Filing for Personal Bankruptcy in Ontario

Personal bankruptcy is a legal process, regulated by the Bankruptcy and Insolvency Act (BIA), designed to provide financial relief to individuals who are unable to pay their debts. This article aims to provide a detailed guide on Filing for Personal Bankruptcy in Ontario, offering insights into the process, the laws involved, and the potential consequences.

The Bankruptcy Process in Ontario

The process of filing for bankruptcy involves several steps, which we will walk you through in this guide.

Initial Consultation

The first step towards filing for bankruptcy is to have an initial consultation with a Licensed Insolvency Trustee (LIT). This consultation is free and meant to provide an exchange of information. The LIT will evaluate your financial situation, answer your questions, and discuss your options. If bankruptcy is decided as the best option, the LIT will prepare the necessary documents for the assignment into bankruptcy.

Document Signing and Filing

The next step involves signing the bankruptcy documents prepared by your LIT. Once signed, these documents are filed with the Office of the Superintendent of Bankruptcy (OSB), and notices of your bankruptcy are sent to your creditors.

Notice to Creditors

Within five days of the filing, a notice of bankruptcy is sent to all known creditors. Upon receiving the notice, most legal proceedings relating to property matters are stayed, preventing creditors from continuing their actions against you. This also includes stopping any wage garnishments and collection calls.

General Administration and Creditors Meeting

General administration involves the management of your bankruptcy estate. In certain cases, a meeting of creditors may be held, where they can ask questions and provide directions to the LIT regarding the administration of the estate.

Duties of the Bankrupt and Trustee’s Report

As a bankrupt individual, you have specific duties to fulfill. Upon completion of these duties, the LIT prepares a report eight months into the process.

Discharge from Bankruptcy

The final step in the process is the discharge from bankruptcy. The timing of this discharge depends on various factors, such as whether it’s your first bankruptcy and if you have surplus income. The discharge releases you from the obligation to repay the debts included in your bankruptcy.

Ontario Bankruptcy Laws

In Ontario, the Ontario Executions Act and the Ontario Limitations Act govern aspects of bankruptcy such as asset exemptions and the statute of limitations for debts.

Exemptions in Ontario

When filing for bankruptcy in Ontario, certain assets are exempt and cannot be seized. These include:

  1. Your primary residence, with an equity of not more than $10,000.
  2. One vehicle worth less than $6,600.
  3. Household furnishings and appliances worth up to $13,150.
  4. Tools of the trade worth up to $11,300.
  5. All necessary clothing and medical devices.
  6. Certain types of life insurance.
  7. All savings in Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIF), and Savings and Profit Sharing Plan (SPSP) funds, excluding contributions made 12 months before filing.

Statute of Limitations

The Ontario Limitations Act specifies that the statute of limitations for most debts expires after two years from when the account originally became delinquent. However, some debts, such as government-guaranteed student loans, taxes, and court-ordered debts are not subject to this statute.

Filing for Bankruptcy

To be eligible to file for bankruptcy in Ontario, you must live, do business, or own property in the province, and you must owe more than $1,000 in unsecured debt. The filing process involves meeting with a LIT, who will evaluate your financial situation and prepare the necessary paperwork.

Automatic Stay of Proceedings

Upon filing your paperwork, an automatic stay of proceedings comes into effect, suspending all collection actions and attempts to force repayment. This provides immediate relief from collection calls, wage garnishments, repossessions, and foreclosures.

Alternatives to Bankruptcy

Filing for bankruptcy has significant consequences, including a negative impact on your credit. Therefore, it’s important to explore all alternatives before deciding to file for bankruptcy. Alternatives may include debt consolidation, credit counselling, debt settlement, and consumer proposals.

Before starting the bankruptcy process, it’s advisable to consult with a debt relief specialist. They can assess your situation and provide an unbiased opinion on your best option. A fresh start is just a phone call away.

Ontario Insolvency Rates

Below is a table showing the annual consumer insolvency rates in Ontario per 1,000 population aged 18 years and older.

Year Insolvency Bankruptcy Proposal
2012 4.5 2.2 2.3
2013 4.1 2.0 2.1
2014 3.8 1.8 2.0
2015 3.7 1.6 2.0
2016 3.6 1.5 2.1
2017 3.4 1.4 2.0
2018 3.4 1.3 2.1
2019 3.8 1.3 2.5
2020 2.9 0.8 2.1
2021 2.5 0.6 1.8

Source: Office of the Superintendent of Bankruptcy Canada

In conclusion, filing for personal bankruptcy in Ontario is a complex process that involves several steps and legal considerations. It’s essential to understand the process, your rights, and the potential consequences before deciding to file. Always seek professional advice to explore all your options and choose the best path for your financial future.

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