Filing for Personal Bankruptcy in Ontario
Ontario personal bankruptcy laws were created in order to allow people who have high levels of debt that they cannot pay back with an opportunity for a “fresh start” by eliminating these debts. The goal of bankruptcy is not to punish someone for not being able to pay back debt. Instead, it is a process that lets you eventually end up in a position where you can rebuild your financial life.
Bankruptcy is a legal process and thus Canadian and Ontario bankruptcy laws outline the process completely. In Canada, the bankruptcy process is regulated by the Office of the Superintendent of Bankruptcy and governed by the Bankruptcy and Insolvency Act of Canada.
The Office of the Superintendent of Bankruptcy licenses trustees in bankruptcy. A Licensed Insolvency Trustee is a person who is registered and licensed to administer consumer proposals and the bankruptcy processes. Filing for personal bankruptcy must be done with a trustee. Most trustees offer free consultations. During the consultation, the trustee will review your particular financial situation and provide you with information on the options available to you that could help alleviate your debt issues. If personal bankruptcy is an option, and you choose to proceed with this option, your trustee will work with you to ensure that all forms are completed and filed correctly. The trustee will then administer the bankruptcy process.
Ontario Personal Bankruptcy Laws & The Bankruptcy Process
Filing for personal bankruptcy in Ontario can eliminate most (if not all) debts. Only unsecured debts can be included in a bankruptcy. This includes debts such as credit cards, personal loans, unsecured lines of credit, department store cards, tax debt and other such debt. Student loans can be included in a bankruptcy under certain conditions. You need to have been out of school for at least seven years in order to include student loan debt in a personal bankruptcy in Ontario.
The bankruptcy process also protects you from legal action and wage garnishment by your unsecured creditors. Under Canadian and Ontario personal bankruptcy laws, once you file for bankruptcy, your creditors cannot contact you directly. All contact must be done through your trustee in bankruptcy. This means that creditors and collection agencies can no longer call you to collect on their debts.
Before you file for bankruptcy, your trustee will let you know the cost of your bankruptcy. This is different for each person. There is usually a fixed basic charge, used by all Trustees, to administer the bankruptcy process. If you have Surplus Income, you may in some circumstances have to contribute some of that to your creditors. However the amount of this contribution is largely determined by your family size, your income and several other factors. These factors are determined by the government. Your trustee will inform you if this is required after reviewing your monthly income statements and expenses.
As a part of the bankruptcy process, you are required to provide your trustee with monthly income and expense statements. This is one of the duties required of those who file for bankruptcy. Other duties include providing your trustee with accurate contact information and updating your trustee with any changes as well as attending two financial counselling sessions.
Myths About Ontario Personal Bankruptcy Laws
Unfortunately, a lot of myths exist regarding bankruptcy. One common myth is that you lose everything you own when you file for bankruptcy. This is not true. If you have a lot of assets with value, such as a house with equity in it, you can make an arrangement with the Trustee to keep the house, as long as you compensate the creditors for this. In addition, you are allowed to keep certain assets that are deemed necessary to live a basic lifestyle. These vary by province. Ontario personal bankruptcy laws allow you to keep:
- Personal Effects (personal items such as household goods, etc.) up to a value of $5,650
- Household Furnishings up to a value of $11,300
- Tools of the Trade (equipment and items that are required to do your job) up to a value of $11,300
- One Personal Automobile up to a value of $5,650
In addition, Canadian law allows you to keep most RRSP contributions (except those made in the last 12 months). You will also likely be able to keep money in company pension plans that are locked in until retirement and life insurance policies that have a preferred beneficiary. For specific information on what will happen to your assets if you choose to file for bankruptcy, you should speak to your trustee directly.
A Licensed Insolvency Trustee can help you understand national and Ontario personal bankruptcy laws and how they apply to your particular case. As mentioned, most trustees offer a free consultation which allows you to meet with a trustee and discuss your situation without paying an upfront fee.