Filing Bankruptcy In Ontario: What You Need to Know
If rising debt payments, high interest rates, and financial stress have left you feeling overwhelmed, you’re in the same boat as thousands of Ontarians. With the average non-mortgage consumer debt sitting at over $22,000, it’s easy for debt to spiral, especially if your income takes a hit. If you’ve already looked into credit counselling or debt settlement without success, bankruptcy might seem like your only way out.
Before making that decision, it’s essential to understand exactly what filing for bankruptcy in Ontario involves.
What Is Bankruptcy?
Bankruptcy is a legal process under the Bankruptcy and Insolvency Act (BIA) that helps individuals eliminate mounting consumer debt. In Ontario, filing for bankruptcy provides immediate protection from creditors, including wage garnishments, lawsuits, and collection calls.
Most unsecured debts — including credit cards and payday loans — can be discharged, giving you a chance to reset your finances without being dragged down by past debt obligations.
| Does Bankruptcy Forgive All Your Debts? No, bankruptcy does not forgive all your debts. While it eliminates most unsecured debts, some types of debt are not discharged through bankruptcy in Ontario, including the following: – Mortgages – Home equity loans & lines of credit – Secured loans – Federal student loans (less than 6-7 years) – Vehicle loans – Legal fines (tickets, lawsuits, etc.) |
Learn more: Bankruptcy
Can Anyone File For Bankruptcy?
Not everyone can file for bankruptcy in Ontario. To be eligible, you must meet the following criteria:
- You must live in Canada
- You must owe $1,000+ in unsecured debt
- Your debts must be higher than the value of your assets
- You must be incapable of paying your debts by their due dates
How Does Bankruptcy Work?
Here’s what you can expect when you file for bankruptcy in Ontario:
1. Find A Licensed Insolvency Trustee (LIT)
Bankruptcy is filed with a Licensed Insolvency Trustee in Ontario, who will supervise the situation and ensure that the laws surrounding the bankruptcy process treat both the consumer and creditors fairly and ethically.
2. Financial Evaluation
Before filing, your LIT will evaluate your financial situation to ensure bankruptcy is the best solution for you. Your LIT will need to determine if you’re insolvent, which essentially means you’re unable to pay your debts and your liabilities outweigh your assets, if any.
3. File For Bankruptcy
If bankruptcy is the right fit, the trustee will begin preparing your legal documents. You’ll need to provide personal and financial information to complete and sign your:
- Assignment of Assets – This is a legal document that allows your trustee to sell your assets to help repay your creditors.
- Statement of Affairs – This is a document that discloses your full financial details.
Your trustee will then register your bankruptcy with the Office of the Superintendent of Bankruptcy (OSB).
Creditors are notified, and you officially enter bankruptcy protection.
4. Stay Of Proceedings
Filing triggers a Stay of Proceedings, which stops creditors from taking any further action against you. This includes phone calls, legal action, and wage garnishment. Your LIT will deal with your creditors for you.
5. Fulfill Your Bankruptcy Obligations
To be discharged from bankruptcy, you’ll need to meet your bankruptcy obligations:
- Surrender Non-Exempt Assets – You will need to surrender valuable assets to liquidate and repay creditors.
- Attend Credit Counselling – You will participate in 2 credit counselling sessions that will teach you how to manage your finances and budget appropriately in order to rebuild your credit and avoid being put in a position to have to declare bankruptcy again.
- Income And Expense Reports – You’ll also need to provide monthly income and expense statements.
- Make Monthly Payments – You’ll make 9 monthly payments of $250 to cover the cost of bankruptcy. If your income exceeds a certain amount, you may need to make surplus income payments.
5. Discharge From Bankruptcy
After 9 months (as long as you adhere to your obligations and this is your first bankruptcy), you may be discharged from your bankruptcy. However, if surplus income applies, you may need to wait 21 months.
After discharge, your unsecured debts are eliminated, and you can start rebuilding your credit again.
Bankruptcy Application In Ontario
In Ontario, bankruptcy is a legal process that is filed with a Licensed Insolvency Trustee. Here are a few locations where you can visit a LIT in Toronto:
| BDO First Call | – 20 Wellington Street East, Suite 500, Toronto, Ontario, M5E 1C5 – 222 Bay St., Suite 2200, Toronto, Ontario, M5K 1H6 | Learn More |
| Remolino Associates | – 1180 Danforth Avenue, Toronto, Ontario M4J 1M3 – 4711 Yonge St. 10th Floor, North York, Ontario M2N 6K8 | Learn More |
| Hoyes Michalos | – 8 King Street E, Suite 800, Toronto, Ontario – 2 Bloor St E, Suite 3500, Toronto, Ontario |
Can You File For Bankruptcy Online In Ontario?
