Personal Bankruptcy

At Dean Debt Solutions, we specialize in providing personalized bankruptcy services designed to help individuals regain control of their financial future. Our team of experienced professionals is dedicated to offering compassionate support and expert guidance through every step of the bankruptcy process. We believe in empowering our clients with the knowledge and tools necessary to make informed decisions, ensuring a smoother transition to financial stability. With our comprehensive approach, we strive to alleviate the stress of financial burdens and pave the way for a brighter, debt-free future.


A Brief Overview

Personal bankruptcy is a legal process, governed by the federal Bankruptcy and Insolvency Act (BIA), that provides relief to individuals who are unable to meet their financial obligations. Like a Consumer Proposal, it is administered solely by a Licensed Insolvency Trustee (LIT).

The Goal of Bankruptcy

The primary goal of bankruptcy is twofold:

  1. To provide an honest but unfortunate debtor with a fresh financial start by legally discharging them from most unsecured debts.
  2. To ensure an equitable distribution of the debtor’s non-exempt assets among their unsecured creditors.

Eligibility and Filing

To file for personal bankruptcy in Ontario, you must:

 

  1. Owe at least $1,000.
  2. Be insolvent (unable to meet your payments as they generally become due).
  3. Reside, carry on business, or have property in the province of Ontario.

 

The process is initiated by meeting with an LIT who files the necessary documents with the Office of the Superintendent of Bankruptcy (OSB).

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Key Aspects of Bankruptcy

  • Asset Liquidation: Unlike a Consumer Proposal, in bankruptcy, the debtor is required to surrender all non-exempt assets to the LIT. Exempt assets vary by province; in Ontario, common exemptions include equity in a principal residence up to a certain value (which is often $0 in Ontario), necessary clothing, furniture, and a modest motor vehicle up to a certain value. The LIT sells these non-exempt assets, and the proceeds are distributed to creditors.
  • Stay of Proceedings: Immediately upon filing, a “stay of proceedings” takes effect, stopping most creditor actions, including wage garnishments, collection calls, and legal action.
  • Surplus Income: Debtors must report their income and expenses to the LIT monthly. If the debtor’s household income exceeds a certain threshold set by the OSB, they are required to pay a portion of the excess income (called Surplus Income) to the estate for the benefit of creditors. This payment requirement extends the duration of the bankruptcy.
  • Duration of Bankruptcy:
    • First-time Bankrupt, No Surplus Income: 9 months.
    • First-time Bankrupt, with Surplus Income: 21 months.
    • Second-time Bankrupt, No Surplus Income: 24 months.
    • Second-time Bankrupt, with Surplus Income: 36 months.
  • Mandatory Counselling: Two mandatory financial counselling sessions must be attended with the LIT.
  • Credit Impact: Bankruptcy results in an R9 credit rating, the most severe negative rating. This record remains on your credit report for 6 years after discharge for a first-time bankruptcy.

Discharge from Bankruptcy

Upon completion of all duties (surrendering assets, making all surplus income payments, attending counselling, and reporting income), the debtor is legally discharged from most unsecured debts, achieving the “fresh start.”

Common Bankruptcy Questions

Understanding bankruptcy can be challenging. Here, we address some of the most common concerns to help you make informed decisions.

What is bankruptcy?

Bankruptcy is a legal process that provides relief to individuals who cannot repay their debts. It allows you to eliminate or restructure your debt under the protection of the bankruptcy court.

How does filing for bankruptcy affect my credit?

Filing for bankruptcy can initially lower your credit score, but it also provides an opportunity to rebuild your credit over time by eliminating overwhelming debt.

Can I keep my house if I file for bankruptcy?

In many cases, you can keep your home during bankruptcy proceedings, especially if you are current on your mortgage payments and your equity is within the allowable exemption limits.

Will all my debts be discharged in bankruptcy?

Not all debts can be discharged in bankruptcy. Common exceptions include student loans, child support, and certain tax obligations.

How long does the bankruptcy process take?

The bankruptcy process typically takes about 9 months for a straightforward case, but it can vary depending on individual circumstances.

What are the alternatives to bankruptcy?

Alternatives to bankruptcy include debt consolidation, consumer proposals, and negotiating directly with creditors for more manageable payment terms.