PERSONAL & BUSINESS BANKRUPTCY IN ONTARIO

Filing Bankruptcy in Ontario – Clear Answers and Debt Relief Options

If you're struggling with overdue bills, collection calls, or debt payments you can’t manage, filing for bankruptcy in Ontario with a Licensed Insolvency Trustee can help you start fresh. Bankruptcy can help you eliminate many unsecured loans, but you should know what happens to your income, property and credit before you decide if this path is right for you.

At Brief & Associates Inc., we help individuals and businesses in Toronto and Eastern Ontario understand their debt-relief options. Our Licensed Insolvency Trustees will review your financial situation, explain the bankruptcy process and help you decide if filing for bankruptcy is the right option for you.

Sometimes you don’t have to file for bankruptcy. A consumer proposal or other repayment arrangement may work better depending on what you owe and what you can afford.

We've been helping Ontarians cope with financial hardship since 1980. With over 10,000 successful cases to date, you can feel confident discussing all your concerns with us, and don’t hesitate to ask any questions; in return, you will get honest, candid advice with no pressure to proceed unless you are entirely comfortable with your decision.

Arrange a no-cost, no-obligation consultation with our team.

When to file for bankruptcy

Consider filing for bankruptcy if your debts are out of control and beyond what you can realistically repay. You don’t have to wait for a creditor to sue you. If you are struggling to make payments or borrowing to pay for day-to-day expenses, it may be time to speak with a Licensed Insolvency Trustee.

Some of these scenarios may sound familiar:

• Your credit card balances keep rising even when you are paying them off on time.
• You are resorting to payday loans or lines of credit to cover basic living expenses.
• Collection agencies are attempting to contact you about past-due accounts.
• A creditor has filed a lawsuit or is garnishing your wages.
• You’re taking out a loan to pay off another loan.
• Your income isn't enough to cover household expenses and debt payments.
• You are worried about losing your home, car or other property.

These problems don’t automatically mean that you need to go bankrupt. They do suggest your current repayment strategy may no longer be working.

We’ll look at the whole picture - your income, assets, expenses and debts - so that we can paint a clear picture of where you stand. Then we will explain what solutions may be appropriate, including personal bankruptcy and consumer proposals.

What you want to do is identify a solution that is actually manageable.

Who can declare bankruptcy in Ontario?

Canadian bankruptcy law sets requirements for persons seeking to file for bankruptcy to relieve their debt.

You may be eligible if you usually:

• Find yourself in debt to one or more creditors in the amount of $1,000 or more.
• Cannot pay your debts as they come due.
• Live in Canada, carry on business in Canada or own property in Canada.
• Meet the legal definition of an insolvent person.

You need at least $1,000 in debt, but if your debt is relatively small, bankruptcy might not be the best choice.

Your own circumstances also affect your eligibility. Having enough debt to qualify doesn't mean it's the best financial decision to file.

A Licensed Insolvency Trustee can review your situation and determine if you qualify for bankruptcy.

In Canada, only a Licensed Insolvency Trustee can administer personal bankruptcies.

The Federal Office of the Superintendent of Bankruptcy (OSB) regulates trustees. They prepare and file bankruptcy documents, communicate with creditors, administer the bankruptcy estate and oversee the duties you must perform.

At Brief & Associates Inc., we will explain your obligations and the probable outcomes of filing before you commit to anything.

Individual Bankruptcy vs Corporate Bankruptcy

How Does the Bankruptcy Process Work?

Filing for bankruptcy includes several steps, including a financial assessment, and ends with your discharge after you meet the applicable requirements. Your trustee files the official bankruptcy and tells you what you must do throughout the process.

1. Meeting with a Licensed Insolvency Trustee

The first step is a private consultation.

We will discuss your income, household expenses, unsecured debt, secured loans, assets, and any collection activity you are experiencing.

You may also ask specific questions such as, “Can I keep my house?” or “What happens to my car?” or “How does bankruptcy affect tax debts?”

This meeting lets us review the debt relief options available to you.

