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Bankruptcy can be a scary word but, in many cases, it is the best option to eliminate debt and reset the odometer on your financial life.
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.
How Much Does Bankruptcy Cost In Toronto?
When exploring options for bankruptcy in Toronto, you want to know exactly how much the procedure will cost. The reality is that the cost is not a standard flat fee. Instead, it is carefully calculated based on government guidelines defined by the Bankruptcy and Insolvency Act.
The most significant factor influencing the cost of the bankruptcy process is your surplus income. The federal government sets specific monthly income limits based on the size of your family living in Ontario. If your net earnings exceed this threshold, you are required to pay a portion of that extra money into your bankruptcy estate. Because of this rule, your monthly payments depend heavily on several variables:
- Income and Family Size: A larger household increases your threshold, which in turn can lower your required surplus income payment.
- Child Support: Deductions like child support or necessary medical expenses are often factored in, providing helpful relief on your final calculation.
When you earn a robust salary, declaring bankruptcy can become quite expensive, and your required timeline could extend well beyond the standard nine months. If high earnings make personal bankruptcy too costly for your budget, you have other debt relief options. Our experienced team will evaluate your finances to find a strategic plan that gets you back on track and ultimately debt free.
Who Qualifies For Bankruptcy?
If you are struggling with debt and find it increasingly impossible to repay what you owe, you may qualify for formal debt relief. To file under the Insolvency Act in Canada, you must meet specific legal criteria designed to protect those who truly need it.
First, you must carry a minimum of $1,000 in unsecured debt. Second, you must be considered technically insolvent. This means you are currently unable to cover your overdue bills as they come due, or the total value of your assets is less than the total amount of your debt. Whether you are struggling with unmanageable credit card debt, high-interest payday loans, or burdensome balances owed to a local bank or credit union, you do not have to carry this weight alone. A licensed insolvency trustee at our Toronto office can confidently assess your financial situation and confirm your eligibility.
Is Filing For Bankruptcy The Right Choice For You?
Filing bankruptcy is a significant financial decision, but it is often the best solution for securing a fresh start. It is generally the right debt solution when you are facing overwhelming financial challenges, earn a modest income, and possess few unprotected assets. Taking this legal action provides immediate legal protection from aggressive creditors and stops stressful wage garnishments.
Before filing, it is important to consider how it will impact your life. It will result in an R9 rating on your credit report, which makes it more difficult to secure new loans or qualify for a mortgage in the near future. While it temporarily impacts your credit, addressing the root problem is the most effective way to start rebuilding.
Bankruptcy is the smarter path when there is no realistic way to clear your balances, even with a zero interest arrangement. On the other hand, it is not the ideal option if you have built up significant equity in your home, earn a higher income, or hold assets you want to retain. In these scenarios, our Toronto team will deal with the nuances of your case and help you explore better avenues. We ensure you understand all the options without ever making you feel judged.
What Are Some Alternatives to Bankruptcy
If bankruptcy does not align with your goals, there are practical alternatives to explore during your free consultation. We focus on finding the exact right strategy to match your needs.
- Consumer Proposal: Filing a consumer proposal is a strong choice for individuals who want to protect their assets and freeze accumulating interest. Unlike bankruptcy, a proposal is a legally binding agreement structured by your bankruptcy trustee to repay a negotiated portion of what you owe. It halts creditor communication while offering a manageable, fixed payment schedule tailored to the Toronto Ontario cost of living.
- Credit Counselling: Working alongside skilled debt counsellors can help you develop a realistic budget to manage smaller financial hurdles. While credit counselling does not offer the same legal stay as a proposal, it provides essential tools and education to safeguard your financial future.
- Debt Management: Frequently facilitated by a specialized agency or credit union, a debt management program combines your unsecured obligations into one single monthly payment to simplify your recovery.
There are proven debt solutions designed to resolve complex debt problems and restore your peace of mind. Reach out to Remolino & Associates today to take the next step toward a stable financial foundation.
Will I Lose Everything Once I File For Bankruptcy?
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.
Can I Keep My Home If I File 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.
Will My Credit Rating Be Affected If I File For Bankruptcy In Ontario?
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.
Bankruptcy Ontario FAQs
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.
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.
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.