If you make the decision to file for bankruptcy in Ontario or anywhere else in the country, you must do so through a Licensed Insolvency Trustee. Only an insolvency trustee is able to assist you in filing for bankruptcy. This cannot be done by a credit counsellor, financial advisor or any other financial professional.
This is because bankruptcy is a legal process. It is governed by the federal Bankruptcy and Insolvency Act (BIA). The Office of the Superintendent of Bankruptcy is responsible for ensuring that bankruptcies and insolvencies in Canada are conducted fairly and in an orderly manner. An insolvency trustee is licensed by the Office of the Superintendent of Bankruptcy to administer bankruptcy and proposal estates.
Under the BIA, a person who is unable to meet his or her financial obligations is considered an “insolvent person.” An insolvent person becomes bankrupt when he or she files for bankruptcy or is petitioned into bankruptcy by a creditor.
When filing for bankruptcy, an insolvency trustee will work with you to ensure that the process is followed correctly and that the rights of the debtor and the creditors are respected and treated fairly.
Working with an Insolvency Trustee
Most insolvency trustees offer a free consultation. During this consultation, you will sit down with the trustee who will review your financial situation. He or she will then inform you of the options that are available to you. Bankruptcy may or not be one of those options. The trustee’s job is to inform you of your options and provide you with details about each of them. He or she will never pressure you into choosing a particular process or making a particular decision. The route you decide to take is up to you.
If you decide to file for bankruptcy in Ontario, the trustee will assist you in completing the required paperwork and filing it with the Office of the Superintendent of Bankruptcy. This can now be done electronically.
Once you file for bankruptcy, the trustee is responsible for all communication between you and your creditors. Under federal law, creditors are not able to contact you directly or take any legal action against you to collect on their debts once you have filed. They are not allowed to start or continue any wage garnishment and they cannot send a collection agency after you.
The Duties of an Insolvency Trustee
After you file for bankruptcy, the trustee will inform your creditors and send them documentation to let them know that you have filed for bankruptcy. This is done primarily to give the creditors an opportunity to prove the amount of their claim against your estate and also so that they will stop contacting you, stop any legal action against you and stop garnishing your wages. As mentioned, the trustee will then be responsible for any communication between you and your creditors.
Your trustee will also review your assets and ensure that you receive all possible exemptions. When you file for bankruptcy in Ontario, you do not lose all of your assets. This is a common misconception. You are able to keep certain assets that are deemed necessary to live a modest lifestyle. These assets are called “exempt assets in bankruptcy.” These exempt assets and the dollar amount that is exempt vary by province.
In Ontario, you are able to keep:
- Personal Items up to $5,650
- Home Furnishings up to $11,300
- Tools of the Trade up to $11,300
- One Personal Vehicle up to $5,650
In addition to the assets that you are able to keep when you file for bankruptcy in Ontario, federal law also allows you to keep RRSP contributions that were made more than 12 months after filing for bankruptcy. Contributions made in the last 12 months may not be exempt.
You will also likely be able to keep pensions plans that are “locked in” until retirement as well as insurance plans that have a preferred beneficiary listed. Your trustee will explain all exemptions to you and make sure that you receive all exemptions that you are entitled to.
The trustee will also ensure that you attend all required financial counselling sessions. When you file for bankruptcy, you will need to attend two of these counselling sessions. The goal of the sessions is to help you with techniques and strategies for budgeting, money management and other financial issues.
In general, the role of a bankruptcy trustee is to administer your bankruptcy. Whether you file for bankruptcy in Ontario or any other province, it’s important that you listen to your trustee and work with him or her. The trustee will be responsible for applying for your discharge from bankruptcy and signing the required discharge paperwork. He or she will only do so if you have worked with the trustee and performed your duties as required.