Filing for Bankruptcy
Many Ontarians feel the stress of financial instability these days. With interest rates moving in an upward trend, insolvency rates are expected to rise over the next five years.
Declaring bankruptcy is not anyone’s first choice when trying to manage debt, but it may be the best option for regaining control of your finances. Despite the negative associations of the word, bankruptcy is not as scary as it sounds. Here’s what to expect when considering bankruptcy as an option.
Be Informed
As with any major financial decision, it’s important to educate yourself about whether filing for bankruptcy makes sense for your situation. The first step is to meet with a Licensed Insolvency Trustee, or LIT, to evaluate your financial history and determine if you qualify to file for bankruptcy. LITs are federally licensed by the Office of the Superintendent of Bankruptcy and are the only individuals who can administer insolvency proceedings such as bankruptcies.
A Licensed Insolvency Trustee will have an honest discussion with you about your current financial situation and propose different debt solutions. As part of this process, your assets and debts will be assessed to determine if your situation qualifies for bankruptcy.
Some assets like clothing, vehicles and RRSP savings may be exempt, as well as secured debts that are fully financed. For example, in Ontario, you are allowed to keep all necessary clothing and all RRSP savings except for any contributions that were made during the last 12 months before your bankruptcy. To learn more about assets that are exempt from bankruptcy, visit our resource here .
While bankruptcy can help eliminate debts such as credit cards, payday loans and bank loans, some debts cannot be discharged. If you currently make child or spousal support payments, you will still be required to make these payments despite filing for bankruptcy. You may also be responsible for your student loan payments unless you have been out of school for more than 7 years. A Licensed Insolvency Trustee will inform you of any limitations and how you will be impacted by this debt relief option.
Application Process
After exploring your debt relief options, you will be able to make a well-informed decision about how best to move forward financially. If you decide to file for bankruptcy, the next step is to complete the bankruptcy application. The LIT will inform you of your rights and responsibilities and will assist you with completing all the necessary paperwork.
When the documents are completed, the trustee will file them with the Office of Superintendent of Bankruptcy. Your trustee will now be responsible for all of the legal obligations in your bankruptcy. This means you will no longer be required to make payments to creditors. Any contact with collection agencies will stop, as will wage garnishments where money is deducted from your paycheques to pay off debt.
Bankruptcy Duties
Once you have filed for bankruptcy, you will be required to follow bankruptcy duties as outlined in the Bankruptcy and Insolvency Act .
You will be responsible for keeping your trustee informed of your financial situation. This includes reporting your income every month and making payments , as per your bankruptcy agreement. You will also need to attend two bankruptcy counselling sessions.
Certificate of Bankruptcy Discharge
If you successfully meet all your bankruptcy duties, it is your first bankruptcy and you don’t have surplus income obligations, you can be free from your debt in 9 months. A bankruptcy discharge is the legal document that officially relieves you of your unsecured debts. If you are required to make surplus income payments, this period is extended to 21 months. You will no longer be responsible for making payments to your creditors and will now be able to rebuild your credit history. If you have been bankrupt before, these timelines will change.
Many of our clients feel a great sense of relief at being able to move forward with a clean slate, and we can help you do the same. Contact us for a free consultation with our Licensed Insolvency Trustees to learn about your debt relief options.
