Filing Bankruptcy in Ontario: A Comprehensive Guide
Declaring bankruptcy is a significant decision, fraught with both emotional and financial implications. Despite the weightiness of the process, it can be a viable solution for those grappling with insurmountable debt. This guide provides a detailed walkthrough on how to file bankruptcy in Ontario, Canada, aiming to provide clarity and direction during a complex and challenging time.
Understanding Bankruptcy in Ontario, Canada
Bankruptcy, a legal status granted by a court, signifies an individual’s inability to pay their debts. Governed by the Bankruptcy and Insolvency Act (BIA), bankruptcy filings in Canada are also subject to specific provincial laws, such as the Ontario Executions Act and the Ontario Limitations Act.
Ontario Bankruptcy Statistics
In 2021, 30,327 consumers in Ontario filed for insolvency, with 7,580 of these progressing to declare bankruptcy. The average assets at filing time amounted to $21,907.90, while the average liabilities (debts) totaled $89,758.27.
The Role of a Licensed Insolvency Trustee (LIT)
To file for bankruptcy in Ontario, the services of a Licensed Insolvency Trustee (LIT) are required. An LIT is the only professional with the qualifications and authority to administer a bankruptcy on your behalf. They are bound by a strict code of ethics and regulated by the federal government through the Office of the Superintendent of Bankruptcy (OSB).
Initial Consultation with an LIT
The bankruptcy process begins with a free consultation with an LIT. During this meeting, your trustee will review your financial situation, including your debts, budget, and assets, to determine the best strategy for addressing your debts.
Evaluating Bankruptcy Costs and Alternatives
Bankruptcy in Ontario, although a government-sponsored debt relief program, isn’t free. The costs associated with discharging unsecured debts vary based on income, expenses, and assets. A consumer proposal may be a more suitable solution, depending on the size of your debt obligations, your earnings, and the value of your assets.
Completing and Filing Bankruptcy Documents
If bankruptcy is the chosen path, the next step involves completing the necessary documents. These include the Assessment Certificate, Assignment, Monthly Income and Expenses Statement, and Statement of Affairs. Once completed, these forms are submitted to the government for approval.
Notifying Creditors and Fulfilling Bankruptcy Duties
Upon approval, your creditors are notified that bankruptcy proceedings have begun. From this point, they can only communicate with your appointed trustee. As part of your bankruptcy duties, you are required to surrender any non-exempt assets and credit cards, make monthly bankruptcy payments, provide monthly reporting, and attend two credit counselling sessions.
Receiving a Bankruptcy Discharge
Once you have met all your obligations, you’ll receive a bankruptcy discharge, releasing you from your legal obligations. If this is your first time filing for bankruptcy in Ontario, you may obtain a discharge in as little as nine months.
Exempt Assets in Ontario
When filing for bankruptcy in Ontario, certain assets are exempt under federal and provincial law. These include your primary residence (if the home’s equity does not exceed $10,000), one vehicle worth less than $6,600, $13,150 of household furnishings and appliances, all necessary clothing and medical devices, certain types of life insurance, and all savings in Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIF), and Savings and Profit Sharing Plan (SPSP) funds.
The Statute of Limitations on Debts in Ontario
Under the Ontario Limitations Act, the statute of limitations on most debts expires after two years. However, some debts, such as government-guaranteed student loans, taxes, and court-ordered debts, are not subject to the statute of limitations.
Alternatives to Bankruptcy
Before deciding to declare bankruptcy, it is wise to consider all available alternatives. Bankruptcy will significantly impact your credit and become a public record. Therefore, it may be in your best interest to explore other debt solutions, such as debt consolidation, credit counselling, debt settlement, or consumer proposals.
Bankruptcy is a profound step, but it doesn’t signify financial ruin. With careful planning and the right guidance, it can serve as a fresh start, leading to a brighter financial future.
