Understanding the complex nature of personal bankruptcy in Ontario can be a daunting task. This guide aims to provide an in-depth analysis of the Personal Bankruptcy Ontario Rules to help you navigate the process with ease.
Overview of Bankruptcy Laws in Ontario
The bankruptcy law in Ontario is governed by four significant legislations:
- The Canadian Bankruptcy and Insolvency Act (BIA).
- Ontario Execution Act.
- Limitations Act.
- Personal Property Security Act of Ontario.
Together, these laws cover all aspects of bankruptcy, defining the rights of debtors and creditors alike.
The Bankruptcy and Insolvency Act (BIA)
The BIA is a federal legislation that provides a legal framework for individuals struggling financially to seek relief. It aims to rehabilitate the “poor and unfortunate debtor” from crippling debts. The Act outlines the duties and responsibilities of all parties involved in a bankruptcy process, including:
- Licensed Insolvency Trustees.
- The debtor or bankrupt.
- Creditors.
- The bankruptcy court.
- The Office of the Superintendent of Bankruptcy.
Moreover, the Act also defines the types of insolvency proceedings that can be filed, procedural matters, how property is handled, how funds are distributed, and the consequences of non-compliance with the BIA’s rules and procedures.
Ontario Execution Act
The Ontario Execution Act outlines the properties that can be kept when you file for bankruptcy in Ontario, also known as exempt assets. These can include property held in trust for someone else, HST credits (in certain circumstances), RRSPs (except contributions made in the last year), and other items that are “exempt from execution or seizure under any laws applicable in the province.”
Limitations Act
The Limitations Act pertains to the statute of limitations on debt collection. It is crucial to understand how this law affects your debt during bankruptcy.
Personal Property Security Act
The Personal Property Security Act (PPSA) necessitates your secured creditors to register their interest in any assets that you’ve put up as collateral for a loan or any liens against your property. These assets are not included in a bankruptcy, making it vital for your trustee to conduct a PPSA system search before selling any assets or allowing a creditor to take possession of an asset.
The Role of a Bankruptcy Trustee
Only a Licensed Insolvency Trustee can initiate and process bankruptcy proceedings. A trustee will review your financial situation, prepare necessary documents, guide you through the signing process, and provide financial counselling to help manage your finances in the future. They are also responsible for dealing with creditors on your behalf.
Filing for Bankruptcy: The Process
Filing for bankruptcy involves several steps:
- Meet with a Licensed Insolvency Trustee who will review your financial situation.
- The trustee will prepare the necessary documents and guide you through the signing process.
- You’ll need to attend two mandatory financial counselling sessions.
- Occasionally, you may also need to attend a meeting with a creditor to discuss your finances if requested.
Cost of Filing for Bankruptcy
The costs of bankruptcy administration are paid from the proceeds of the sale of your property and from mandatory or voluntary payments made to your trustee.
Will Bankruptcy Eliminate All Debts?
Bankruptcy eliminates most unsecured debts, but not all. Certain debts, such as court-imposed fines, alimony or child/spousal support, debts arising from fraud, civil court damages, and student loans for studies within the past seven years, are not dischargeable in a bankruptcy.
Payments During Bankruptcy
You will most likely have to make monthly payments to your trustee for the benefit of your creditors. These payments, referred to as surplus income payments, are determined based on the government’s assessment of what a household needs on a net monthly basis to maintain a reasonable standard of living.
Impact of Bankruptcy on Credit Rating
Yes, bankruptcy does impact your credit rating. Your credit bureau record will reflect your bankruptcy, remaining listed for six to seven years after your discharge.
Bankruptcy and Your Assets
Provincial law determines which assets are exempt from seizure in a bankruptcy. In Ontario, a bankrupt person may claim exemptions for household furniture and appliances, personal effects, tools required for work, and one vehicle per bankrupt person, owned free and clear of liens.
Bankruptcy Duration
If this is your first bankruptcy and you have no surplus income, you’ll be eligible for an automatic discharge from bankruptcy after nine months, given you’ve met all your responsibilities. If you do have surplus income, you will remain in bankruptcy for an additional 12 months, during which you will continue making surplus income payments.
Your Responsibilities During Bankruptcy
While you’re in bankruptcy, you’re required to disclose all your assets and debts, surrender all your credit cards, attend two counselling sessions, report any changes in your financial, family, and residential status, and make monthly surplus payments. You also need to file monthly income and expense reports and provide your income tax information to your trustee.
Conclusion
Personal bankruptcy is a complex process governed by stringent Personal Bankruptcy Ontario Rules. However, with the right guidance and understanding, it can provide significant financial relief to those struggling with crippling debts. If you find yourself needing help, reach out to a Licensed Insolvency Trustee to discuss your situation and explore your options.
