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Frequently Asked Questions about Personal Bankruptcy in Ontario

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    Personal Bankruptcy Canada FAQPersonal bankruptcy is a legal process that involves many aspects and details. Therefore, it is only natural that many people have a number of questions about this process. Here are some common questions relating to personal bankruptcy in Ontario and answers to these questions. If you have any specific questions that you don’t see answered here, please feel free to contact us.

    What is Personal Bankruptcy?

    Personal bankruptcy is a legal process where a person who is unable to meet his or her financial commitments is able to eliminate most (if not all) of his or her debts.

    Who can File for Bankruptcy?

    In Ontario, personal bankruptcy can be filed by a person who has become insolvent and cannot meet his or her financial obligations. A person becomes insolvent when he or she has liabilities that are greater than his or her assets and are unable to pay bills as they become due.

    What Legal Protection do you Receive when you File for Personal Bankruptcy in Ontario?

    When you file for personal bankruptcy in Ontario, you receive legal protection from your creditors. They are not able to call or have collection agencies contact you to collect their debts. All communication with your creditors will be done through your trustee in bankruptcy. In addition, any legal action – question for Diane- that has started against you as well as any wage garnishment will stop as a result of the bankruptcy.  

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    What Happens to my Assets when I file for Bankruptcy?

    When you file for personal bankruptcy in Ontario, you do not lose all of your assets. Your Licensed Insolvency Trustee will review your financial situation and determine which of your assets are exempt. Assets that are not exempt or secured will be taken and sold by the trustee and the proceeds will be used to compensate your creditors. You may be able to keep additional assets if you compensate your trustee for their value.

    What Assets are Exempt in a Personal Bankruptcy in Ontario?

    Ontario allows a person who has filed for personal bankruptcy to keep many assets related to day-to-day life and earning a living. When you file for personal bankruptcy in Ontario, you are able to keep: Up to $5,650 in personal items, up to $11,300 in household furnishings, up to $11,300 in tools of the trade and up to $5,650 in a personal vehicle. You may also be able to keep your home, though you may lose the equity you have in your home. You will need to confirm these specific details with your Licensed Insolvency Trustee. You are also able to keep your RRSP contributions (except those made in the last 12 months) as well as most pensions and life insurance plans. Speak to your trustee for details.

    What is Surplus Income?

    The Canadian government sets income thresholds for individuals and families in Canada. When you file for bankruptcy, you are required to provide proof of your income to your trustee each month. If your income is greater than the thresholds set by the government for your particular situation and family size, you may need to make surplus income payments to your trustee who will then distribute these payments to your creditors.

    How Long Does Bankruptcy Last?

    If it is your first time filing for bankruptcy, you will be automatically discharged from bankruptcy in nine months, in most cases. However, you will need to ensure that you complete your duties during the process in order to ensure discharge. Your duties include monthly income reporting, making payments if required, attending two financial counselling sessions and keeping your trustee informed of your current contact information.

    How Does Personal Bankruptcy Affect my Credit Rating?

    If it is your first time filing for bankruptcy, a note will be placed on your credit report. This note will remain for six years after you have been discharged.

    What is a Licensed Insolvency Trustee?

    A Licensed Insolvency Trustee is an individual who has been trained, licensed and regulated by the federal government to administer bankruptcy and proposal estates.

    How can I Rebuild my Financial Life after Personal Bankruptcy?

    After you have been discharged from bankruptcy, you will need to take steps if you wish to rebuild your financial life and improve your credit rating. This is a process that takes time and it cannot be done overnight. In order to rebuild your credit, you will need to show that you can borrow reasonable amounts of money and pay it back on time. One way to do this is by getting a secured credit card and using this card for some purchases. It is then important to make sure that you make all of your payments on time.