Will Bankruptcy Stop an Eviction in Ontario?

Financial struggles can often lead to extreme measures such as declaring bankruptcy. One of the most common concerns for individuals facing bankruptcy is the fear of eviction. This post explores the question, “Will bankruptcy stop an eviction in Ontario?” and provides a comprehensive understanding of the legal considerations in such situations.

Understanding Bankruptcy

In Canada, bankruptcy is a legal process that offers relief to individuals who are unable to pay their debts. The process eradicates most, if not all, unsecured debts including credit card bills, personal loans, and income taxes owed. However, it’s important to note that filing for bankruptcy requires surrendering certain assets, which can include your home, to repay part of your debts.

Filing for Bankruptcy: Impact on Eviction

So, will bankruptcy stop an eviction in Ontario? Surprisingly, the answer is yes. Upon filing for bankruptcy, all legal proceedings, including eviction notices, must be halted. If you declare bankruptcy and are yet to be discharged, your landlord is legally prohibited from initiating eviction processes for arrears.

The Role of a Consumer Proposal

A consumer proposal is another option for individuals struggling with debt. It involves an agreement to repay a portion of your debts, including rent arrears. Just like bankruptcy, filing a consumer proposal prevents creditors from initiating or continuing legal proceedings against you.

Stay of Proceedings: A Closer Look

A stay of proceedings, initiated upon filing for bankruptcy or a consumer proposal, prevents any legal action against you. It halts wage garnishments and prevents creditors from directly contacting you for debt repayment. Any legal proceedings stopped by bankruptcy cannot resume once the bankruptcy or proposal is discharged.

Remaining in the Rental Unit Post-Bankruptcy

Yes, you can continue to live in your rental unit after filing for bankruptcy. However, this decision can strain relationships with your landlord. Furthermore, any rent arrears accumulated post-bankruptcy will not be discharged and must be paid.

Landlord’s Responsibilities During Tenant’s Bankruptcy

Upon learning of a tenant’s bankruptcy, the landlord is prohibited from pursuing rent arrears. However, they may file a proof of claim with the Licensed Insolvency Trustee (LIT) to participate in the bankruptcy.

Eviction Process in Ontario

In Ontario, landlords must adhere to specific steps to evict a tenant as stipulated in the Residential Tenancies Act. These steps include issuing a notice of termination, applying for an eviction order, and possibly, a notice to vacate from the Sheriff.

The Intersection of Federal and Provincial Legislation

The Bankruptcy & Insolvency Act (BIA), a federal legislation, supersedes provincial legislation regarding landlord-tenant issues. Thus, the stay of proceedings provided by the BIA is effective against the landlord upon filing for personal bankruptcy or a consumer proposal.

Limitations of Bankruptcy in Protecting Tenancy

Despite the protections offered by bankruptcy, there are limitations. For instance, it will not halt an eviction if the landlord intends to significantly renovate, sell, or use the property for personal reasons, a scenario often referred to as a “renoviction”.

In Conclusion

While bankruptcy can stop an eviction in Ontario due to rent arrears, it’s a complex process that should be considered carefully. It can provide temporary relief from eviction and other financial pressures, but also comes with long-term implications. Always seek professional advice when considering bankruptcy as a solution to financial woes.

From this comprehensive review, it’s clear that the answer to the question, “Will bankruptcy stop an eviction in Ontario?” is affirmative. Yet, it’s crucial to remember that bankruptcy is not a one-size-fits-all solution and should be considered as a last resort.

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