Most people are aware of the negative impacts of a bankruptcy filing and are thus hesitant to explore this solution to their debt issues. Fewer are aware of the advantages of filing an assignment in bankruptcy to help get back on track financially. The purpose of the Bankruptcy and Insolvency Act is to provide relief to an honest but unfortunate debtor. Whether debt struggles arose due to a divorce, loss of job, medical costs or helping family – everyone can use a fresh start from their debt.

Pros of Claiming Personal Bankruptcy

  • Stops creditors from pursuing you for collection. A bankruptcy filing will stop a garnishment of your wages and stop the collection calls.
  • Stops all payments to unsecured creditors allowing you to focus on your monthly living expenses.
  • Exemptions in Ontario allow you to keep certain exempt assets (ex. household furnishings, a car up to $6,600 and house if equity is less than $10,000).
  • Discharges your obligation to pay your unsecured creditors in as little as nine months depending on your circumstances.
  • Two counselling sessions that you are required to attend and will discuss budgeting, money management and rebuilding credit. These sessions are very useful for your financial stability moving forward.

Cons of Claiming Personal Bankruptcy

  • Negatively impacts your credit rating as an R9 for 6-7 years from discharge.
  • If you have assets with realizable value above exemptions, the Trustee will be required to realize on those assets (ex. if you have a GIC worth $2,000 the Trustee must collapse the GIC for the benefit of your creditors).
  • You are accountable to the Trustee to provide monthly income and expense statements. This can actually be considered an advantage as you are forced to track your monthly expenses.
  • If your income exceeds a certain threshold based on your family size, you may be required to pay surplus income payments to the trustee.
  • Tax refunds for the year of bankruptcy and any prior unfiled returns will go directly to your trustee for the benefit of your creditors.
  • You can’t be a director of a corporation while you are undischarged.
  • It could impact licenses required for employment purposes (real estate brokers, etc.)
  • You can’t be a sponsor for someone to move to Canada while undischarged.

Call Fresh Start Now today to discuss if the advantages of filing personal bankruptcy outweigh the disadvantages to provide you with a fresh start.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)