No, you cannot file for bankruptcy online; however, you can submit most bankruptcy-related documents through the Bankruptcy Submissions Online portal. To start the online process, you’ll need the following:
- A My Ontario account
- Your completed court documents
- A valid credit or debit card
- Your court file number if you’re submitting documents for a current case
If filing fees apply, you can pay them online or at the court counter.
Note: Once you upload your documents, you’ll get a confirmation, which means your documents have been received but have not yet been accepted or filed. Be sure to keep a record of this confirmation. Within 3 business days, court staff will look everything over.
| Pro Tip: Work With A Professional Bankruptcy filings can be complex. As such, it’s strongly recommended that you work with a lawyer or LIT to help you through the process. They can explain your legal options, help prepare appropriate evidence for court, and make sure you meet all requirements. If you can’t afford a lawyer, consider working with Pro Bono Ontario, a non-profit organization made up of legal experts who provide legal help to those who don’t have the financial resources to cover lawyer fees. |
Cost Of Filing
The true cost of filing for bankruptcy in Ontario varies depending on factors such as your income, assets, and personal financial situation. To get an exact estimate, it’s important to speak with a Licensed Insolvency Trustee. Rule 128 of the Bankruptcy and Insolvency Act determines how the cost of bankruptcy is calculated.
Bankruptcy costs cover the following:
- Your LIT’s time
- Administrative services
- Court filing fees
Trustee charges are regulated by the Office of the Superintendent of Bankruptcy (OSB) to ensure fairness and transparency.
How Does Surplus Income Affect Bankruptcy Cost?
Surplus income plays a key role in how much you’ll pay during bankruptcy. If your monthly income exceeds a certain level, you’re required to make additional payments called ‘surplus income’ payments. The more you earn above that threshold, the more you have to pay, which can increase the cost of your bankruptcy.
Learn more: How Much Does It Cost To File For Bankruptcy?
Ontario Bankruptcy Laws
Bankruptcy in Ontario is subject to the following provincial laws:
- Ontario Execution Act: This Act outlines asset exemptions beyond those specified in the Bankruptcy and Insolvency Act.
- Ontario Limitations Act: This Act sets the statute of limitations in terms of how long a collection agency can legally pursue repayment, which is typically two years. If this time has passed, you may be protected from legal action.
- Personal Property Security Act (PPSA): This Act ensures that creditors register any interest they have in assets used as collateral. Before selling these assets, your trustee will search the PPSA registry to verify there are no outstanding claims from creditors.
Will You Lose Your Home? Asset Exemptions In Ontario
When you think of bankruptcy, you likely think of losing all your valuables, including your home and car. But while bankruptcy does involve the surrender of assets, there are exemptions.
In Ontario, the following assets may be exempt from seizure through bankruptcy:
| Home | Your primary residence, with equity less than $10,783 |
| Vehicle | One personal vehicle, valued under $7,117 |
| Furniture & Appliances | Household furnishings and appliances, up to $14,180 in value |
| Work Tools | Tools used for work, up to $14,405 in value |
| Clothing | Essential clothing for you and your dependents |
| Medical | Required medical devices for you and your dependents |
| Insurance | Certain forms of life insurance policies |
| Savings | Savings held in RRSPs, RRIFs, and SPSP funds, except contributions made within the 12 months prior to filing. |
Learn more: Will I Lose My House If I File For Bankruptcy In Canada?
Does Bankruptcy Affect My Credit?
Your credit score will be affected when you file for bankruptcy in Ontario. Once you file for bankruptcy, the credit bureaus will be notified and your credit report will be updated accordingly. This note on your credit report will remain there for 6-7 years after discharge for a first bankruptcy filing, and 14 years after a second filing.
Since your credit will be affected, so will your ability to take out any other loans until your credit report is given a clean slate. You likely will not be able to take out a mortgage, auto loan, or anything else on credit. If you happen to find a lender who is willing to extend credit to you, they will probably charge you a much higher interest rate.
Final Thoughts
Bankruptcy is obviously not a decision to make lightly. Your best bet is to discuss your situation with a bankruptcy trustee or credit counsellor in Ontario to go over all of your options. If bankruptcy seems like the right fit for you, we can help you on your journey to a debt-free life.
