Filing Bankruptcy and Bankruptcy Process in Ontario

The Superintendent of Bankruptcy has published the following guide on the bankruptcy process.

What is bankruptcy and what are the benefits to the debtor?

Personal Bankruptcy in Ontario is a legal process in which you may be discharged from most of your debts. It is regulated by the Bankruptcy and Insolvency Act. The purpose of the Act is to permit an honest, but unfortunate, debtor to obtain a bankruptcy discharge from his or her debts, subject to reasonable conditions. After filing bankruptcy, your property is given to a trustee in bankruptcy who then sells it and distributes the money among your creditors. Your unsecured creditors will not be able to take legal steps to recover their debts from you (such as seizing property or wage garnishment).

Rules pertaining to filing bankruptcy and to the bankruptcy process in Ontario allow for filing a joint assignment. A joint assignment allows two bankrupts, involved in a close financial relationship, to file for bankruptcy and to see their files dealt with as one file. This is available to debtors if their debts are substantially the same and the trustee believes it is in the best interest of the debtors and creditors. 

What are the duties of a bankrupt?

Once you are legally a bankrupt, you are required to perform the duties of bankrupts as outlined in Appendix I of the Act. The trustee will inform you of these duties.

How does one become bankrupt?

To start the bankruptcy process, first you contact a bankruptcy trustee who will assess your financial situation and explain the options available to you, including bankruptcy and alternatives to bankruptcy. After that, if you still want to go ahead and file bankruptcy, the trustee will help you complete several forms which you will have to sign. You are considered a bankrupt only when the trustee files these forms with the Official Receiver.

What kind of forms will I have to sign?

When filing bankruptcy in Ontario, you will have to sign at least two forms. One is an "Assignment", and the other is your "Statement of Affairs". In the assignment you state that you are handing over all of your property to the trustee for the benefit of your creditors. In the statement of affairs you list your assets, liabilities, income and expenses. As well you will have to answer several questions about your family, employment and disposition of assets. Before you sign them, make sure you understand the legal documents that are part of your bankruptcy file. Although the trustee prepares them from the information you provide, they are your statements. You are responsible for the accuracy of their contents. Review them carefully before you sign. Once these documents have been filed with the Official Receiver, you are legally bankrupt and, at this point, the bankruptcy process cannot be reversed without a court order. Keep copies of notices and all other documents the trustee sends you.

What happens after the forms are filed with the Official Receiver and I become bankrupt?

Generally, a meeting of creditors is not necessary but there may be instances where such a meeting will be held. (A creditors' meeting is only held in about one personal bankruptcy out of 1,000, and generally only if you have significant tax debt). Creditors or the Official Receiver may request one after filing bankruptcy. If a meeting of creditors is called, you must attend this meeting. You may also be required to go to the Official Receiver's office to answer several questions under oath about your financial affairs.

What happens at the first meeting of creditors?

If a meeting is called, the next step in the bankruptcy process will be preparing a report about your assets and liabilities for the creditors by your trustee, and creditors may ask you related questions. The creditors will then vote to either confirm the trustee's appointment, or substitute a trustee of their choice. The creditors will then have an opportunity to vote for the appointment of inspectors. They may also give directions to the trustee with reference to the administration of the estate.

What does the examination with the Official Receiver involve?

During the bankruptcy process the Official Receiver may send you a notice instructing you to appear before him or her for an examination under oath. The Official Receiver will then ask you a number of questions about the causes of your bankruptcy, your conduct, the disposition of your property, and the nature of your debts.

When is a bankrupt discharged?

There will be an automatic bankruptcy discharge for first-time bankrupts nine months after they became bankrupt unless the trustee recommends a discharge with conditions or it is opposed by either a creditor, the trustee or the Superintendent of Bankruptcy. In addition, if you have surplus income of more than $200 per month, your bankruptcy will be extended to 21 months in the case of a first bankruptcy.

How does bankruptcy affect employment?

For the most part, bankruptcy should not affect your employment. However, there are some special cases. For example, you may have difficulty being bonded. Your trustee will be able to give you more information on other possible restrictions or prohibitions.

Are there any fees associated with filing bankruptcy?

Yes. There is a filing fee to be paid to the Superintendent of Bankruptcy. In addition, the trustee is entitled to be paid. These fees are prescribed by the Bankruptcy and Insolvency Rules which may be consulted on the OSB's Web Site. In general, you will pay a monthly contribution to your bankruptcy, and you will pay a surplus income payment based on your income. Contact us to review your situation and explain in detail the cost of your specific bankruptcy.

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