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Bankruptcy In Ontario

How Do I File for Bankruptcy in Ontario?

No one plans to file for Bankruptcy, but all it takes is the loss of a job or a medical issue, and you can find yourself in deep financial distress. If you’re dealing with significant debt and considering filing for Bankruptcy in Ontario, know that you are not alone. Help is available, and Bankruptcy can provide the relief you need to regain your financial footing.

What is Bankruptcy?

In Canada, Bankruptcy is a legal proceeding that is governed by the Bankruptcy and Insolvency Act. The purpose of Bankruptcy is to bring relief to those that can no longer manage their debt. While no one wants to file for Bankruptcy, it is an available debt relief option that can provide a fresh financial start to those who really need it.

How to File For Bankruptcy in Ontario?

If you are considering Bankruptcy in Ontario, your first step is to meet with a Licensed Insolvency Trustee (LIT). An LIT can work with you to determine if Bankruptcy is the right option. An LIT is the only professional authorized to administer government-regulated insolvency proceedings, including Bankruptcy and Consumer Proposals.

Your next step is to work with your LIT to complete the necessary paperwork. They will then file the documents with the Office of the Superintendent of Bankruptcy (OSB), and you will officially declare Bankruptcy.

What Happens When You Declare Bankruptcy?

Once you’ve declared Bankruptcy, your LIT will do most of the heavy lifting. They will notify your creditors to tell them about your Bankruptcy and deal with them on your behalf. Your LIT can also sell any of your non-exempt assets to raise money to pay your creditors.

After filing, you will have to attend two financial counselling sessions. The goal is to help you understand how you ended up having to file for Bankruptcy, and to give you the tools you need to prevent it from happening again in the future.

When you are discharged from Bankruptcy, you are released from your legal obligations to repay your debts from the date you filed. There are some debts you can not be released from, including child support, alimony, student loans (if it’s been 7 years since you were a student), court-ordered fines and penalties, and any debts arising from fraud.

The benefit of filing for Bankruptcy is the elimination of most unsecured debts. Plus, wage garnishments, lawsuits, collections calls, and requests for payments will instantly stop.

How long does the Bankruptcy process take?

The first time you declare Bankruptcy in Ontario, the entire process (from filing to discharge), will take nine months or more depending on your situation. If you are declaring Bankruptcy in Ontario for a second time, you can expect the process to take around 24 months after you file.

How much does it cost to declare Bankruptcy in Ontario?

All of the fees associated with filing for Bankruptcy in Ontario are set by the Bankruptcy and Insolvency Act and monitored by the Federal Government. The cost of Bankruptcy will differ between individuals because it is based on personal factors like your monthly income and expenses. Three areas are considered in determining the cost of Bankruptcy, including:

  • Administration cost. The minimum cost you will pay for filing for your first Bankruptcy in Ontario, or anywhere in Canada is $1,845. This is not a one time payment, it is spread out over the duration of your Bankruptcy.
  • Surplus income cost.  Surplus income is the amount of money you earn that exceeds the amount of money you need to maintain a reasonable standard of living. This amount is set by the OSB. If your household income exceeds this amount, you will have to pay surplus payments to your LIT during Bankruptcy.
  • Asset cost. This is the amount you stand to lose from the sale of any eligible assets.

How long does Bankruptcy stay on your credit report in Ontario?

While Bankruptcy can provide a fresh financial start, there are some things to consider. First, your credit will take a major hit. When you declare Bankruptcy, you will be assigned the lowest possible credit score and a first time bankruptcy will stay on your credit report for six or seven years. Until the Bankruptcy is removed from your credit report, it may be more difficult to obtain credit.

Will you lose everything if you file for Bankruptcy?

Filing for Bankruptcy doesn’t mean that you will lose the shirt off of your back. However, the LIT can sell eligible unencumbered (no liens)  assets to increase distributions to your creditors. The Ontario Bankruptcy Execution Act outlines what is exempt from seizure (what you can keep). Some exemptions include:

  • Your clothing
  • One vehicle worth up to $7,117
  • $14,180 worth of home furnishings and appliances
  • $14,405 worth of tools and equipment needed to earn a living

How to Know if You Should File For Bankruptcy

If you are debating whether to file for Bankruptcy, you should reach out to a Licensed Insolvency Trustee. However, there are some indicators you can look for to help you determine if you should file, including:

  • Missing your monthly mortgage or loan payments
  • Hitting your credit card limits each month
  • Using credit card cash advances to pay regular bills
  • Taking out payday loans
  • Receiving calls from collections agencies
  • Wages are being garnished
  • Creditors have taken legal action against you

How a Licensed Insolvency Trustee Can Help

If you’re concerned about your debt and considering filing for Bankruptcy in Ontario, contact a Licensed Insolvency Trustee today. An LIT can assess your financial situation and determine if you have other options. You don’t have to do this alone, reach out for a free consultation by calling 519-310-JOHN or by filling out our online contact form.

John Adamson, CPA, CMA

John is a Licensed Insolvency Trustee (1994), a Chartered Insolvency and Restructuring Professional (CIRP – 1994), and a Chartered Professional Accountant with a Certified Management Accounting designation (CPA, CMA – 1992). His experience includes more than 25 years of helping individuals, small businesses, their owners and even lenders, find solutions to their debt problems.

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