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In Canada, the bankruptcy process is safe and fully-regulated making it a solid alternative for those who cannot repay their debt.
A Licensed Insolvency Trustee at Remolino & Associates will advise you on the risks and requirements of declaring bankruptcy. Look to us to patiently explain it all in the clearest terms and help you make an informed choice.
What is Bankruptcy?
Bankruptcy is a process for eliminating debt, including CRA debt, popular with over-extended individuals and business owners. Governed by the Canadian Bankruptcy and Insolvency Act, it involves a legal declaration of your inability to pay your debts to your creditors, due to insufficient income or assets to meet your obligations.
Most of your personal belongings are exempt from seizure as legislated by the Ontario Execution Act. It’s even possible to keep your car and house when filing for bankruptcy.
What are the benefits and cost?
The main benefit of filing bankruptcy is that all creditor actions stop immediately upon filing. Imagine, an end to the harassing calls, garnishments — and constant fear of legal action.
As a solution to deep financial difficulties, Bankruptcy brings you these advantages:
- Elimination of your debt
- Protection from creditors, harassing calls and aggressive debt collection tactics
- Protection from the threat of all legal action
- Immediate halt on any wage garnishments
- Release of your frozen bank accounts
- Protection for some (or most) of your assets, depending on exemption laws
- Credit counselling to help you return to financial health
Most importantly, filing for bankruptcy through Remolino & Associates can bring you peace of mind and a positive way forward, through:
- Legal protection while you regain financial stability
- The opportunity to eliminate unsecured debt and start fresh, and
- Some private debt and credit counselling to guide you and empower your financial future.
What is the Bankruptcy Process?
By declaring bankruptcy, you can be legally discharged from most of your debts. Once filed, your non-exempt property is given to a Licensed Insolvency Trustee who then sells it and distributes the money among the debtor’s creditors in settlement of the debt.
Below is a summarized process for How To File For Bankruptcy in Ontario. A detailed, step-by-step explanation of the process for filing bankruptcy is also available.
Step 1 : Set up a confidential appointment with a Licensed Insolvency Trustee
Your LIT will file the proposal with the Office of the Superintendent of Bankruptcy (OSB), at which time you stop making payments to your creditors. If any creditors are collecting garnishments or have legal proceedings underway, collections or legal actions will stop at this point.
Step 2 : Complete Bankruptcy Forms and Documentation
Work with your trustee to fill out and sign all the necessary paperwork and complete the required government forms. These documents include:
- A Statement of Affairs (Form 79) which lists all of your assets, debts, income and expenses, along with personal information including your address, marital status, household size and disposition of assets.
- An Assignment of Assets (Form 21): a document that assigns all of your eligible assets to the benefit of your creditors.
Tip: Be sure to be fully honest and accurate in filling out these forms or it could affect the legality of your filing.
Step 3: Your Documents Are Filed and Your Creditors Notified
Your trustee will electronically file your completed and signed documents with the federal government Once these forms are filed with the Official receiver, you will be considered bankrupt. Your trustee will immediately receive a notification and you will be assigned a file number.
Next, your trustee will notify your creditors, electronically by mail or fax. The process of creditor notification is generally quite fast and collection calls and other actions should stop within a very short time frame. If they do not, speak to your trustee right away about how to proceed.
If your wages are being garnished (or a garnishment order has been issued) your trustee will also immediately notify your employer and the garnishment should also stop as soon as possible.
Step 4: Complete your Bankruptcy Duties
Once you are bankrupt, the process is fairly simple. To obtain your discharge you must complete certain duties including:
- Surrender credit cards and certain assets and your credit cards
- Attend two credit counselling sessions
- Provide proof of income and expenses
- Make payments including (if required) surplus income payments
- Provide information needed to file necessary tax returns
Step 5: Obtain Discharge from Bankruptcy
Most personal bankruptcies in Canada end in an automatic discharge. It can take as little as nine months for a first time bankrupt, with no supplementary income. Your discharge is the most important step, as your bankruptcy discharge is what eliminates your unsecured debts.
Bankruptcy Ontario FAQs
No, you won’t lose everything. In Ontario, provincial exemptions are generous enough that most people who file for bankruptcy won’t lose anything unless they own high-value assets.
Ontario seizure exemptions include:
- All your personal clothing.
- Most of your household furnishings (up to a maximum value).
- A personal vehicle (if the vehicle’s value is below a certain threshold).
- The tools of your trade – whatever you use to earn a living or run a business.
- Your home, if the equity is less than $10,000.
- All RRSP, RRIF and DPSP savings, except for the contributions you made in the last 12 months before filing for bankruptcy.
You may get to keep your home, depending on how much equity is in it and whether you can afford to keep up with your mortgage payments. If your equity is less than $10,000, you’ll keep your home even after filing for bankruptcy.
Filing for bankruptcy automatically eliminates all your student loan debt if you have not attended school in the last seven years. You may still be able to eliminate your student loan debt even if you attended school in the past seven years, depending on your individual situation.
A LIT can explain your options for dealing with student loan debt.
Yes, you will still have to pay alimony and child support, even if you file for bankruptcy.
Filing for bankruptcy will not affect your spouse’s credit report. However, if you have co-signed a loan agreement with your spouse, they will assume the full responsibility of repaying the debt after you file for bankruptcy.
If you and your spouse co-signed on a loan, it would be better for both of you to consult with a LIT before filing for bankruptcy.
It’s important to note that your credit rating will already be affected if you used up all of your available credit, if you’ve been missing bill payments, and if your debt has become unmanageable.
That being said, filing for bankruptcy will also affect your credit score. Your listed accounts will get an R9 rating, which will be attached to your file for about seven years.
However, bankruptcy can offer you a fresh financial start, which could help you rebuild your credit score faster than other debt relief solutions.
Most personal bankruptcies are not advertised in the media. So unless you’re a celebrity, most people won’t find out that you filed for bankruptcy.
Even though bankruptcies are in the public record, you would have to pay to learn more about the financial situation of someone else, and that doesn’t happen very often.
In most cases, your friends and relatives won’t find out about your debt or that you filed for bankruptcy unless you tell them.
The Licensed Insolvency Trustee works for you and your creditors. The trustee is an officer of the court, and their role is to make sure that the entire bankruptcy process respects all the rules and procedures and is fair for all the parties involved.
You must hand over all your credit cards to your trustee when you file for bankruptcy. Your LIT will go over credit rebuilding strategies and programs with you.
You will be allowed to apply for a credit card after you’re discharged from bankruptcy, and you will likely have to start with a secured credit card.