Declaring bankruptcy can be a daunting process, fraught with uncertainty and confusion. Here are some Frequently Asked Questions About Bankruptcy in Ontario to help you navigate this financial landscape.
1. Understanding Bankruptcy
1.1 What does filing for bankruptcy mean?
Declaring bankruptcy is a legal procedure overseen by a Licensed Insolvency Trustee (LIT). It involves a comprehensive review of your financial status, preparation and filing of requisite documents, and provision of financial counselling to prevent future financial mishaps.
1.2 Who handles bankruptcy cases?
Only Licensed Insolvency Trustees, who are trained and certified by the government, can administer bankruptcy and consumer proposal proceedings.
1.3 What are the roles of a bankruptcy trustee?
A bankruptcy trustee is a professional who provides a free consultation to evaluate your financial situation and guide you through the process. They can explain possible alternatives to bankruptcy and handle communication with creditors on your behalf.
2. Process and Cost of Filing Bankruptcy
2.1 How is bankruptcy filed?
After an initial consultation with a Licensed Insolvency Trustee, they will prepare the necessary documents and guide you through the signing process.
2.2 How much does it cost to file for bankruptcy?
The costs for administering bankruptcy are typically covered by the sale of your assets and any required payments to the trustee.
2.3 Are there any mandatory meetings to attend?
Yes, filing for bankruptcy requires attending two compulsory financial counselling sessions. Additionally, creditors or the Office of the Superintendent of Bankruptcy may request random examinations, which you must attend.
3. Debts and Bankruptcy
3.1 What debts are eliminated by bankruptcy?
Most unsecured debts are wiped out by bankruptcy. However, some specific debts like court-imposed fines, alimony or child support, debts from fraudulent activities, and student loans (if studied within the last seven years) are not discharged.
3.2 Can taxes owed be included in bankruptcy?
Yes, personal income tax and director’s liability (HST, GST, PST, source deductions) can be covered under personal bankruptcy.
3.3 What happens to student loan debt in bankruptcy?
Student loans are discharged only if bankruptcy is filed seven years after the completion of studies.
4. Bankruptcy Implications
4.1 Who will know about my bankruptcy?
Only creditors and their agencies are formally notified. Personal bankruptcies generally go unnoticed by family and friends.
4.2 Will bankruptcy affect my credit rating?
Yes. Bankruptcy will appear on your credit bureau record for six or seven years after your discharge, depending on your region.
4.3 Can a bank refuse to open an account because I’m bankrupt?
No. Canadian law prohibits banks from refusing to open personal accounts due to bankruptcy or unemployment.
5. Bankruptcy and Assets
5.1 Will I lose my home if I file for bankruptcy?
Bankruptcy does not automatically lead to the loss of your home. If your mortgage payments are up to date, you may be able to keep your home, but you must provide the trustee with a recent appraisal and a current mortgage balance statement.
5.2 Are any assets exempt from seizure in bankruptcy?
Yes, certain assets are exempt from seizure in bankruptcy. The specific exemptions vary by province.
6. Bankruptcy and Income
6.1 Will I have to make any payments?
Yes, you will likely have to make monthly surplus income payments to your trustee.
6.2 How does surplus income work?
‘Surplus income‘ is the portion of your income that surpasses the limit set by the Canadian government for maintaining a reasonable standard of living. Half of this surplus income must be paid to your trustee.
6.3 What happens to my wages during bankruptcy?
If your income exceeds the limit set by the Superintendent of Bankruptcy, the trustee is obliged to collect a portion of your earnings.
7. Bankruptcy Duration and Discharge
7.1 When does bankruptcy end?
The duration of bankruptcy varies depending on whether it’s your first bankruptcy and whether you have surplus income.
7.2 What is bankruptcy discharge?
Bankruptcy discharge is the legal process that releases you from the obligation to repay the debts you owed when you filed for bankruptcy.
8. Bankruptcy and Family
8.1 Will my spouse be responsible for my debts?
Unless it’s a joint debt, personal debts are not transferred to your spouse in the event of bankruptcy.
8.2 Will bankruptcy affect child support payments?
Child support or spousal support payments that are part of a court-ordered agreement are not dischargeable in a bankruptcy.
9. Bankruptcy Counseling
9.1 What is bankruptcy counselling?
Bankruptcy counselling is a mandatory part of the bankruptcy process. It involves two sessions focusing on money management skills, budgeting, goal-setting, and understanding the factors that led to financial distress.
9.2 What’s the difference between a bankruptcy trustee and a credit counselor?
Only a bankruptcy trustee is licensed to administer the Bankruptcy and Insolvency Act. Credit counselors, unless affiliated with a trustee, cannot file bankruptcy or consumer proposal documents.
10. Seeking Help
10.1 Where can I get more information about personal bankruptcy?
To learn more about personal bankruptcy, you should speak with a licensed trustee. At Bankruptcy Canada, your first consultation is free, confidential, and comes with no obligation.
Bankruptcy is a complex process, but with the right guidance, it can be navigated successfully. If you’re considering bankruptcy, it’s essential to consult with a trained and licensed professional who can provide advice tailored to your specific situation.
