Declaring Bankruptcy in Ontario

Understanding Bankruptcy in Ontario: A Comprehensive Guide

Facing a mountain of debt can be daunting. If you’re considering declaring bankruptcy in Ontario, it’s crucial to understand the implications, both positive and negative. This guide will provide an in-depth understanding to help you make an informed decision.

Pros and Cons of Bankruptcy

Declaring bankruptcy in Ontario can provide relief from overwhelming debts, offering a fresh financial start. However, it’s not a decision to be taken lightly. Let’s explore the pros and cons.

Pros of Bankruptcy

The primary advantage of bankruptcy is debt elimination. It can halt collection calls and end wage garnishment orders. However, it’s important to note that not all debts can be absolved via bankruptcy.

Cons of Bankruptcy

While bankruptcy can significantly reduce your debts, it brings about consequences. It can lead to the loss of certain assets and negatively impact your credit score.

Assets and Bankruptcy: What You Need to Know

When declaring bankruptcy, you’re required to surrender your assets to a Licensed Insolvency Trustee. These assets are then sold, and the proceeds are distributed among your creditors.

Exempt Assets in Bankruptcy

Certain assets are exempt from seizure under Ontario bankruptcy law. These include personal and household belongings, tools used for business, and protection if your home equity falls below a specified threshold.

Bankruptcy Exemptions: Retaining Your Assets

Under Ontario law, certain assets are considered exempt in a bankruptcy case.

  • Clothing: Unlimited amount
  • Motor Vehicle: Up to $7,117
  • Home Furnishings and Appliances: Up to $14,180
  • Tools of the Trade: Up to $14,405
  • Pensions, Certain Types of Life Insurance Policies, and RRSPs: Most are exempt, excluding recent contributions.

How will Bankruptcy Impact My Home and Car?

The impact of bankruptcy on your home and car largely depends on your individual circumstances and the amount of equity in these assets.

Impact on Home

If you don’t have significant equity in your home, bankruptcy may not affect it.

Impact on Car

In most cases, you can retain your car. Ontario law allows you to keep one vehicle.

Effect of Bankruptcy on Credit Rating

Bankruptcy will be noted on your credit report after filing, impacting your ability to obtain future credit and the interest rates on any credit you receive.

Bankruptcy and its Effect on your Spouse

Generally, if your debts are solely yours, declaring bankruptcy should not affect your spouse or their credit rating. However, there are exceptions, and these details should be understood prior to filing.

How to Declare Bankruptcy in Ontario

Declaring bankruptcy in Ontario can only be done through a Licensed Insolvency Trustee. The process involves reviewing your debts, assets, budget, and comparing bankruptcy with other options.

The Aftermath of Declaring Bankruptcy

Declaring bankruptcy has both short and long-term effects. It’s important to consult with professionals to understand if it’s the right debt management option for you.

Bankruptcy offers a way out of overwhelming debt, but it’s not the only solution. There are alternatives like consumer proposals if your property exceeds exemption limits.

Remember, you’re not alone in this journey. There are professionals and resources available to help you navigate these challenging waters.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.