Bankruptcy is a viable option for many individuals facing insurmountable financial difficulties. However, the process can be complex and intimidating. This comprehensive guide aims to demystify the process and provide valuable insights into seeking help with bankruptcy in Ontario.
Understanding Bankruptcy in Ontario
Bankruptcy in Canada is a legal process governed by the Bankruptcy and Insolvency Act (BIA). This federal legislation outlines rules and requirements for all parties involved in a bankruptcy proceeding. Bankruptcy is typically considered a last resort for individuals unable to meet their debt payment obligations.
There can be numerous causes leading to bankruptcy, including major life events such as illness, divorce, or job loss. These events can severely impact an individual’s financial stability, making bankruptcy a necessary step towards a fresh start.
Seeking Help With Bankruptcy
When faced with overwhelming debt, it’s crucial to seek professional help. In Canada, the Office of the Superintendent of Bankruptcy (OSB) and the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) work together to provide Canadians with reliable advice and solutions.
These organizations offer essential tools and information to help individuals navigate financial difficulties. However, finding the right professional to assist with debt can be a challenge. Here are a few points to consider:
- Be wary of unregulated, unlicensed debt advisors.
- If a deal sounds too good to be true, it likely is.
- Consult with a Licensed Insolvency Trustee (LIT).
- Consider non-insolvency options such as debt consolidation or financial counselling.
- Take advantage of free consultations with an LIT.
- Be a well-informed consumer by consulting reliable sources, asking questions, and seeking second opinions.
Role of Licensed Insolvency Trustee (LIT)
In Canada, only a Licensed Insolvency Trustee (LIT) is authorized to administer bankruptcy proceedings. LITs provide independent, unbiased advice about the options available to deal with debt. They are required to assess your financial and personal situation and discuss all options available, including insolvency and non-insolvency options.
Benefits of Declaring Bankruptcy
Declaring bankruptcy can provide immediate relief from creditors. Once bankruptcy proceedings begin, all efforts to collect debts must cease, including wage garnishments and collection calls. This type of protection is typically not available through other forms of credit counselling or debt management plans.
Completing bankruptcy proceedings can absolve you of your unsecured debt obligations, freeing up more funds for essential expenses. This can significantly improve your financial standing, allowing you to focus on saving for retirement, establishing an emergency fund, or planning for future expenses.
The Bankruptcy Process
The bankruptcy process begins with a consultation with an LIT, who helps you complete all necessary documents to initiate the process. Once the process begins, the LIT will directly deal with your creditors on your behalf.
Impact on Assets and Income
Bankruptcy proceedings can affect your assets and income. If you have a certain amount of equity in assets such as a vehicle or home, these may need to be sold to pay your creditors. However, each province has a list of bankruptcy exemptions, allowing you to keep certain assets up to a specific value.
Your income is also affected by bankruptcy. Depending on your family size and income level, 50% of all money earned over a certain threshold must be paid each month to your trustee.
Debts Covered by Bankruptcy
Bankruptcy proceedings deal exclusively with unsecured debts. These are debts where you’ve not pledged any asset as collateral. Here are some examples of debts that can be included in a bankruptcy:
- Credit cards.
- Personal loans.
- Lines of credit.
- Income tax debt.
- Student loans (if it’s been at least seven years since you’ve graduated).
- Medical bills.
- Bank overdrafts.
- Unpaid property taxes.
- Unpaid utility bills.
However, bankruptcy will not eliminate certain debts, including:
- Mortgage.
- Car loan.
- Child and spousal support payments.
- Court fines.
- Student loans less than seven years old.
- Debts resulting from fraud.
Bankruptcy vs. Consumer Proposal
While both bankruptcy and consumer proposal can help clear your debts and protect you from creditors, there are some key differences. One major advantage of a consumer proposal is that you will not lose any of your assets and you are not required to surrender anything.
Seeking Help With Bankruptcy in Ontario
If you’re struggling with unmanageable debt in Ontario, it’s crucial to seek professional help. A Licensed Insolvency Trustee can help you understand all the debt-relief options available and guide you in making the best decision for your situation.
There are numerous resources available to help you navigate the complex process of bankruptcy. The OSB’s Debt Solutions Portal provides accurate and reliable information, including a handy questionnaire, to help consumers deal with their financial difficulties.
Conclusion
Bankruptcy is a viable option for many individuals facing insurmountable financial difficulties. However, the process can be complex and intimidating. This comprehensive guide aims to demystify the process and provide valuable insights into seeking help with bankruptcy in Ontario. Remember, it’s crucial to seek professional help and be a well-informed consumer to navigate this complex process smoothly.
