How do Bankruptcies work in Ontario?
Table of Content
- Are you considering bankruptcy?
- Pros and Cons of Claiming Bankruptcy
- What Assets Do I Lose After Filing For Bankruptcy?
- Assets Exempted from Bankruptcy
- Is My Home Taken Away By Bankruptcy Trustee?
- Do I have To Give Away My Car Because Of Bankruptcy?
- How Is My Credit Ranking Affected Upon Filing Bankruptcy?
- What Effect Can Bankruptcy have on my Spouse?
- Procedure Of Filing For Bankruptcy In Ontario
Are you considering bankruptcy?
If you are struggling to make ends meet, you may be considering bankruptcy to get out of debt. Declaring bankruptcy in Ontario can provide relief from creditor harassment and the threat of foreclosure or wage garnishment. But before you decide to file for bankruptcy, it is crucial to understand the consequences and how bankruptcy works in Ontario.
Pros and Cons of Claiming Bankruptcy
The pros and cons of bankruptcy are often hotly debated. On one side, some people argue that bankruptcy is a fresh financial start that allows you to get out from under the burden of debt and rebuild your credit. On the other side, others argue that bankruptcy is the last resort and can have long-term negative consequences. If you find yourself in such a dilemma, our licensed Insolvee Trustees here at Risman Zysman are here to assess your financial situation and try to provide clarity to you before you decide to file for bankruptcy.
- Pros of Bankruptcy
–Bankruptcy can give you a fresh start. If you're struggling to make ends meet because of crushing debt, filing for bankruptcy can give you a clean slate. This can be a significant relief and allow you to move on with your life.
–Bankruptcy can stop creditor harassment. It will stop creditors from contacting you and trying to collect money.
–Bankruptcy can help you avoid foreclosure or wage garnishment. If you're behind on your mortgage or other bills, bankruptcy can be a possible solution for tackling this problem.
- Cons of Bankruptcy
–Bankruptcy can have long-term negative consequences. For example, your credit score will take a hit after declaring bankruptcy, making it difficult to get a loan from a future creditor or rent an apartment.
–Bankruptcy can have a heavy impact on your credit ratings. Filing for bankruptcy will reflect on your credit report for up to ten years and can make it challenging to get credit in the future. However, there are always solutions to boost your credit score over the years. You can contact our Trustees at Rysman Zysman to guide you properly on the path toward your credit score recovery.
–Depending on your conditions, you will have to let go of certain assets under your possession. However, booking a consultation with a Licensed Insolvency Trustee before declaring bankruptcy is always advised so that all your assets can be reviewed and determine whether bankruptcy is the ideal solution for your debt.
What Assets Do I Lose After Filing For Bankruptcy?
A person's major point of concern regarding bankruptcy is what will happen to their assets. The good news is that most people who file for bankruptcy protection keep most of their essential belongings. Here's a look at what happens to assets in bankruptcy:
–Exempt Assets. You are allowed to keep certain assets that are considered exempt, such as your home, your car, and your furniture.
–Non-Exempt Assets. If you have not considered exempt assets, you may have to sell them or give them to a trustee to pay back your creditors. Samples of non-exempt assets are cash, stocks, and bonds.
So, will you lose everything if you file for bankruptcy? Probably not. But you may have to sell some of your belongings to pay back your creditors.
Assets Exempted from Bankruptcy
Bankruptcy exemptions determine what assets you get to keep if you file for bankruptcy in Ontario. In general, you can keep all of your assets as long as they fall within the exemption limits set by your state.
Most states have a wide variety of exemptions available, so you should be able to find one that fits your needs. Some of the most common exemptions include:
-The homestead exemption: Allows you to protect an amount of $14,180 as equity in your home or other primary residences.
-The retirement exemption: Protects a certain amount of money in your retirement accounts, such as 401(k)s and IRAs.
-The car exemption: This allows you to exempt a value of $7,117 for your car or other vehicles.
-The clothing exemption: There is no limit on clothing items, and one can keep all their clothes after filing for bankruptcy as they are considered essential for living.
Is My Home Taken Away By Bankruptcy Trustee?
Under normal circumstances, the bankruptcy trustee will not require you to sell your house to pay off your creditors. However, there are some exceptions to this rule. For example, if you have a lot of equity in your home, the trustee may elect to sell your house to pay off your creditors. Additionally, if you have unpaid taxes or other debts that are secured by your home (such as a mortgage), the trustee may take action to collect on those debts by selling your home.
Based on our experience over the years, there are extremely rare cases where our Trustees at Rysman Zysman will consider selling your house to pay off your debt. As long as you continue to make your mortgage payments and remain current on your other debts, you should be able to keep your home even after filing for bankruptcy.
Do I have To Give Away My Car Because Of Bankruptcy?
If you are filing for bankruptcy, the trustee may take your car if it is considered part of your estate. However, if your vehicle is essential for transportation or work, you may be able to keep it by filing a "motion to exempt property" and proving to the trustee that you need the vehicle. In some cases, the court may also allow you to keep your car by paying the lender directly or through a reorganization plan. Ultimately, whether or not you can keep your car during bankruptcy will depend on your particular circumstances.
How Is My Credit Ranking Affected Upon Filing Bankruptcy?
Bankruptcy will stay on your credit report for ten years. This will make it challenging to get approved for new lines of credit and could lead to you getting declined for loans or mortgages. In addition, your credit score will drop significantly after declaring bankruptcy. This means you'll likely have to pay higher interest rates on any future debts you take on. While it's true that going bankrupt can negatively affect your credit rating, it's not the end of the world. There are still ways to rebuild your credit and improve your overall financial standing.
What Effect Can Bankruptcy have on my Spouse?
Yes, it can. If you file for bankruptcy, your spouse may be affected too. Any assets that you and your spouse jointly own will be included in the bankruptcy proceedings. This includes property, savings, and investments. However, if your spouse chooses to file for bankruptcy separately, their assets will not be included in your proceedings. Get in touch with our licensed insolvency trustee at Risman Zysman to learn more about how bankruptcy could affect your spouse.
Procedure Of Filing For Bankruptcy In Ontario
You need to take a few steps in claiming bankruptcies in Ontario. First, you'll need to contact a Licensed Insolvency Trustee (LIT) and complete an initial consultation. During this consultation, the LIT will review your financial situation and help you determine whether or not claiming bankruptcy is the right decision for you.
If you decide to proceed with bankruptcy, attending a mandatory debtor education program is the next step. This program will provide you with information on managing your finances and making better money decisions in the future. After completing the debtor education program, you'll file a formal bankruptcy application with the LIT.
Now, your creditors will be allowed to object to your bankruptcy filing. However, if no objections are raised, the LIT will declare you bankrupt, and you'll be able to start rebuilding your financial life.
If you feel overwhelmed with your debts and consider bankruptcy an option, it is essential to understand how the process works in Ontario. At Risman Zysman Inc., our licensed insolvency trustee can guide you through every step of the process and help you get back on your feet. Contact us today for a free consultation to discuss your options.