How bankruptcies work in Ontario?

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In Ontario, filing for bankruptcy is simple with a Licensed Insolvency Trustee (LIT). Start by discussing your situation with an LIT. If bankruptcy is your choice, you’ll complete forms like the Statement of Affairs with the trustee. Once filed, it halts creditor actions, offering a fresh start.

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Bankruptcy Process Question

How bankruptcies work in Ontario? If I file for bankruptcy in Ontario, how does the process work, and what should I know?

From: Anonymous Question
Location: Cambridge, Ontario (ON)
Category: personal bankruptcy

Bankruptcy Process Answer

Taking the step to file for bankruptcy in Ontario is straightforward when you know what’s involved, and a Licensed Insolvency Trustee (LIT) is there to guide you. First, arrange a private chat with a trustee to get a good grasp of your financial picture. If you choose to move forward, you’ll team up with the trustee to fill out essential paperwork, like the Statement of Affairs and the Assignment of Assets. Once these forms are signed, the trustee takes care of filing them with the Office of the Superintendent of Bankruptcy, which instantly marks the start of your bankruptcy journey and grants immediate protection from unsecured creditors, thanks to a stay of proceedings. After that, your creditors get the heads-up about your bankruptcy status, meaning no more collection calls or wage garnishments—giving you a much-needed breather.

From: Insider Adam

Office of the Superintendent of Bankruptcy (OSB) Answer

In Ontario, the process of filing for bankruptcy is governed by the Bankruptcy and Insolvency Act (BIA). To initiate the process, you must file a bankruptcy application with a licensed insolvency trustee (LIT), who will guide you through the process (BIA, s. 20).

Once you file for bankruptcy, your creditors are automatically notified, and a stay of proceedings comes into effect, preventing creditors from taking further legal action against you (BIA, s. 69). The LIT will then conduct a meeting with your creditors to discuss the bankruptcy, which must be attended (BIA, s. 102).

You are required to complete a number of duties, which include providing financial information, attending credit counselling sessions, and making payments to the LIT if your income exceeds a certain threshold (BIA, s. 68). The bankruptcy lasts for a period of nine months for a first bankruptcy, provided you meet all requirements, though it can extend to 21 months if debts exceed a certain limit (BIA, s. 91).

After fulfilling your obligations, you will receive a discharge from bankruptcy, releasing you from the majority of your debts (BIA, s. 178). Note that certain debts, such as student loans or alimony, may not be discharged.

Throughout the process, you should remain aware of the impact on your credit report and other financial implications, as bankruptcy will be recorded for a period of six to seven years, depending on your situation (C.R.C., c. 368, s. 4).

From: OSB Helper

Related Questions to Licensed Insolvency Trustee

Here are the top 5 most frequently asked questions related to how bankruptcies work in Ontario, along with brief answers:

1. What assets can I keep if I file for bankruptcy in Ontario?

You can keep personal clothing, most household furnishings, a vehicle below a certain dollar value, tools of the trade, and your home if the equity is less than $10,000. You also retain RRSP, RRIF, and DPSP savings except for contributions made in the 12 months before bankruptcy[1][4].

2. How long does the bankruptcy process take in Ontario?

For a first-time bankrupt, the process typically takes nine months if no surplus income payments are required, and 21 months if such payments are necessary. For a second-time bankrupt, it takes 24 months without surplus income obligations and 36 months with these obligations[4].

3. What is the process for filing bankruptcy in Ontario?

The process involves setting up a confidential appointment with a Licensed Insolvency Trustee, completing necessary forms and documentation, and filing these documents with the Office of the Superintendent of Bankruptcy. Your trustee will then notify your creditors and manage the distribution of your non-exempt assets[2][5].

4. Are tax debts included in a bankruptcy in Ontario?

Yes, personal income tax debts, HST, and other tax debts can be included in a bankruptcy and can be discharged. However, you must keep all tax filings and installment payments current, and advise your trustee of any tax debts[1].

5. What happens to my tax refund if I file for bankruptcy in Ontario?

Any income tax refunds owing to you will be sent directly to the trustee by the Canada Revenue Agency. However, you will keep your HST cheques and child tax benefits[1].

If you have a question about debt see our debt questions or ask your own debt related question.

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