Filing for Bankruptcy in Ontario: A Comprehensive Guide to Financial Relief 

^{By Andrew Bazelevsky at Bromwich+Smith | 1270 words | Reading Time: 5 minutes and 52 seconds| Date: 2023/06/20}

Financial difficulties can arise unexpectedly, leaving individuals overwhelmed with debt and struggling to remain in control of their finances. In Canada filing for bankruptcy is a legal process that provides financial and emotional relief to those burdened by unmanageable debt. If you find yourself in a dire financial situation, read on to understand the process and make an informed decision to learn if filing Bankruptcy is the right option for you.  

Understanding What Is Bankruptcy 

Bankruptcy is a legal procedure designed to help individuals or businesses in financial distress by providing a fresh start. In Canada, the Bankruptcy and Insolvency Act is a federal legislation which governs bankruptcy proceedings, outlining the rights and obligations of both the individual filing for bankruptcy and their creditors. It is crucial to understand the basics of bankruptcy to recognize if this is the right debt relief option for you.  

Benefits of Bankruptcy 

• Immediate Debt Relief: Filing for bankruptcy provides a means to eliminate most unsecured debts and break agreements with secured creditors at the choice of the bankrupt. It offers relief from overwhelming financial burdens and puts an end to collection efforts by creditors. This means you will no longer receive harassing phone calls, letters or be threatened wage garnishments. All contact from your creditors will stop. Not all debt is able to be included in your Bankruptcy filing, specifically:  
   

fines, penalties and restitution orders imposed by Court;  

Court awarded damages for intentionally inflicted bodily harm, sexual assault or wrongful death;  

debts arising out of fraud, embezzlement, misappropriation, defalcation or resulting from obtaining property or services by false pretences or fraudulent misrepresentation.  This includes most EI overpayments; 

debts or liabilities for alimony, maintenance, spousal support or child support; and 

student loans where I have been a full or part-time student at any time in the 7 years prior to filing. 

• Legal Protection: Bankruptcy provides an automatic stay of proceedings, preventing most creditors from taking legal action or initiating collection efforts against you. This includes wage garnishment.  
   

• Professional Support: Working with a licensed insolvency trustee (LIT) during the bankruptcy process ensures you receive expert guidance, enabling you to navigate the bankruptcy process and make informed decisions. In Canada, only a licensed insolvency trustee can file your bankruptcy, so it is important to start the process with a trustee firm from the beginning. Many debt relief organizations will need to contract a trustee, which will cost you more in fees.  

Bankruptcy Process in Canada  

1. Review your Financial Situation: The process will start with an evaluation of your finances and determining whether bankruptcy is the best solution. A debt relief specialist will be able to help you consider alternative options including consumer proposals or other non-statutory options. If bankruptcy remains the most viable choice, they will be able to help set up a meeting with a LIT. 

2. Meeting with a LIT: An LIT is a professional who is licensed to administer bankruptcy proceedings. Schedule a meeting to discuss your financial situation, understand the implications of bankruptcy, and explore available alternatives. Your LIT will ensure that you understand all options available to you, and the full scope of filing a bankruptcy. How it will affect your credit, how much you will need to pay, which debts are included and any obligations you will need to adhere to.  

3. Filing for Bankruptcy: If bankruptcy is decided upon, your LIT will help you prepare the necessary documentation, including a Statement of Affairs, which outlines your assets, liabilities, income, and expenses. The LIT will file this documentation with the Office of the Superintendent of Bankruptcy (OSB) and notify your creditors of the bankruptcy to get you much needed relief. 

4. Debt Discharge: During the bankruptcy period, which typically lasts nine months or, in some cases twenty-one months, for first-time bankruptcies in Canada Ontario, you will make monthly payments. The payments and duration of your bankruptcy are based on your income and any non-exempt assets you own. At the end of the bankruptcy period, assuming you have fulfilled all of your obligations, including two credit counselling sessions, in most cases, you will receive a discharge, releasing you from the debts that were included in the bankruptcy filing.  

5. Rebuilding Your Finances: After bankruptcy, it is crucial to focus on rebuilding your financial portfolio. Take the tools you have accumulated during your credit counselling and develop a budget, and rebuild your credit slowly. This can be done (this doesn’t rebuild credit) by having small limit, guaranteed credit cards.  

When considering filing for Bankruptcy, we recommend that you explore all options available, and ensure that you ask as many questions as you need to in order to feel comfortable with your decision. A bankruptcy is a strong tool, and while it is the best option for some, others will feel more comfortable with a Consumer Proposal or other non-statutory options.  

Remember, we’re here to help you find the solution that best fits your needs. At Bromwich+Smith, we do this by offering an initial free, no obligation, confidential consultation by phone 1.855.884.9243 or video. You can also request a call back at our contact us page. We’re working with you to rebuild your worth. 

FAQ to Filing for Bankruptcy in Ontario

1: What is bankruptcy? 
 
Bankruptcy is a legal procedure designed to provide a fresh start to individuals or businesses experiencing financial distress. It helps eliminate or reduce debt and offers relief from collection efforts by creditors. 
 
2: What are the benefits of filing for bankruptcy? 
 
Filing for bankruptcy in Ontario offers several benefits, including debt relief by eliminating or reducing your debt. It provides legal protection through an automatic stay of proceedings, preventing creditors from taking legal action. Additionally, it offers professional support from licensed insolvency trustees who guide you through the process and help you make informed decisions. 
 
3: What is the bankruptcy process in Ontario? 
 
The bankruptcy process in Ontario involves a few key steps. First, you need to review your financial situation with a debt relief specialist to determine if bankruptcy is the best solution. If it is, you'll meet with a licensed insolvency trustee (LIT) to discuss your financial situation, explore alternatives, and understand the implications of bankruptcy. If you decide to proceed with bankruptcy, your LIT will help you prepare the necessary documentation, file it with the Office of the Superintendent of Bankruptcy (OSB), and notify your creditors. During the bankruptcy period, you'll make monthly payments based on your income and assets. Once you fulfill all obligations, including credit counseling sessions, you'll receive a discharge, releasing you from the included debts. 
 
4: How long does the bankruptcy period typically last in Ontario? 
 
The bankruptcy period in Ontario usually lasts for nine months for first-time bankruptcies. However, the exact duration may vary depending on individual circumstances. It is advisable to consult with a licensed insolvency trustee for precise information based on your specific case. 
 
5: What should I do after bankruptcy to rebuild my finances? 
 
After bankruptcy, it is essential to focus on rebuilding your financial situation. Start by utilizing the tools and knowledge gained during credit counseling to create a budget. Make timely payments for bills and consider obtaining small limit, guaranteed credit cards to gradually rebuild your credit. Taking these steps will help you work towards financial stability and improve your creditworthiness over time. 

By Andrew Bazelevsky, CPA, CGA, Licensed Insolvency Trustee at Bromwich+Smith

Andrew was born in Ukraine and came to Canada in 1998 on his own at the age of 18, as a student. Andrew graduated from Grant MacEwan Community College in Edmonton, Alberta with the applied bachelor’s degree in accounting. Andrew earned his professional accounting designation in 2011 and obtained his Insolvency Trustee license in 2013.