2. View your debt resolutions

We'll review the possible alternatives before suggesting bankruptcy.

These may include a consumer proposal, division 1 proposal, credit counselling or repayment arrangements with creditors.

We’ll explain how each option works, what payments you might have to make and how it can affect your finances.

If bankruptcy seems like the best option, we will discuss what to do next.

3. Prepare and file the bankruptcy documents

Your trustee will prepare the necessary filing documents using information about your financial situation.

You will be required to tell the truth about your creditors, debts, assets, income and expenses.

Once the paperwork has been reviewed and signed, it will be filed by your trustee through the federal insolvency system.

Most people don't need to go to bankruptcy court to start the process.

4. Protection from most unsecured creditors

When you file for bankruptcy, an automatic stay of proceedings typically begins.

This legal protection prevents most unsecured creditors from continuing to pursue collection against you.

It can stop collection calls, most wage garnishments and lawsuits on the debts covered by the bankruptcy.

There are some exceptions, notably for secured liabilities, support obligations and some legal proceedings.

5. Carry out your duties in bankruptcy

After you file, you’ll have obligations to satisfy before you get your discharge.

These usually involve reporting household income and expenses, attending two financial counselling sessions, making required payments, and working with your trustee.

We will explain what to do and when.

Surplus Income: What You Might Have to Pay in Bankruptcy

Surplus income is the amount of income your household has over the federal guideline for your household size. In general, if you have a monthly surplus income of $200 or more, you must contribute 50 percent of that surplus to your bankruptcy estate.

*The table above is for general reference only because regulations change. Please talk to us for accurate estimates of your bankruptcy payments.

Your trustee will calculate surplus income based on your reported household income, household size and allowable expenses. You must inform us of any changes to your income or household situation during the bankruptcy.

How Long Does Bankruptcy Last and When Are You Discharged?

Discharge means you’re legally released from the debts covered by your bankruptcy. Most first-time filers end bankruptcy with an automatic discharge, as long as they meet the required obligations and no creditor, trustee, or court objects.

If you have unpaid duties, don’t pay surplus income, a creditor objects, or the trustee or court sees a problem that needs review, a discharge can be delayed, or a court hearing may be required.

What Debts Does Bankruptcy Discharge?

Personal bankruptcy can relieve you of many unsecured debts you can no longer repay.

Unsecured debt is debt that’s not backed by any property that a lender can take back if you stop paying.

Common examples include:

• Credit card balances
• Personal loan without security
• Loans in cash
• Unsecured lines of credit
• Utility bills that are overdue
• Certain income tax liabilities
• Other eligible unsecured liabilities

When you file for bankruptcy, you typically pay these debts through your bankruptcy estate, not by making direct payments to individual creditors.

Once you’re discharged, you’re freed from your legal obligation to pay most of the debts included.

Bankruptcy doesn’t wipe out all debts, however.

Discharge also doesn't eliminate all debts. You may still owe some debts such as child support, spousal support, court-imposed fines and some debts based on fraud.

You usually don’t have to pay back government student loans if you left school less than seven years before you file, though there are some exceptions.

Secured loans like mortgages and car loans are different because the lender has a claim on the property that was used as collateral.

If you owe taxes, student loans, or other obligations you’re unsure about, we’ll review how they might be treated before you proceed.

Bankruptcy: Can It Stop Collection Calls and Wage Garnishments?

If creditors contact you regularly or money is being deducted from your paycheque, your immediate concern may be getting relief from collection activity.

Bankruptcy normally provides legal protection through a stay of proceedings.

Once the stay is in effect, most unsecured creditors must stop efforts to collect the debt included in the bankruptcy.

This protection can:

• Halt most collection calls and payment demands.
• Stop most unsecured wage garnishments.
• Prevent creditors from suing to collect included unsecured debts.
• Halt many of the ongoing legal actions involving those debts.
• Have the creditors involved deal with your trustee rather than coming to you for payment.

The stay does not cover all debt or enforcement actions.

