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Aug 18, 2017

Know what to expect when filing for bankruptcy in Ontario

Although bankruptcy might not have been in your plans for the future, changing circumstances can leave you no other option but to at least consider it. While a business or personal bankruptcy can offer a fresh start, many people shy away because all they know about bankruptcy is what they have heard about it. Decisions made at this time may determine future financial stability, so, proper knowledge about the bankruptcy process can help you make informed decisions.

Before filing for bankruptcy, it may be wise to get qualified advice about the alternatives and the available options -- especially if you have a large estate or business. It is a decision not to be taken lightly because even though it may ultimately lead to a clean financial slate, there may be several challenges along the way.

Know what to expect

If, after consultation with legal counsel and making careful consideration, you have decided to declare bankruptcy, prepare yourself for the following steps to follow throughout the process:
  • Trustee meeting-- A licensed bankruptcy trustee must file bankruptcy in Ontario. Your legal representative could suggest a Trustee in Bankruptcy and arrange a meeting. At this meeting, he or she will review the financial details and make sure you are both aware of and understand possible alternatives such as filing a proposal.
  • Filing for bankruptcy-- The trustee will file for bankruptcy on your behalf and the Office of the Superintendent of Bankruptcy will declare you bankrupt. This will prevent further legal action against you and your payments to unsecured creditors will cease.
  • Creditor notifications-- The trustee will notify your creditors of your filing for bankruptcy and a meeting of creditors may subsequently be scheduled.
  • The sale of assets-- Upon filing for bankruptcy, the trustee takes possession of your assets, which he or she will sell to secure funds for paying secured debts. However, federal and provincial exemptions exist. In Ontario, an automobile (up to a certain value), household goods, business equipment and tools to specified values will not be seized in bankruptcy.
  • Monthly payments-- While working toward the discharge of debts you may have to make monthly payments to the creditors through the trustee. The trustee will determine the amount of the payments based upon OSB standards.
  • Creditors' meeting-- If such a meeting is called, the purpose would be for the creditors to obtain more information about your bankruptcy.
  • OSB examination-- Only under certain circumstances may the Office of the Superintendent of Bankruptcy examine the cause of your bankruptcy filing. You will be under oath during such an examination.
  • Financial counselling -- Two counselling sessions with the trustee are mandatory to equip you with the knowledge to understand what causes bankruptcy and also basic financial management to prevent similar problems in the future.
  • Final report -- Before the OSB will discharge your debts, it will study a report that the trustee will prepare about the manner in which you performed the duties. Based upon the recommendations of the trustee, the OSB may discharge all your debts in the ninth month.
  • Discharge hearing -- If for any reason, the trustee does not recommend the discharge, there may be a court hearing at which the court will investigate the bankruptcy circumstances. This may happen if it is not your first bankruptcy or if any party objects to the discharge. Such a hearing may result in a discharge refusal, a suspended discharge, conditional discharge or absolute discharge.

Understanding the process and knowing what to anticipate may make it easier to navigate a bankruptcy in a way that can lead to a fresh financial start. An experienced bankruptcy lawyer can answer any questions you may have, determine the best course of action for you to take and protect your rights throughout the process.