What Happens When I File for Bankruptcy in Ontario?

Understanding Bankruptcy in Ontario: A Comprehensive Guide

Are you pondering over the question, “What Happens When I File for Bankruptcy in Ontario?” If yes, you’re at the right place. This comprehensive guide will walk you through every step of the bankruptcy process in Ontario, armed with insights from a Licensed Insolvency Trustee.

1. Introduction to Bankruptcy in Ontario

Bankruptcy in Ontario is a legal procedure, supervised by a Licensed Insolvency Trustee (LIT), aimed at helping individuals overwhelmed by debt to start afresh. It provides immediate protection against creditors, halts wage garnishments, and commences the process of eliminating your debts. However, it’s essential to understand the implications of filing for bankruptcy, as it could significantly impact your creditworthiness in the future.

2. Engaging with a Licensed Insolvency Trustee

Before declaring bankruptcy, it’s crucial to consult with a Licensed Insolvency Trustee. These professionals are experts in Canadian insolvency procedures and can guide you through the entire bankruptcy process, ensuring you understand your options before making a commitment. They can also help explore alternatives to bankruptcy.

During your meeting with the LIT, prepare to discuss your debts, monthly income, and expenses. It’s crucial to be transparent about your financial situation to get the most accurate advice.

3. Preparing and Filing Bankruptcy Documents

Once you decide to proceed with bankruptcy, the LIT will help you prepare the necessary documents. It’s important to provide accurate and complete information, as this will determine your discharge from debts later. The documents required include:

  1. The Assessment Certificate.
  2. The Monthly Income and Expense Statement.
  3. The Statement of Affairs.
  4. The Assignment for the General Benefit of Creditors.

Once prepared, the trustee will file these documents with the Office of the Superintendent of Bankruptcy, a division of the federal government. The bankruptcy commences as soon as these documents are filed.

4. Notification to Creditors

After filing, all your creditors will be notified within five days. They will be directed to the trustee to file their claim for the amount owed. This process ensures that creditors stop pursuing you for repayment and instead, communicate directly with the trustee.

5. Obligations During Bankruptcy

During the bankruptcy period, you are required to fulfill certain obligations, including:

  • Providing tax information for the trustee to file outstanding tax returns.
  • Submitting monthly copies of pay stubs and proof of other income.
  • Attending credit counselling sessions.
  • Making the required contributions (including surplus income payments) to the bankruptcy estate.
  • Surrendering any non-exempt assets.
  • Completing any other duties requested by the trustee.

These duties help ensure that the bankruptcy process is carried out smoothly and fairly.

6. Surplus Income and Bankruptcy Estate

During your bankruptcy, any surplus income — as defined by the Office of the Superintendent of Bankruptcy (OSB) — is calculated based on your family size, actual income, living costs, and expenses. This surplus income, along with any assets surrendered and tax refunds, forms the bankruptcy estate. The LIT manages this estate, using the funds to administer the bankruptcy and distribute to creditors as per the Bankruptcy and Insolvency Act (BIA).

7. Secured and Unsecured Debts in Bankruptcy

Bankruptcy affects secured and unsecured debts differently. Secured creditors, like mortgage and car loan providers, have a claim on specific assets and are treated uniquely in bankruptcy. Unsecured debts, on the other hand, like credit card balances, personal loans, and utility bills, are typically discharged in bankruptcy. However, certain unsecured debts, such as recent student loans, spousal and child support, and court-awarded damages, are not discharged.

8. Duration and Discharge of Bankruptcy

The duration of your bankruptcy depends on various factors, including whether it’s your first bankruptcy and whether you have surplus income. If it’s your first bankruptcy and you don’t have surplus income, you could be discharged within nine months.

The discharge from bankruptcy is a legal process that releases you from the obligation to repay the debts covered by your bankruptcy. However, you can only be discharged upon completion of all your duties during the bankruptcy period.

9. Post-Bankruptcy Life

Life after bankruptcy presents an opportunity for a fresh start. However, it’s important to note that your ability to get credit in the future could be substantially impacted. Therefore, it’s crucial to develop good financial management habits to avoid falling into debt again.

10. Conclusion

Declaring bankruptcy in Ontario is a significant decision that should not be taken lightly. It’s crucial to understand the process thoroughly and seek professional advice from a Licensed Insolvency Trustee. Remember, taking action sooner rather than later can help you get a fresh start and pave the way to a more stable financial future.

For more information on “What Happens When I File for Bankruptcy in Ontario?” or to schedule a free consultation with a trustee, please contact us today.

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