Secured creditors can continue their rights in respect of property pledged as collateral. In some cases, enforcement of child and spousal support may also continue.

If you receive a court document, notice of garnishment or demand from a collection agency, be sure to keep a copy.

We will go over the details and explain what protection may be available.

You don’t have to wait until your paycheck is garnished to get advice.

What happens to your property in bankruptcy?

One of the biggest worries for people who file for bankruptcy is whether they will lose everything they own.

Filing for bankruptcy doesn't mean that you have to give up all of your property.

Ontario law has exemptions that protect certain assets from seizure. An asset's protection depends on the type of asset, its value, and the legal limits of protection.

Property that may be eligible for protection includes:

• Clothing and personal items required
• Some household appliances and furniture
• Tools and equipment needed to earn a living
• Other property covered by Ontario’s exemption rules

Depending on the circumstances and applicable limits, some equity in a principal residence may also be protected.

Non-exempt property may have to be surrendered or otherwise administered as part of the bankruptcy estate.

Ontario Bankruptcy Exemptions

Can you keep your house?

Your ability to remain in your home will depend on its value, how much you owe, how much equity you have, and whether you can continue making your mortgage payments.

When you file for bankruptcy, your mortgage doesn't just vanish.

To keep the property, you'll usually have to continue making mortgage payments and any nonexempt equity.

If you own your home and want to deal with unsecured debts while keeping your home, you might want to consider a consumer proposal instead.

And what about your vehicle?

How your vehicle is treated depends on its value, how it is financed, the equity available, and any exemptions that apply.

With a secured car loan, the lender generally keeps its rights under the contract.

If you make payments, you might be able to keep the vehicle depending on your circumstances.

We will review your property before filing and advise you on what you may be able to keep.

You need to know how bankruptcy might affect your assets before you sign the papers.

How Your Income Affects Bankruptcy

Your income can affect how much you pay during bankruptcy and how long the process lasts.

Most of those in bankruptcy must file monthly reports of their household income and expenses.

Your trustee will use this information to decide if surplus-income payments are applicable.

The federal government sets standards for calculating surplus income.

If your household income is above the applicable threshold, you might have to pay more into your bankruptcy estate.

The calculation considers your household size, your earnings, and certain allowable expenses. For example, someone with a higher household income may be able to afford higher payments than someone who is unemployed or has a lower income.

Even when you are bankrupt, your situation can change.

If you change jobs, lose income, or your household changes, you’ll need to tell your trustee.

We’ll explain how we calculate surplus income and which documentation you’ll need to provide.

An online surplus-income calculator can give you a ballpark figure, but your actual payment obligations depend on the rules that apply and the financial information you report.

How much does it cost to file bankruptcy? Demystifying trustee fees and services

You might already be in financial trouble, but filing for bankruptcy still costs money. The amount you pay depends on your income, household size, assets and whether surplus-income payments apply.

In Canada, the federal government regulates Licensed Insolvency Trustee fees and the cost of administering a bankruptcy. This will depend on your circumstances, but you may have to make payments toward your bankruptcy estate. If your household income is above the government surplus-income limit, you may also have to make additional payments.

At Brief & Associates Inc., we’ll review your financial picture and discuss the anticipated costs before you decide. You will learn what payments you could be required to make, how payments are calculated, and whether another debt relief option may cost less.

Some people may find consumer proposals to be a better option. It allows you to repay a negotiated amount of your unsecured debts in scheduled payments and generally retain your assets.

What if you have no money ,can you declare bankruptcy?

You don’t need many assets or a lot of income to get bankruptcy help. Even if you’re unemployed, receiving government benefits, or having difficulty making ends meet, you can still speak with a Licensed Insolvency Trustee about your options.

We’ll review your financial situation, explain any applicable costs, and discuss available payment options.

Sole Proprietors: Division I Proposals and Consumer Proposals

For a sole proprietor, the business and the individual are not separate. A sole proprietor can potentially deal with business-related debts through a consumer proposal or personal bankruptcy. Most of the time, business debts are personal debts.

