Under Section 69.4 of the federal Bankruptcy and Insolvency Act, a creditor can ask the court to lift the stay of proceedings. This rare move allows them to continue a lawsuit against you. The court filing fees for this motion are around $320 CAD, plus thousands in lawyer fees.
When you file for insolvency in Canada, an automatic stay of proceedings protects you from most lawsuits and collections. However, this legal shield is not entirely bulletproof.
In certain unique circumstances, creditors can apply to the bankruptcy court to have this protection lifted. This is formally known as an application under Section 69.4 of the Bankruptcy and Insolvency Act (BIA). Generally, a creditor only attempts this if they can prove they are facing severe unfairness, or if the debt involves fraud.
Step-by-Step Process for Creditors in Canada
Whether the motion is filed at the Supreme Court in British Columbia or the Cour supérieure in Quebec, the creditor must secure formal judicial approval. Here is how the process generally unfolds.
Step 1: Drafting the Motion to Lift the Stay
The creditor’s law firm will draft a formal Notice of Motion and an Affidavit. These documents explain exactly why the creditor believes the stay of proceedings should be lifted. The paperwork is then filed at the local bankruptcy court. 📝
Step 2: Serving the Debtor and the LIT
Once filed, the creditor must formally serve these documents to both you (the debtor) and your Licensed Insolvency Trustee (LIT). You will receive notice of the upcoming court date, giving you a chance to prepare a defence.
Step 3: Proving Material Prejudice at the Hearing
At the hearing, the judge will review the evidence. The creditor must prove they will suffer material prejudice if the stay remains, or that equitable grounds exist to lift it. For example, if a civil lawsuit was nearly finished before you filed for bankruptcy, the judge might allow the trial to conclude.
When Will a Judge Lift the Stay?
Canadian courts do not lift the stay for just any reason. Here is a breakdown of common scenarios:
| Scenario | Will the Court Likely Lift the Stay? |
|---|---|
| Complex Fraud Allegations | Yes, courts often allow fraud trials to proceed because fraud debts survive bankruptcy. |
| Multi-Party Litigation | Yes, if stopping the lawsuit hurts other innocent co-defendants. |
| Standard Credit Card Debt | No, unsecured creditors must go through the standard LIT claims process. |
| Secured Creditor Realizing Assets | Yes, secured creditors usually get permission to seize their specific collateral. |
How Much Does it Cost in Canada?
Applying to lift the stay is an expensive legal procedure. As of May 2026, the costs generally include:
- Court Filing Fees: Filing a motion in bankruptcy court typically costs between $160 CAD and $320 CAD, depending on the province.
- Lawyer Fees for Creditors: Preparing and arguing the motion can easily cost the creditor $3,000 CAD to $10,000+ CAD in law firm fees.
- Debtor Defence Costs: If you choose to hire a lawyer to fight the motion, expect to pay standard hourly rates of $300 CAD to $600 CAD.
How Long Does the Process Take?
Getting a court date for a Section 69.4 motion typically takes 4 to 8 weeks, depending on how busy the local courthouse is. If the judge grants the order, the stay is lifted immediately, and the creditor’s original lawsuit can resume exactly where it left off. ⌛
Frequently Asked Questions (FAQ)
Does lifting the stay mean I automatically lose the lawsuit?
No. Lifting the stay simply gives the creditor permission to continue the legal process. You still have the right to mount a defence and argue your case in civil court.
Can the CRA ask to lift the stay of proceedings?
While the CRA is bound by the stay for standard tax debts, they may seek court permission to lift it in complex cases involving massive tax evasion or corporate auditor disputes.
Will my LIT defend me in court against this motion?
Generally, no. Your LIT acts as an impartial officer of the court. If you wish to defend against a motion to lift the stay, you will typically need to hire your own private lawyer.
Are spousal support claims affected by the stay?
No. Family law matters like spousal support and child support are largely exempt from the stay of proceedings. A former spouse does not normally need to apply to lift the stay to enforce support.
Facing a motivated creditor in bankruptcy court can be highly intimidating. If you are dealing with complex legal actions or allegations of fraud, we highly recommend searching our directory to find an experienced local lawyer who can protect your rights.
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