How Do I File Bankruptcy In Ontario?

Understanding Bankruptcy: The Step-by-Step Process in Ontario

Bankruptcy is a legal status that provides financial relief to individuals who are unable to pay their debts. If you are considering filing for bankruptcy in Ontario, it is essential to understand the steps involved and the implications of this decision. This article will guide you through the process, highlighting important factors to consider.

Qualifying for Bankruptcy in Ontario

Before diving into the process of filing for bankruptcy, it’s vital to ascertain whether you qualify. To be eligible for personal bankruptcy in Ontario, you must be at least 18 years old and insolvent, meaning you owe a minimum of $1,000 and are unable to make payments when they are due.

Assets You Can Retain Post-Bankruptcy

Filing for bankruptcy doesn’t necessarily mean you will lose all your assets. Depending on your financial situation, certain assets may be exempt:

  • Equity in your home up to $10,783.
  • Household items, furniture, and clothing up to $14,180 in value.
  • One automobile with equity up to $7,117.
  • Tools used for your profession up to $14,405 in value.
  • Pension and RRSPs (excluding contributions made 12 months before declaring bankruptcy).

Debts That Remain Despite Bankruptcy

Certain obligations are immune to bankruptcy. These include child support, alimony, student loans (if you completed your studies less than seven years ago), court-imposed fines, and fraudulent debts.

Debts Eliminated By Bankruptcy

Personal bankruptcy can wipe out most of your unsecured debts like credit cards, lines of credit, personal loans, payday loans, and income tax debt.

Surplus Income and Bankruptcy

Surplus income is the amount you earn above the basic income set by the Superintendent of Bankruptcy for different family sizes each year. If your income exceeds this threshold, you are required to contribute half of your surplus earnings to your bankruptcy estate.

Spousal Impact of Bankruptcy

Filing for personal bankruptcy in Ontario generally does not impact your spouse unless they have co-signed or guaranteed your debt, or if you both share a credit card account. Jointly owned assets with equity may also be affected.

Bankruptcy vs Consumer Proposal

Bankruptcy requires you to surrender non-exempt assets, while a Consumer Proposal allows you to retain all your assets, including your home and car. However, you must continue making payments on these assets.

Consumer Proposals are appealing for debtors with significant assets, stable income, or those who wish to avoid bankruptcy and its mark on their credit report.

Steps to File for Bankruptcy in Ontario

1. Find a Trustee

Start by finding and meeting with a Licensed Insolvency Trustee to review your financial situation and discuss your debt repayment options.

2. Filing for Bankruptcy

The trustee will assist you in completing necessary forms and submit your file to the OSB.

3. Post-Filing Actions

Once you’ve officially filed for bankruptcy, you’ll stop dealing with your unsecured creditors directly and halt payments to them. You’ll be making payments to your trustee for fees, assets, or surplus income.

4. Sale of Assets

The trustee will liquidate your non-exempt assets and hold the proceeds for disbursement to your creditors.

5. Notification of Creditors

Your creditors will be informed about your bankruptcy status by the trustee.

6. Creditors’ Meeting

Attend the creditors’ meeting if requested by your creditors or the OSB.

7. Examination

If an examination is requested by the OSB, you must attend it.

8. Debt & Credit Counselling

You’ll be required to attend two financial counseling sessions.

9. Trustee’s Report

The trustee will send a comprehensive report to the OSB and your creditors on your bankruptcy requirements performance and current financial situation.

10. Discharge Hearing

Qualifying first-time bankruptcies can be given an automatic, absolute discharge 9 months after the initial filing without a hearing.

11. Legal Discharge

Once you have received an automatic or absolute discharge, or have fulfilled the terms of either a suspended or conditional discharge, you will be released from paying the debts covered in your bankruptcy.

Taking the First Step Towards a Debt-Free Life

If you’re overwhelmed by debt, reach out to a professional for a confidential consultation. They can review your financial situation in detail and discuss all available options.

“When you are in a financial crisis, knowledge is power. Understanding what bankruptcy entails and how to file for it in Ontario can provide the clarity needed to make an informed decision.”

Remember, it’s crucial to approach bankruptcy with caution and seek advice from a licensed insolvency trustee.

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