Facts About Bankruptcy In Ontario

Filing Bankruptcy In Ontario – What You Should Know

Filing bankruptcy is a way to get rid of your debts when you are having problems paying them.

By surrendering your assets, you can repay some of your creditors and have your debts discharged.

While bankruptcy is not without consequences, it can be the best option when you are struggling to make payments to repay your debts.

It gives you a chance to start fresh with your finances, although it is not an immediate solution to your problems.

It’s important to be aware of the key facts before you make a decision on whether bankruptcy is right for you.

The bankruptcy process in Canada is largely the same no matter where you are, but there are some differences concerning things such as which assets you can keep, depending on which province you live in.

In Ontario, there are some things that you should be aware of concerning how bankruptcy works in the province.

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When You Can File for Bankruptcy

You are eligible to file bankruptcy in Ontario if you live, own property or do business in the province.

You need to owe more than $1,000 in unsecured debt if you want to file bankruptcy in Ontario.

When you meet these criteria and are unable to pay your debts, bankruptcy could be the option that works for you.

Bankruptcy Erases Most Debts, But Not All

One thing to keep in mind if you are considering filing bankruptcy is that while it helps you to deal with most debts, it does not erase all debts.

Unsecured debts are generally discharged when you file bankruptcy in Ontario.

However, some of the debts that will remain include secured debts, including mortgages and car loans, as well as student loans, child support and alimony.

If you owe any court-ordered debts, you will still need to pay these, even if you file bankruptcy.

If you owe tax to the Canada Revenue Agency, you may be able to discharge your debt if there hasn’t been a lien placed on your property.

The Ontario Limitations Act sets out the statute of limitations for debts that were sold to a collector.

The statute expires after two years in most cases, excepting the examples above, meaning you may not need to file bankruptcy to deal with debts that have passed the statute of limitations.

You Can Keep Some of Your Assets

Bankruptcy doesn’t have to mean that you lose everything.

The Ontario Executions Act defines which assets are exempt from bankruptcy in Ontario.

There are also certain things that you can keep under federal law.

You are allowed to keep a number of things so that you are able to enjoy a certain standard of living.

If you file bankruptcy in Ontario, you will be able to keep:


  • Your primary residence if the equity is less than $10,000;
  • One vehicle worth less than $6,000;
  • Furnishings and appliances worth up to $13,150;
  • Tools of the trade (equipment used for business) up to $11,300;
  • Clothes for you and your dependents;
  • Necessary medical devices for you and your dependents;
  • Some types of life insurance;
  • Savings in a Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF), or Savings and Profit Sharing Plan (SPSP) fund – this does not include contributions from the 12 months prior to filing for bankruptcy.


You Can Keep Your Home in Bankruptcy

Many people worry about losing their home if they have to file for bankruptcy.

However, what happens to your home will depend on how much equity there is.

If you have no more than $10,000 equity in your home, you will not lose it if you file for bankruptcy.

The equity in your home is worked out by taking the current market value and subtracting the remaining balance of your mortgage, as well as any liens and tax arrears on the property.

If you have more than $10,000 equity in your home, there is a risk that it might be seized by the Licensed Insolvency Trustee and used to help pay your debts.

Before filing for bankruptcy, it is important to consider your home and the equity in it if you are a homeowner.

There might be better options for you, such as filing a consumer proposal or even choosing to sell your home yourself to give you the necessary funds to repay your debts.

Bankruptcy Stays on Your Credit Report for a Set Time

Bankruptcy doesn’t affect your finances forever, although you should be prepared for it to have an impact for a number of years.

When you file bankruptcy for the first time, it will remain as a note on your credit report for six years after you are discharged.

This might seem like a long time, but it doesn’t mean that bankruptcy is wrong for you.

If you are considering bankruptcy, it is likely that you already have adverse credit.

Bankruptcy could help you to start rebuilding your credit again, even if it might feel like you are making things worse.

Once you have been discharged, you are able to start rebuilding your credit so that you can borrow again in the future.

It may be difficult to find lenders willing to take you on at first, but you can slowly build up a healthy credit score again so that you can be financially stable.

Bankruptcy Doesn’t Have to Affect Your Spouse

If you’re married, you might be concerned about bankruptcy affecting your spouse.

If you have personal debts, filing bankruptcy won’t affect your spouse’s credit history.

However, if you have joint loans that you have co-signed or your spouse has guaranteed, they will likely be required to repay the debt alone after you have filed for bankruptcy.

This is important to keep in mind if you are considering bankruptcy in Ontario.

Before you file bankruptcy in Ontario, be sure to get the right advice.

You should speak to a Licensed Insolvency Trustee about your situation and the options that are available to you.

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