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Filing for Bankruptcy in Ontario and What it Means

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    Afarber Personal Bankruptcy Filing In OntarioWhen it comes to bankruptcy, many people know the term, but they’re unfamiliar with the exact process and what it means. Filing for bankruptcy in Ontario is a legal process. It is designed to provide “honest but unfortunate debtors” with a way to eliminate their debts. An individual can choose to file for bankruptcy or he or she can be petitioned into bankruptcy by creditors. The process of creditors petitioning a person into bankruptcy in Ontario can be costly and it is not the same as taking a person to court.

    There are a number of different factors to consider before deciding if this option is right for you. There may be other options as well. Many people are unaware of the fact that bankruptcy is not the only option available to those who are dealing with debt. However, it is one of the most commonly known options.

    In order to determine if it is the right choice for you and your situation, it’s important that you understand exactly what it means to file for bankruptcy in Ontario and that you have appropriate information on the other options that may be available.

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    Bankruptcy and Your Assets

    Many people worry about what will happen to their assets when they file for bankruptcy. This is natural. You have worked for these assets and it makes sense that you would like to keep them. The assets you won are divided into 2 groups: exempt assets and other assets. The other assets include your residence, you auto and investments such as RRSPs. The exempt assets that you are able to keep varies between different provinces and territories in Canada. Your Licensed Insolvency Trustee can help you understand which assets you will be able to keep and ensure that you retain all exempt assets.

    Under Ontario law, a person who declares bankruptcy is able to keep certain assets. These assets include:

    • Up to $11,300 in furniture
    • Up to $5,650 in personal items
    • Up to $11,300 in tools of the trade (items required to do work and make a living)
    • Up to $5,650 in one personal vehicle

    If you have any equity in your residence, this equity is available for your creditors. However you can come to an agreement with your trustee and creditors whereby you offer to pay the trustee for the value of the equity over a period of time. These payments are distributed to your creditors and when you have paid the trustee in full, ownership in your residence reverts to you. During this period you can continue to live in your home.

    Canadian law also allows you to keep funds that have been placed in locked-in pensions and life insurance as well as funds in RRSPs. You may lose RRSP contributions made in the 12 months prior to bankruptcy, however.

    Bankruptcy and your Credit Rating

    Another concern that many have is how bankruptcy will affect their credit rating, credit report and credit score. Again, this is a completely natural concern. Your credit report and credit score can affect your ability to get a loan in the future.

    When you file for bankruptcy in Ontario, a note is made on your credit report. This note remains for at least six years after you have been discharged from bankruptcy. It will remain there longer if you have declared bankruptcy in the past.

    However, it’s important to remember that, if you are struggling with large amounts of debt and are having difficulty meeting your financial commitments and making payments, your credit rating has likely already been impacted negatively.

    You will also want to remember that it is possible to rebuild and repair your credit report by following good credit practices over time. Personal bankruptcy does not have to ruin your credit rating forever.

    Alternatives to Bankruptcy in Ontario

    As mentioned, bankruptcy is not the only option available to those who are having difficulty repaying their debts. In order to learn more about the options available to you, it’s a good idea to speak with an Ontario insolvency trustee. This is a trained, registered and regulated individual who works with people who are having financial difficulties. A trustee can review your financial situation and present you with details about the options available to you.

    One alternative to bankruptcy that may be an option for you is called a consumer proposal. This is a situation where you make an offer to your unsecured creditors to pay them a portion of the overall amount owing. This amount is paid in monthly payments over a predetermined period of time. Once you have made all of the payments and fulfilled your duties, the remaining outstanding debt will be discharged. A consumer proposal is a legal process that provides many of the same legal protections as bankruptcy.

    As you can see, there are options for those who are struggling with debt. Going for a free consultation with a trustee in bankruptcy in Ontario can help you understand the options available to you and allow you to make an informed choice to eliminate your debt.


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