Effects of Claiming Bankruptcy in Ontario

claiming bankruptcy

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Bankruptcy is a legal proceeding that eliminates accumulated debt. With bankruptcy, individuals or business owners issue a legal declaration of their inability to pay their debts due to insufficient income. 

This process efficiently operates thanks to the Canadian Bankruptcy and Insolvency Act (BIA), which provides tailored guidelines for debtors, creditors and Licensed Insolvency Trustees (LIT) during a bankruptcy process. The BIA protects the rights of Canadian debtors and offers them the option to submit a financial proposal or to file for bankruptcy. 

This article aims to guide you through the effects of declaring bankruptcy in Ontario and explains how the process works.

The Effects of Declaring Bankruptcy

By declaring bankruptcy in Ontario, you are giving yourself a chance to get a fresh start regarding your financial matters. It is essential to be aware that bankruptcy brings both positive and negative effects on debtors.

The Positive Effects of Declaring Bankruptcy

One of the benefits of declaring bankruptcy is that all creditor harassment or actions against debtors cease, as well as any wage garnishments from employers. Bankruptcy eliminates unsecured debts, releases the debtor’s frozen bank accounts, protects some of their assets, and allows them to attend private credit counselling sessions.

Once you declare bankruptcy in Ontario, you are able to keep several of your assets, such as the following:

  • Most of your pension plans
  • Any essential belongings
  • One vehicle worth up to $7,117
  • Home (as long as there is no equity exceeding $10,783)

The Negative Effects of Declaring Bankruptcy

If you wish to declare bankruptcy, you must understand the negative effects of this process. For instance:

  • Your credit score is affected for six years after the discharge date, for the first time bankrupt; 14 years for the second time bankrupt, etc.
  • You may not be able to eliminate all of your debt, for example traffic tickets and student loans less than seven years old;  
  • There is a possibility that you may lose some of your assets.

The negative effects of declaring bankruptcy will depend on your assets, the amount of debt you have collected over time, and your overall financial situation. Once you have decided to move forward with your decision to declare bankruptcy, talk to an experienced Licensed Insolvency Trustee and ensure you know which assets you will lose (if any) and what debt payments you will still have to manage. 

An experienced Licensed Insolvency Trustee can effectively answer your questions and guide you through the bankruptcy process.

The Bankruptcy Process

In Ontario, anyone declaring bankruptcy discharges most of their debts. A Licensed Insolvency Trustee will sell all non-exempted assets and distribute the money among creditors. 

Overall, the step-by-step process of filing for bankruptcy in Ontario is very straightforward. If you wish to go ahead with your bankruptcy, these are the steps you must follow:

Step 1: Contact a Remolino & Associates’ Licensed Insolvency Trustee

Remolino & Associates offers a free consultation and a financial assessment of the situation in order to recommend the best debt solution.

Step 2: Complete All Bankruptcy Forms and Documentation

Your LIT will prepare all the necessary paperwork and government forms you must sign. 

Some of the bankruptcy forms include: 

  • Form 21 (Assignment of Assets): assigns all of your eligible assets to creditors
  • Form 79 (Statement of Affairs): an inventory of all your assets and liabilities
  • Form 65 (Statement of Income and Expenses): lists your income, fixed expenses, living expenses and personal information

Step 3: The Official Receiver Files Documents

Once you sign your bankruptcy documents, your Trustee and the Official Receiver from the Office of the Superintendent of Bankruptcy file your bankruptcy documents. After the submission you are officially considered bankrupt and cannot reverse the process without a court order.

Your Licensed Insolvency Trustee handles your bankruptcy documents to creditors and employers.

Step 4: Commit to Your Bankruptcy Duties

Upon officially declaring bankruptcy, you must complete your bankruptcy payments and duties. That includes attending counselling sessions, surrendering credit cards, making surplus income payments, if required, and providing all required information for tax purposes. You must also inform your Trustee of any significant changes in your financial situation. 

In rare cases, you may have to perform an examination at the Official Receiver’s office or attend a meeting with your creditors and the Official Receiver, in which your Licensed Insolvency Trustee will present a financial report of your income and assets.

Step 5: Receive Your Discharge Certification

The final step in the bankruptcy process involves a discharge and most debtors who declare bankruptcy for the first time often receive an automatic discharge after nine months of filing their documentation. Once you are discharged from bankruptcy, you receive a Certificate of Discharge, stating that your bankruptcy process has ended and you are, finally, debt-free.

Occasionally, a creditor or the Superintendent of Bankruptcy may oppose the automatic discharge which can result in a discharge with certain conditions.

Filing for Bankruptcy Online in Ontario

The process of filing for bankruptcy online is very similar to the traditional method. People in debt who decide to declare bankruptcy and opt to go ahead with the online process must still contact a Licensed Insolvency Trustee, sign documents and commit to their bankruptcy duties.

However, in the online process, you have the option to contact your LIT through video calls. During these calls, your Trustee will explain what debt relief options are available to you and the pros and cons of you declaring bankruptcy.

If bankruptcy is the best option, the bankruptcy forms will be signed online using the protected software for electronic signatures selected by the Tustee.

Other Alternatives for Bankruptcy

If you reach out to a Trustee with the intention of filing for bankruptcy in Ontario, they might advise you to choose another option that will be more beneficial to you – after all, a variety of debt consolidation methods are available to meet the different needs of each debtor.

Here are some alternatives for bankruptcy that you can choose from:

  • Consumer Proposals
  • Debt Consolidation
  • Informal Debt Settlements
  • Debt Management Plans
  • Debt Restructuring
  • Liquidation of Personal Assets

If bankruptcy is the best option for you, rest assured that your Licensed Insolvency Trustee will assist you at every step.

Contact Remolino & Associates for Assistance With Your Bankruptcy Process Today

If you wish to declare bankruptcy in Ontario, do not hesitate to contact the Licensed Insolvency Trustees at Remolino & Associates.

Book a virtual appointment or call us at 416-792-5599 or toll-free at 1-888-227-1058, and our friendly team will be more than happy to guide you through your debt-free journey.


You can keep your home depending on its equity (it must not exceed $10,783). In addition, You must commit to continue making your mortgage payments.

Your spouse will not have their assets and credit score impacted if you file for bankruptcy. However, if you co-signed a loan with your spouse, they will assume responsibility for repaying your debt.

Filing for bankruptcy in Ontario automatically eliminates student loans – but only if you have not attended school for the last seven years prior to going bankrupt.

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