Filing Bankruptcy Without Any Assets
Many clients who get in touch with bankruptcy trustees for the first time fear that without assets they can’t file for bankruptcy.
They assume that they need to have existing and valuable assets that can be sold to repay their debts if they decide to file bankruptcy in Ontario.
While there is no denying that having assets can affect your bankruptcy filing, it doesn’t mean that individuals who are facing overwhelming debts but have no assets can’t be suitable candidates for bankruptcy proceedings.
On the contrary, BankruptcyCanada.com trustees weigh in on what it means to have no assets when you file bankruptcy in Ontario.
Here is what you need to know about personal bankruptcy and what difference your assets – or absence of – can make to bankruptcy payments.
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You don’t need assets to declare bankruptcy in Ontario
To qualify for bankruptcy in Ontario, you need to pass what is called the solvency test.
Your trustee will help you understand whether you are eligible for bankruptcy filing.
But the principles are straightforward.
Individuals who wish to consider personal bankruptcy in Ontario need to meet the following criteria:
- You need to live, do business, or own a property in Ontario;
- You owe over $1,000 in unsecured debt;
- Can’t make your payments on time;
- The value of your debt is greater than the value of your assets.
As such, if you don’t have any asset, the last statement remains true.
The value of your debt remains higher than the value of your assets if you were to sell them.
Therefore, a licensed insolvency trustee can help you file bankruptcy and administer it, even if you have no assets.
When no assets or equity can be divided among the unsecured creditors, the creditors are still required to write off the outstanding debts.
It’s precisely what bankruptcy proceedings can do.
Otherwise, assets that are not exempt from the proceedings can be sold to pay your creditors.
The trustee ensures that when you file bankruptcy, the process is fair for everyone, creditors and debtors.
What else affects your bankruptcy repayments?
You may not have any assets, but if you have surplus income, it can affect your bankruptcy duration and cost.
To define whether you have surplus income, the trustee compares your total household income vs similar households of the same size, following the guidelines set by the Superintendent of Bankruptcy.
If your household is found to have an income greater than stated in the guidelines, minus the allowable deductions, you have what is called surplus income.
You can check the Superintendent’s standards for family unit’s available monthly income for 2020 on the Office of the Superintendent of Bankruptcy site.
Each trustee uses the same comparison guidelines.
Individuals who have a surplus income are expected to pay 50% of the surplus for fair distribution to their unsecured creditors.
This will also prolong the duration of your bankruptcy, from 9 months to 21 months for first-time filings.
What happens at the end of the bankruptcy?
The bankruptcy is completed when you cover the federal cost of bankruptcy, $1,800, plus any additional relevant payment.
You are also expected to file monthly reports and attend credit counselling sessions for successful completion.
Only then can your unsecured debt be forgiven.
Unsure whether bankruptcy is the right debt relief solution for your situation?
Get in touch with an Ontario trustee (877) 879-4770 to find out how we can help.
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