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What Declaring Bankruptcy in Ontario Means

Declaring Personal BankruptcyMany people have heard of the term “bankruptcy” or “declaring bankruptcy,” but they may not know exactly what these terms mean. Bankruptcy in Ontario and across Canada is a legal process that is governed by the federal Bankruptcy and Insolvency Act.

Bankruptcy is a process that provides an “honest but unfortunate debtor” who is unable to meet his or her financial commitments as they become due with a way to eliminate these debts and start fresh. The goal of the process is not to punish those who file for bankruptcy, but to allow them an opportunity to start anew and ensure that the creditors get properly dealt with, with respect to the assets available.

What Happens to your Assets when you File Bankruptcy in Ontario?

Many people believe that they will immediately lose all of their assets when they file for bankruptcy. This is not true. As mentioned, the goal of the bankruptcy process is not to punish those who file. Therefore, you are able to keep certain assets that are deemed as needed to live a basic lifestyle. These assets are called “exempt assets.” These exempt assets and the value of assets that can be considered exempt vary by province. In Ontario, you are able to keep:

  • Personal Effects and Household Goods up to $5,650
  • Home Furnishings up to $11,300
  • Tools of the Trade up to $11,300
  • A Personal Automobile (one only) up to $5,650

 

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Canadian law also allows you to keep RRSP contributions made more than 12 months before the date of insolvency as well as “locked in” retirement plans and life insurance policies that have a preferred beneficiary. This is federal law that applies across the country, whether you file for bankruptcy in Ontario or any other province or territory.

Your Duties in Bankruptcy

When you file for bankruptcy in Ontario, there are various duties that you must perform under the terms of the bankruptcy process. These duties are described under section 158 of the Bankruptcy and Insolvency Act of Canada.

  • One duty is in regard to your assets. You must disclose all of your assets to your trustee. As mentioned above, many assets are considered exempt. Those that are not considered exempt must be surrendered to your trustee. Before you file for bankruptcy, your trustee will review your assets and determine what will need to be done with them. It is also your responsibility to disclose any property or assets that you have sold or given away prior to filing.
  • You will also need to hand over all of your credit cards to the trustee who will cancel them. You must also provide the trustee with all financial documents requested by the trustee, including financial records, documents, writings, papers, tax returns, etc. You will also need to provide all information necessary to file the required tax returns.
  • You will need to complete all required paperwork related to filing for bankruptcy. Your trustee will assist you in completing and filing this paperwork.
  • During bankruptcy, you will need to provide your trustee with a monthly report on your household income and expenses as well as proof of income and receipts for certain expenses.
  • If a meeting of creditors is called, you will need to attend this meeting.
  • If your trustee determines that your income requires you to make surplus income payments, it is your duty to make these payments as directed. In addition, while each situation is different, you will likely be required to make payments to your estate in the form of a base contribution each month. These payments cover the cost of administering your estate. Your trustee will provide you with information relating to any required payments that you will need to make.
  • You are required to take two financial counselling sessions. The first session must be completed between 10- 60 days after your bankruptcy date. The second session must be completed within 120 days. The goal of these sessions is to provide you with information on budgeting and money management. These sessions will help you avoid financial problems in the future. The sessions are also designed to help you rebuild your credit rating and your financial life once the bankruptcy period is over.

Your trustee in bankruptcy will inform you of all of the duties that you are responsible for during the bankruptcy process. You will need to cooperate with the trustee during the bankruptcy process and respect the obligations that are described to you.

The consequences for not fulfilling your duties and obligations are determined on a case-by-case basis . Failing to complete your duties could mean a court hearing and lead to refusal or suspension of your bankruptcy discharge or you being granted a conditional discharge.

As you can see, bankruptcy in Ontario is a federal process that is clearly laid out. By following the process and working with your trustee, you will be able to put yourself on the path to a brighter financial future.

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