If you’re a sole proprietor with unsecured debt of $250,000 or less (not including your principal residence mortgage), a consumer proposal may be an option. A person can make a proposal to creditors for repayment, often while keeping assets and the business running.

If unsecured debts exceed the consumer-proposal limit or you need a more flexible repayment structure, you may consider a Division I proposal, which requires consultation with the Department for Business, Energy & Industrial Strategy (BEIS). It is also the formal way for corporations to propose restructuring debts instead of filing for bankruptcy.

For business owners, the right choice depends on whether the business is a sole proprietorship, partnership, or corporation; whether debts are personally guaranteed; whether CRA, payroll, or HST debts are involved; and whether the business has sufficient cash flow to support a proposal.

Business and Corporate Bankruptcy Ontario

A corporation or other business entity that is insolvent may file an assignment in bankruptcy through a Licensed Insolvency Trustee . The bankruptcy starts when the assignment is filed with the office of the Superintendent of Bankruptcy.

In a corporate bankruptcy, the trustee usually takes control of the company’s assets. The trustee can sell, realize, or otherwise administer those assets and distribute the proceeds to creditors according to the precedence rules in the Bankruptcy and Insolvency Act.

When a corporation goes bankrupt, it doesn’t get the same personal discharge an individual does. Once the estate has been administered, the corporation is typically dissolved or wound up.

Corporate bankruptcy may be appropriate if the business has no viable restructuring option, cannot meet its obligations, and creditors would be better served by an orderly realization of the company’s assets.

Director’s liability and personal guaranties

Corporate insolvency does not necessarily exonerate directors or owners from personal liabilities. Directors could still be liable for unpaid source deductions, some HST liabilities, unpaid wages and any debts for which they gave a personal guaranty.

If you personally guaranteed corporate debt, the lender can come after you personally even after the corporation has filed bankruptcy. In addition to the corporate filing, you may need a personal consumer proposal, Division I proposal, or personal bankruptcy depending on your situation.

A Licensed Insolvency Trustee can review which obligations are the company’s, which could affect you personally, and whether a corporate proposal, corporate bankruptcy, or another wind-down option is more appropriate.

What Are Your Duties After You File for Bankruptcy?

While bankruptcy can offer relief from many collection actions, you must meet certain obligations before you can receive your discharge.

Your Licensed Insolvency Trustee will review these responsibilities, help you understand what you need to do, and guide you through the process.

In bankruptcy, you will usually have to:

• Report your profits and losses. Submit monthly reports of household income and expenses, with supporting documents such as pay stubs or benefit statements upon request.
• Ask for financial counselling. You must attend 2 mandatory counselling sessions on issues such as budgeting, managing expenses, borrowing responsibly and rebuilding your finances.
• Give precise financial information. Your debts, assets, income and other pertinent information. You will also need to work with your trustee to report any changes to your financial or household situation.
• Forfeit your credit cards. When you file, you must surrender most credit cards.
• Make the necessary payments. Pay all amounts you must pay during your bankruptcy, including surplus income contributions (if applicable).

If you don’t fulfill these obligations, it can delay your discharge, so it’s important to know about them right from the start.

At Brief & Associates Inc., we will tell you what your responsibilities are in plain language, answer your questions, and ensure you stay informed along the way. If your income or personal circumstances change, we will explain how this may affect your bankruptcy.

Why Choose Brief & Associates Inc.

Bankruptcy rules are complicated enough when you’re dealing with debt, without having to figure them out on your own. Brief & Associates Inc. gives you straightforward answers, realistic debt relief options and personal support so you can make smart choices about your finances.

We’ve been helping individuals and businesses work through financial difficulties since 1980. Our Licensed Insolvency Trustees are here to help you, providing professional advice to clients across Toronto and Eastern Ontario without judgment or pressure.

What to expect when working with us:

• Over 50 years of experience.
• 10,000+ successful filings.
• Advice customized to your situation.
• Respectful, face-to-face conversations.
• Phone and virtual appointments
• Convenient in-person appointments in Toronto, Oshawa, Kingston, Brockville and Cobourg
• Guidance throughout the bankruptcy, consumer proposals, and other debt relief process.

