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Personal Bankruptcy Facts You Need to Know

Personal bankruptcy is a legal process that will get rid of your debts.

However, there are a handful of things, like child support and recent student loans, that do not go away.

When you file personal bankruptcy in Ontario, you go through a Licensed Insolvency Trustee. The Trustee’s job is to make sure everyone—both you and your creditors—are treated fairly.

So, here are a few personal bankruptcy facts for Ontario you need to know.

Who qualifies?

In order to qualify for personal bankruptcy, you must meet three criteria:

  1. You must owe at least $1,000 in unsecured debt.
    • That’s your credit cards, lines of credit, payday loans, money you owe that is not secured by property. So, your house and car payments don’t count.
  2. You must be insolvent.
    • This means one of two things:
    • That you either owe more than you own, or you are unable to pay your bills and still eat, put gas in your car – basically meet your living expenses.
  3. You must live, work, or own property in Canada.
    • You do not, however, need to be a citizen or even a permanent resident.
    • If you meet the criteria, now what?

How it Works

You’ll meet with a Licensed Insolvency Trustee (or LIT for short) to explore your options. Bankruptcy is not the only option, but if you decide to go ahead with it, here’s what happens.

First, the LIT files the paperwork.

Once that happens, the creditors no longer call and, if your wages are garnished, that stops.

Then, you’ll report your monthly finances to your LIT.

Also, you’ll attend two credit counselling sessions to help you get your financial life back on track.

How long does it take? The good news is that you can be discharged from bankruptcy in as little as nine months. You’ll be out of debt and able to make a new start.

Here’s a few more valuable personal bankruptcy facts you’ll want to know if you’re in Ontario:

Your Personal Belongings

You WILL get to keep most of your personal belongings: your clothing, tools that you use for your job, that sort of thing.

Your Furniture

You can keep your furniture up to $13,150, and that’s the garage sale value, not what you bought it for.

Your Car

You get to keep your car with a value of up to $6,600. If you don’t own it outright, you can keep it and continue to make the payments.

 Your House

What about your house? You may be able to keep your house if you don’t have much equity in it.

 Do You Have to Make Payments?

You may be required to make surplus income payments based on your family size and income.

According to the bankruptcy laws in Ontario, if your take home pay exceeds the limits set by the province, you are required to make surplus payments.

This would extend the bankruptcy discharge an additional year. That’s 21 months in total.

There you have it. The personal bankruptcy facts for Ontario. Not an easy decision, but it can pave the way to a better financial future.

Each situation is different, however. A Licensed Insolvency Trustee is the best person to lay out your options and help you decide if bankruptcy is the right solution for you.

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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