In Canada, filing for bankruptcy or a consumer proposal triggers an automatic Stay of Proceedings. This immediate federal injunction stops most collection calls, wage garnishments, and lawsuits. To get this protection, you must file with a Licensed Insolvency Trustee (LIT).
Dealing with overwhelming debt can feel like carrying a massive weight. If your phone is ringing non-stop with collection calls, or you are facing a lawsuit from a credit card company, you may be feeling trapped.
Fortunately, Canadian law provides a powerful tool to protect you. It is called a Stay of Proceedings. This federal protection gives you the breathing room you need to organize your finances and start fresh. Generally, consulting a local law firm or a Licensed Insolvency Trustee is the best way to understand your options.
Step-by-Step Process in Canada
Whether you live in Toronto, Calgary, or Vancouver, the rules for a Stay of Proceedings are governed by the federal Bankruptcy and Insolvency Act (BIA). However, local provincial courts, such as the Superior Court of Justice in Ontario or the Court of King’s Bench in Alberta, uphold these rules. Here is how the process generally works.
Step 1: Contacting a Licensed Insolvency Trustee (LIT)
Your first step is to reach out to an LIT. In Canada, only an LIT is licensed by the federal government to file a bankruptcy or consumer proposal on your behalf. They will review your unique financial situation to find the best solution.
Step 2: Filling Out the Required Forms
Once you choose a path, your LIT will prepare the necessary statutory forms. You will sign the official Statement of Affairs and other federal documents outlining your debts and assets. 📝
Step 3: Filing and Notifying Creditors
The moment your LIT submits your paperwork to the Office of the Superintendent of Bankruptcy (OSB), the Stay of Proceedings goes into effect. Your LIT will immediately notify your creditors, including the Canada Revenue Agency (CRA). By law, all standard collection efforts must stop instantly.
What the Stay Stops vs. What it Does Not Stop
It is important to know that while this legal shield is incredibly strong, it does not stop every type of legal action. Here is a general breakdown:
| Type of Debt or Action | Does the Stay Stop It? |
|---|---|
| Credit Card Lawsuits & Payday Loans | Yes, collections must stop immediately. |
| Canada Revenue Agency (CRA) Collections | Yes, wage garnishments and account freezes stop. |
| Spousal Support & Child Support | No, ongoing family support payments must continue. |
| Criminal Fines & Penalties | No, you must still pay court-ordered fines. |
How Much Does it Cost in Canada?
You do not pay a separate government fee just for the Stay of Proceedings. The protection is built into the standard costs of your insolvency filing. As of May 2026, typical costs are:
- Bankruptcy Costs: Usually involves monthly contributions to your LIT. The minimum base fee is often around $200 CAD per month for 9 months.
- Consumer Proposal: You pay a negotiated monthly amount based on your budget, often spreading payments over a maximum of 5 years.
- Lawyer Fees: If you hire a private lawyer for advice prior to filing, typical law firm rates in Canada range from $300 CAD to $500 CAD per hour.
How Long Does the Process Take?
The protection is instantaneous. The moment your paperwork is filed, the stay is active. It remains in place throughout your entire bankruptcy or proposal process, which can last anywhere from 9 months to 5 years. Once you are officially discharged, your eligible debts are eliminated permanently. ⌛
Frequently Asked Questions (FAQ)
Will a stay of proceedings stop a wage garnishment?
Yes. Once filed, your LIT sends a legal notice to your employer and the garnishing creditor. The wage garnishment must stop immediately, unless it relates to spousal support.
Does this stop my mortgage lender from foreclosing?
Generally, no. Secured creditors have the right to enforce their security if you fall behind on payments. The stay primarily targets unsecured debts.
What happens if a collection agency ignores the stay?
If a creditor continues to harass you, inform them of your filing and provide your LIT’s contact details. Continuing to demand payment violates federal law, and your LIT can intervene.
Is a stay of proceedings a matter of public record?
Yes. Because it is tied to your bankruptcy or proposal, the filing is recorded in the OSB registry, which is accessible to the public for a small fee.
If debt is keeping you awake at night, you do not have to fight the battle alone. Consider browsing our directory to find a skilled local lawyer or Licensed Insolvency Trustee who can review your case and help you find the peace of mind you deserve.
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