Bankruptcy in Ontario: What You Need to Know
Declaring bankruptcy in Ontario can give you a fresh financial start.
However, dealing with insolvency and debt can be quite overwhelming and challenging if you are new to the process.
Compounding to the stress and worry is dealing with collection calls and the threats of legal action.
Knowing where to turn at this stressful time can be difficult.
Fortunately, we are here to help guide you through the process.
We feel that giving people an understanding of their options and how the process works can help them breathe again.
If you are thinking about filing bankruptcy in Ontario, this article is here to help guide you through the process.
The purpose of this article is to help you understand what happens before, during and after bankruptcy in Ontario.
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Before Declaring Bankruptcy In Ontario
Most people reading this article are in this stage.
Before you file for bankruptcy in Ontario you must do your research and gather information.
Fortunately, you can seek such information from a licensed insolvency trustee during a free initial consultation.
You don’t have to commit to anything to meet with a trustee, and there is no cost to hear what the trustee has to say.
In some cases, the trustee can show you how you can get your finances under control without any professional assistance.
Ontario’s insolvency and bankruptcy laws ensure you have a full understanding of your options and rights before deciding if bankruptcy is right for you.
Schedule a Free Meeting With a Licensed Insolvency Trustee (LIT) Near You
Start by finding a trustee in your area to arrange a risk-free consultation meeting that carries no strings attached or obligations.
Our Licensed Insolvency Trustees are regulated and licensed by the government and they are experts in the Ontario bankruptcy procedures.
LITs are well trained debt consultants who offer many different debt relief services.
Trustees are bound by a strict code of ethics and will always treat you with respect and answer all of your questions.
At your consultation meeting the trustee will listen to your situation and ask you relevant questions so they have a full understanding of your debt situation.
There are always options available, which the trustee will review with you.
There are alternatives to an Ontario bankruptcy that you might like to explore.
The trustee can explain how each situation will deal with your debt.
During this process make sure you ask lots of questions.
If you choose to pursue bankruptcy to get out of debt, the trustee will review the Ontario bankruptcy process with you.
The LIT will make sure you understand how the bankruptcy laws will apply to you, including how the bankruptcy exemptions will or will not protect your assets.
Most trustees will advise against going bankrupt if you have assets you would lose unless there is no other viable alternative.
How Should I Prepare For My Meeting With a Trustee?
To prepare for your consultation meeting with the trustee we recommend:
- Writing down a list of questions you have; make sure you get adequate answers to all of your questions.
- Bring information on all of your debts.
- Be prepared to discuss your monthly income, expenses and family size.
Prepare Your Bankruptcy Documents
There are a few necessary documents that are required to file for bankruptcy in Ontario.
Your trustee can help you prepare these documents if you decide to proceed with the bankruptcy.
The required documents to go bankrupt in Ontario are:
- The Assessment Certificate – This document states that you have met with a Licensed Insolvency Trustee who has explained all of the options available to you that don’t include bankruptcy. This is intended to confirm that you understand that there are other ways to get out of debt and that you have decided to proceed with the bankruptcy filing.
- Form 65 – Monthly Income and Expense Statement – This form details your monthly budget and information about your family.
- The Statement of Affairs (Form 79) – Form 79 lists all your current assets and liabilities.
- The Assignment For The General Benefit of Creditors – This is the last document required to declare bankruptcy in Ontario, and is used to assign your non-exempt assets to your LIT (Licensed Insolvency Trustee).
The trustee will gather these documents, and a few other forms for you to sign.
Once everything is ready you will meet with the Trustee again.
You can review the documents a final time and when you are ready you can sign the papers.
If you have any questions, make sure you ask them before signing the documents.
Filing the Bankruptcy Documents
Once you are happy with everything and have signed the paperwork your trustee will file the paperwork with the Office of the Superintendent of Bankruptcy.
The trustee has access to an electronic filing system to file the paperwork with the OSB (Office of the Superintendent of Bankruptcy).
This electronic system ensures everything works smoothly and nothing is missed.
To confirm that your bankruptcy filing has been accepted your trustee will receive a Certificate of Appointment.
This document is the official confirmation that your bankruptcy filing has been received and your bankruptcy period has started.
Once the paperwork has been filed, your creditors will be notified.
Your trustee will notify your creditors and handle all communications with them.
Once your bankruptcy has been received by the Office of the Superintendent a “Stay of Proceedings” will automatically go into place.
This automatic stay of proceedings is what protects you from your creditors and legal actions such as wage garnishments, lawsuits, and collection calls.
