Effects of Claiming Bankruptcy in Ontario

While the cost of living may vary from one city to another, Ontario is one of the most expensive provinces in Canada.

As such, it stands to reason that (along with Alberta and British Columbia) it holds 3 out of every 4 dollars’ household debt in the country.

As the cost of living rises many households have no choice but to rely on sources of credit such as credit cards and loans to get by.

Over time these debts can get harder to manage, and result in households spending a fortune on interest.

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In fact, the average Canadian household spends 7.3% of their income on interest charges alone.

The good news is that there are lots of options for debt-stricken Canadians who want to turn things around.

Bankruptcy, for instance, may be a daunting prospect for many, but it can be the fastest way to get the fresh start you need and start rebuilding your financial life free of debt.

Nonetheless, it’s not an arrangement that should be entered into lightly.

It needs to be an informed decision based on all the available evidence.

With that in mind, let’s take a look at the effects of claiming Bankruptcy in Ontario…

Understanding the pros and cons of Bankruptcy

It’s impossible to file for Bankruptcy in Ontario without the aid of a Licensed Insolvency Trustee.

As well as facilitating the Bankruptcy, taking care of the complex paperwork and making sure you meet your obligations within the crucial first 9 months, they will explain the process in detail and answer any questions you may have.

They will also explain the advantages and disadvantages of Bankruptcy.

In a nutshell, Bankruptcy can give you the fresh start you need but it is not without consequences.

While many find that all their debts are automatically discharged (including tax debts and student loans over 7 years old), not all debts can be eliminated.

Your Trustee will explain to you in greater detail which debts can and cannot be eliminated.

However, it goes without saying that Bankruptcy has its caveats.

It will have lasting implications for your credit rating, and you may have to surrender your assets to the benefit of your creditors.

Will I lose all of my assets?

Not necessarily.

When you are declared bankrupt, you are legally obliged to surrender your assets to your Licensed Insolvency Trustee.

However, some assets are exempt from seizure when you claim Bankruptcy in Ontario.

Many assume that they will lose their homes, but this may not happen to you.

Under current Bankruptcy law, if you have less than $10,000 equity in your property, your home is safe.

Other exempt assets include:


  • Your clothing;
  • Pension Plans, RRSPs and some life insurance policies (although recent contributions can be seized);
  • Motor vehicles up to the value of $6,600;
  • Furnishings and appliances up to the value of $13,150;
  • Trade tools up to the value of $11,300.


As part of the process, your Trustee will take an inventory of all your assets and assign a fair value to each.

But, as you can see, you won’t lose all of your assets when declaring Bankruptcy, and you may not even lose any at all if your assets fall below these assigned values.

If, however, your Trustee finds that your assets are particularly vulnerable, they may suggest alternative arrangements like a Consumer Proposal.

Will I ever get credit again?

Many people see a Personal Bankruptcy as the end.

But it’s much more apt to see it as a new beginning.

When you’re claiming Bankruptcy in Canada, the process includes two mandatory Credit Counselling sessions which will help you to identify where and how things went wrong in relation to your debts.

These sessions will help you to get into better financial habits including budgeting and saving- both of which will be much easier now that you’ve been liberated from your debts.

You may find that post-Bankruptcy you’re much less likely to need to rely on credit.

But that doesn’t mean that you can’t start to rebuild your credit once more.

Your first Bankruptcy stays on your credit record for 6 years (15 for every subsequent Bankruptcy).

After this, it will be much easier to get access to credit on better terms.

Will I have to go to court?

Very few personal Bankruptcies ever go to court and your Trustee will guide you through the process of meeting your legal obligations within the first 9 months of filing, so that your debts have a better chance of being automatically discharged.

These include:

  • Covering all necessary payments to the state;
  • Providing all information needed to file your tax returns (both pre-bankruptcy and post-bankruptcy);
  • Making sure you submit your monthly income and expense reports;
  • Attending your Credit Counselling sessions;
  • Reporting all of your assets to the Trustee;
  • Staying in contact with your Trustee and ensuring that your contact information is kept up to date.


Will bankruptcy affect my partner / spouse?

You’ll be relieved to hear that your Bankruptcy will not affect your partner or spouse, so long as the debts incurred are yours and yours alone.

They will, however, be just as liable as you for shared debts which you took out together.

It’s important to note that they are liable for shared debts even if you should separate.

How we can help

Since 1999 we’ve helped over 200,000 Canadians from all walks of life to live free of debt.

We can help to put you in touch with a Licensed Insolvency Trustee who will take the time to get to know your circumstances and let you know what your available options are.

You may opt to go ahead with a Bankruptcy in Ontario, or you may choose an alternative like a Consumer Proposal.

Whatever you choose, we’ll make sure that it’s an informed choice.

If you’d like to know more about our services, call us today on (877)879-4770 to arrange a risk-free, zero-obligation and 100% confidential callback.

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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