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Under section 69 of the Bankruptcy & Insolvency Act (BIA), filing for bankruptcy or a consumer proposal triggers an “automatic stay of proceedings.” This prevents a landlord from using pre-bankruptcy rent arrears—which are considered provable in bankruptcy—as grounds for eviction. Furthermore, according to section 84.2 of the BIA, a tenancy cannot be terminated solely because a tenant owes rent at the time they declare bankruptcy.
Please note, however, that this restriction does not apply to rent that accrues after the bankruptcy filing. A tenant is not protected from eviction, such as through an N4 notice, for any failure to pay post-bankruptcy rent.
Regarding previous unpaid arrears up to the date of bankruptcy filing, the Landlord becomes an unsecured creditor and must submit a Proof of Claim to the bankruptcy trustee under the jurisdiction of the Bankruptcy Court. The trustee will then liquidate the bankrupt tenant’s assets and pay creditors according to their ranking until the tenant is discharged.
The following scenarios illustrate how to proceed with N4 notices or/and L1 applications depending on when the bankruptcy occurs:
i) No N4 notice served during the pre-bankruptcy period
The Landlord can serve an N4 notice for rent arrears that accrue after the date of the bankruptcy filing. For any rent owed during the pre-bankruptcy period, the Landlord is required to file a Proof of Claim with the trustee in bankruptcy.
ii) The L1 application has already been filed with the Landlord and Tenant Board
Upon being notified of the tenant’s bankruptcy status, the Landlord must amend the L1 application to include the tenant’s trustee in bankruptcy as a party. Additionally, a Notice of Hearing must be served to the trustee. Although the rent arrears owed before the bankruptcy filing date must be handled as a claim within the jurisdiction of the Bankruptcy Court, any rent that accrues after the date of bankruptcy can be determined at the L1 hearing.
iii) L1 Orders Issued During Pre-Bankruptcy
The Landlord can still enforce the eviction component of an L1 order issued during the pre-bankruptcy period. However, the monetary component of the order should be stayed under s. 69.4 of the BIA. The Landlord may request to amend the existing order to include only the eviction and not the collection of rent arrears stated in the order.
This is supported by In the Matter of the Bankruptcy of Sylvie Marie Lafond (aka Jane Lafond) of the City of Ottawa, in the Province of Ontario, 2023 ONSC 4065, where the Court concluded that the eviction clause in an L1 order remained enforceable and was not stayed by s. 69 of the BIA. This principle was also noted in Re Snaith, 2025 ONSC 3413.
iv) Mediated Settlement or Conditional L1 Order Before Bankruptcy Filing
The Landlord can file an L3 (for mediated settlement) or an L4 (for conditional L1 order) to request an ex-parte order for an eviction based on a breach of the settlement or conditions. However, no request can be made for the collection of rent arrears from the pre-bankruptcy period. While bankruptcy prevents the collection of pre-existing rent arrears, it does not override the landlord’s right to evict for ongoing non-compliance.
While single-tenant scenarios are relatively straightforward, complications arise when there is a joint tenancy with two or more tenants. Because joint tenants are jointly and severally liable to the landlord for the entire rent, the Landlord may seek the full amount owed from any non-bankrupt joint tenant(s). This remains true even though it is impossible to terminate the tenancy of only the non-bankrupt joint tenant(s) due to the restrictions set out in section 84.2 of the Bankruptcy and Insolvency Act (BIA). The recent decision in Mahmood v. Riutta, 2024 ONLTB 62844 [para. 32 – 36] can be referenced.
Given that both bankruptcy law and residential tenancy law are involved in these situations, it is highly recommended to consult with a legal professional to navigate these overlapping jurisdictions.
Disclaimer: This information is not intended to be construed as a legal advice, but strictly for your information only. Please contact Trustworthy Legal Services for an independent legal advice in your particular situation. The first consultation is required prior to the retainer of your case.
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