The Stay of Proceedings:
- Stops all legal actions against you.
- Stops interest charges from accruing on your unsecured debts.
- Stops creditors from garnishing your wages.
- Prevents collection agencies from contacting you.
During the Ontario Bankruptcy Process
The action of filing bankruptcy does not eliminate your debt or release you from the legal obligation to pay your debts.
It is important that you understand this.
To have your debts legally eliminated you must receive your bankruptcy discharge.
To get your discharge you must complete the duties and obligations required of a bankrupt.
The LIT will have explained all the duties you are required to complete at the initial consultation so you should be aware of what is expected of you.
Duties that are required of a bankrupt include attending financial counseling sessions and reporting your income and expenses to the trustee on time each month.
Your Obligations as a Bankrupt in Ontario
During the bankruptcy you will be expected to fulfil certain obligations.
Some of the things you will be expected to do will happen right at the beginning of your bankruptcy, while other obligations are ongoing.
The first thing you will have to do is surrender all of your credit cards – even those with a zero balance – to the trustee.
Your credit cards must be cancelled once you go bankrupt, and your trustee will take care of this for you.
Secondly, you will be required to surrender your non-exempt assets to your trustee.
The trustee will have explained the Ontario bankruptcy exemptions at the initial consultation so you will be aware of what you are expected to surrender.
Your trustee will collect these assets and eventually liquidate them.
The funds the trustee receives will be held in trust and will become part of your bankruptcy estate.
The bankruptcy estate is simply the collection of funds that will eventually be distributed to your creditors.
Finally, you will be required to attend two financial counseling sessions with your trustee.
You must complete the first session within 60 days of your bankruptcy filing and the second session within 210 days of the start of your bankruptcy case.
The purpose of these counseling meetings is to provide you resources for managing your finances and tips for avoiding money problems in the future.
You will get the skills you need to make the most of your fresh start once you are discharged from bankruptcy.
Ongoing Obligations for the Bankrupt
In addition to the duties explained above, the bankrupt will be required to complete certain duties throughout the bankruptcy as well.
Mainly the bankrupt will be required to provide the trustee monthly income and expense statements.
The purpose of doing this is so the trustee can calculate any “surplus income” the bankrupt is required to pay as detailed by the Bankruptcy & Insolvency Act.
Surplus income is based on a calculation that factors in your family size, living costs, expenses, and your income.
Your LIT will also handle your tax return for the year of your bankruptcy, and you will be required to provide the trustee the information required to do so.
The trustee will file two tax returns on your behalf – one for the current year prior to your bankruptcy, and for the current year after your bankruptcy.
If you are owed a tax refund it will be surrendered to your trustee and will become part of your bankruptcy estate.
After Bankruptcy: Getting Your Discharge from Bankruptcy
You will be officially discharged from bankruptcy if you have completed all your duties and paid all the necessary fees at the end of your bankruptcy term.
Getting your discharge occurs automatically. This is what legally releases you from the obligation to repay your debts.
If you are a first time bankrupt without surplus income you will qualify for an automatic discharge after nine months.
This is the most common scenario.
Second time bankrupts are still eligible for an automatic bankruptcy discharge, although it will take 24 months.
Some bankrupts will not be eligible for an automatic discharge because it is their third time going bankrupt or their creditors object to the discharge.
Although this is incredibly rare it can occur.
In this situation your trustee will have to apply for a discharge hearing.
You and your LIT will be required to attend this meeting.
At the hearing, your LIT will present the facts of your bankruptcy and help you get your discharge.
The court can decide either to grant you the discharge or impose a conditional discharge, which means you must complete certain conditions to get your discharge.
Getting Help from BankruptcyCanada’s Ontario Trustees
With a basic understanding of Ontario bankruptcy after reading this article we hope you feel a little bit better.
There are ways out of debt no matter how difficult your situation may seem.
Ontario insolvency laws are intended to give honest but unfortunate Canadians who are trapped in debt a fresh start.
It is not intended to punish or demean.
If you are ready to take the next step schedule a free consultation with a Licensed Insolvency Trustee (LIT).
The meeting with the trustee will lift a weight off your shoulder and carries no obligation.
In some cases, the trustee will tell you how to get out of debt without any professional intervention.
The trustee might, for example, show you how to get your finances under control with simple budgeting changes.
The consultation meeting is confidential and there is no obligation to proceed with the trustee.
If nothing else, you will have a better understanding of your options after meeting the trustee.
Schedule a free consultation online today.
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