You don’t have to make a big money decision without knowing your options. We’ll help you understand what you owe, what you may be able to keep and what debt relief solution makes sense for your situation.

Contact a Licensed Insolvency Trustee about your debt

If you’re falling behind on payments, dealing with creditors, or considering personal bankruptcy, speak with our team before you decide what to do next.

At Brief & Associates Inc., we will look at your financial situation and tell you which debt relief options you may qualify for.

This is your chance to ask about costs, creditor protection, your home or vehicle, and the steps in filing.

We can also help you understand if a consumer proposal or another repayment arrangement may be a better fit.

Ready to get a grip on your debt? Contact Brief & Associates Inc. today for a free, confidential consultation.

FAQs (Frequently Asked Questions)

Can I file for bankruptcy without going to court?

Yes. Most personal bankruptcies are filed through a Licensed Insolvency Trustee, and you don’t need to appear in court. If there are objections to your discharge, or other matters a judge must decide, you may need a hearing.

Can bankruptcy prevent my bank account from being frozen?

In most cases, bankruptcy will allow you to unfreeze blocked accounts and protect any new accounts from being frozen. However, this depends on the reason for the freeze and whether the bankruptcy resolved it.

Can CRA debt be included in a bankruptcy?

Yes. Income tax debt can be included in bankruptcy.

It can include many Canada Revenue Agency personal income tax debts. Some tax situations have special rules, and large tax debts may affect discharge requirements.

May I continue working during the bankruptcy?

Most people can continue to work. Some regulated professions, licensing requirements or employment arrangements may be subject to restrictions.

Can bankruptcy help with business debt?

Yes, but it depends on the business structure and the debts. Sole proprietors, partnerships and corporations can have different legal obligations. Personal guaranties on business debt may also impact your options.

Can I get credit after bankruptcy?

You may be able to apply for new credit after discharge, but not necessarily. Lenders will look at your income, credit history and ability to repay.

Does my income change while I am in bankruptcy?

You must tell your trustee if your household income changes. If your income goes up or down, it may change the amount of surplus income you have to pay.

How long does a bankruptcy last in Ontario?

The first bankruptcy normally lasts 9 months if you have no surplus income, or 21 months if you have surplus income. A second bankruptcy usually lasts 24 months without surplus income or 36 months with surplus income.

What is excess income in bankruptcy?

Surplus income is the amount of money you have above the federal guideline for your household size. If you have an average monthly surplus income of $200 or more, you usually put 50 percent of that amount into your bankruptcy estate.

Can I Keep My Car if I Declare Bankruptcy in Ontario?

Perhaps. In Ontario, you can exempt one vehicle up to $8,578. If the equity in the vehicle exceeds the exemption amount, you may be required to pay the non-exempt amount or surrender the vehicle.

You may be able to keep your RRSP when you file for bankruptcy.

Generally, RRSPs and RRIFs are protected in bankruptcy, except for contributions made in the 12 months prior to filing.

What happens to my corporation if it goes bankrupt?

The corporation’s assets usually vest in the Licensed Insolvency Trustee, who may sell or otherwise realize upon them and distribute the proceeds to creditors. Administration is generally followed by winding up or dissolution.

Are you personally liable for your corporation’s debts?

Perhaps, but not necessarily. Corporate debts are normally the responsibility of the corporation, but personal guarantees, unpaid source deductions, certain HST liabilities, unpaid wages and director liabilities may create personal exposure.

Can a sole proprietor submit a consumer proposal for business debts?

Yes. Because a sole proprietor and the business are not legally separate, unsecured business debts can often be included in a personal consumer proposal if you are eligible and meet the debt limit.

When is a Chapter 11 filing better than a Division I proposal?

A Division I proposal can be considered if the person or corporation has sufficient income or business cash flow to fund a repayment arrangement, wants to avoid bankruptcy and can provide creditors with a better recovery than they would get in bankruptcy.