcy or proposal will appear on your Canadian credit report. If you fail to pay US creditors, the default will appear on your US credit report.

Filing from outside of Canada vis a vis a consumer proposal or personal bankruptcy is possible if you're a former Canadian resident currently living abroad. What follows are the steps you'd need to take to file your insolvency proceeding as quickly and as efficiently as possible.

Can you convert a Chapter 7 to a 13? ›

All debtors acting in good faith have one opportunity to convert their bankruptcy from a Chapter 7 case to a Chapter 13 case. You will need to obtain credit counseling and create a debt repayment plan that allows for the repayment of a substantial amount of your debts.

The biggest difference between Chapter 7 and Chapter 13 is that Chapter 7 focuses on discharging (getting rid of) unsecured debt such as credit cards, personal loans and medical bills while Chapter 13 allows you to catch up on secured debts like your home or your car while also discharging unsecured debt.

Business bankruptcies typically fall into one of three categories. Two — Chapter 7 and Chapter 13 — are variations on the personal bankruptcy theme. Chapter 11 bankruptcy is generally for businesses that have hit a bad patch and might be able to survive if their operations, along with their debt, can be reorganized.

Not only are the fees of Chapter 7 bankruptcy lower, but you also end up paying less to your creditors.

While you can travel, even on a luxury vacation, taking the following steps can help avoid complications in your bankruptcy case: Don't use any credit cards, as extra expenses will be questioned in regard to your case. If traveling overseas, obtain your trustee's consent and provide any information they request.

Once you're declared bankrupt, your LIT will take possession of your allowable assets (as permitted by your province or territory). These assets will be liquidated, and the money will be distributed to your creditors. Make sure you report any payments you make, employment or life changes to your LIT.

The total number of insolvencies (bankruptcies and proposals) in Canada increased by 3.1% in May 2024 compared to the previous month. Bankruptcies increased by 7.8% and proposals increased by 1.6%.

The Companies' Creditor Arrangement Act (“CCAA”)

The CCAA has been referred to as the Canadian chapter 11, referring to US Bankruptcy Code chapter 11 proceedings, but there are important differences.