Business Bankruptcy in Canada is primarily governed by the Bankruptcy and Insolvency Act (BIA), a…
Is bankruptcy looking more and more like a reality for you? You probably have many questions regarding the bankruptcy process, but the good news is you won’t be going through it alone. The first step is to contact a Licensed Insolvency Trustee, a federally regulated professional who will guide you through the bankruptcy process.
In most cases, you’ll be able to keep your car, your house, your pension, your possessions, and much of your income. You will have to give up your credit cards and attend credit counseling sessions, but creditors will no longer be allowed to contact or harass you. Are you ready for a fresh start? Then read on.
Starting the Bankruptcy Process
There is an amount of paperwork involved with the bankruptcy process in Ontario, but your trustee will do most of the heavy lifting. That’s why the first step is to contact a Licensed Insolvency Trustee. The first thing that a trustee will do is go over all of the potential options that are on the table for you. It is possible that a way to move forward without declaring bankruptcy could be found.
Getting a trustee working on your side will get the ball rolling. Your trustee will give you forms to sign and then file them with the Office of the Superintendent of Bankruptcy (OSB). Your bankruptcy process begins the moment your paperwork is filed. It takes five days for creditors to be notified once everything has been filed. Your creditors will then need to file claims regarding what you owe them. You won’t have to worry about being contacted or harassed once this takes place.
What You Need to Do During Bankruptcy
Your trustee will handle all of the paperwork and filing involved with the bankruptcy process. However, you still have some obligations. One of your duties during the bankruptcy process is to provide your trustee with all of the tax information that is requested. This will be used to file any outstanding tax returns. In addition, you will be asked to submit any pay stubs or proof of income that you have each month. You will also be asked to surrender any non-exempt assets that you possess.
Your trustee will be able to guide you regarding what is exempt and what is not. You will need to make a minimum monthly contribution to your bankruptcy estate, usually about $200. This contribution is to cover administrative, mailing and filing fees.
You will also have to attend two credit counseling sessions when you are going through the bankruptcy process. These sessions are designed to help you learn some useful budgeting tools that can be used once you are on the other side of the bankruptcy tunnel. Most people end up enjoying these sessions and learning a lot.
What Can You Keep During Bankruptcy?
Many people are afraid to file for bankruptcy because they fear that they will have to give up everything they own. However, that isn’t the case. There are quite a few exemptions when it comes to bankruptcy.
You will be able to keep an unlimited amount of clothing. What’s more, you will be able to keep your car or truck if it is paid for and its value is less than $6,600. If your vehicle is security for a loan, you may keep it as long as you continue making payments. You’ll also be permitted to have $13,150 worth of home furnishings and appliances.
Bankruptcy won’t interfere with your ability to earn a living, but there are limits to how much you are allowed to earn during a bankruptcy. These limits depend on your family size. For a single-person household, the monthly income limit (as of 2018) is $2,152. For larger families, the limits are:
- 2-member family: $2,679
- 3-member family: $3,293
- 4-member family: $3,998
- 5-member family: $4,535
- 6-member family: $5,114
- 7-member family: $5,694
Anything above these limits is considered surplus income, half of which must be contributed to your bankruptcy estate for distribution to your creditors.
You will also be permitted to keep up to $11,300 worth of tools and equipment that you use for work. There’s one other exemption that may give you real peace of mind. Ontario’s bankruptcy laws allow for most pension plans and certain life insurance policies to stay in the hands of the person declaring bankruptcy. It is also very possible that you won’t lose your home when filing for bankruptcy. Of course, you need to get the right help if you want to ensure that everything goes smoothly.
How Long Does Bankruptcy Take?
Most first-time filers can expect an automatic discharge after nine months. Of course, a speedy process hinges on your ability to perform the legal duties that are asked of you and provide honest reports regarding income and assets. While most bankruptcies are automatically discharged after nine months, certain factors can extend this time period:
- 21 months if you have to pay surplus income
- 24 months if it is your second bankruptcy
- 36 months if it is your second bankruptcy and you have to pay surplus income
However, certain factors can delay or prevent an automatic discharge. If you have more than two past bankruptcies, you will have to go to court. Creditors can also question your bankruptcy which can delay it, although they very rarely do so. Lastly, failing to meet your bankruptcy duties–mainly, keeping in contact with your trustee–can quite easily delay an automatic discharge.
Will Declaring Bankruptcy Impact My Spouse or Significant Other?
Filing for bankruptcy generally will not impact your spouse or significant other. Of course, that is only the case if your debt belongs to you alone. Your spouse can become fully liable for outstanding debts if they signed for or guaranteed any of them. Then, there is a chance that your creditors could go after your spouse for payments even after your responsibility has been terminated through bankruptcy.
What Happens After Bankruptcy?
You will receive a bankruptcy discharge following your bankruptcy period. That means that you have been released from all of your obligations to repay your debts. This can feel like a true fresh start in life.
However, it doesn’t mean the job is done. What is life like after bankruptcy? Your bankruptcy will be noted on your credit report. Unfortunately, this will impact your report for a full six years. That jumps up to 14 years if this is your second time filing for bankruptcy.
Having a bankruptcy noted on your credit report means that you may find it more difficult to obtain credit. You may be offered higher interest rates than you’re used to. Although bankruptcy will remain on your credit score for six years, you can begin the credit rebuilding process immediately.
Learn More About How to Claim Bankruptcy in Ontario
You may be feeling like it’s hard to make sense of your options at the moment. That’s why it’s so important to meet with a Licensed Insolvency Trustee (LIT) who can assess your situation and help you decide your next step.
Call today for a free no-obligation consultation with a trustee. You’re already one step closer to putting debt collectors behind you and rebuilding your life.