Although the Bankruptcy and Insolvency Act (BIA) controls bankruptcy filings in Canada, there are specific laws in Ontario that govern things like exemptions. You can look at the high-level details of the BIA here. This page helps you understand how these laws can affect your filing in Ontario. For more information about bankruptcies in Canada, please read Debt.ca’s Bankruptcy Guide.

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What does consumer debt look like in Ontario?

  • Average non-mortgage debt in 2019: $24,032[1]
  • Median mortgage debt, excluding Toronto and Ottawa: $145,000[2]
    • Toronto: $280,000
    • Ottawa: $206,000
  • Average student loan debt for Bachelor’s degree graduates: $30,000[3]
    • 60% of students in Ontario graduate with debt

Ontario bankruptcy and insolvency statistics

  • 38,856 consumers in Ontario were insolvent in 2018[4]
  • 38% of those consumers went on to declare bankruptcy (14,660)
  • Average assets at the time of filing: $30,774.14
  • Average liabilities (debts) at the time of filing: $98,577.12
  • With an average household income of $74,287 in Ontario,[5] the average filer effectively owed $1.33 for every dollar they earned
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Insolvency & Bankruptcy Statistics in Ontario

Ontario

Nationwide
Q4 2019Q3 2019Q4 2018% Change
Insolvency35,15537,70831,90010.2%
Consumer Proposal21,62720,95118,31518.1%
Bankruptcy13,62813,75713,585-0.4%
Q4 2019Q3 2019Q4 2018% Change
Insolvency11,58811,5149,97610.2%
Consumer Proposal7,9767,7766,38924.8%
Bankruptcy3,6123,7383,5670.7%
2018 vs 2019 in Ontario
20192018% Change
Insolvency44,85238,8569.5%
Consumer Proposal30,27524,19625.1%
Bankruptcy14,57714,660-0.6%

Source: https://www.ic.gc.ca/

Bankruptcy laws in Ontario

  • The Ontario Executions Act defines which assets are exempt from bankruptcy, besides those defined under the Bankruptcy and Insolvency Act.
  • The Ontario Limitations Act defines the statute of limitations for debts that were sold to a collector. In most cases, the statute expires after two years. If a debt is past the statute of limitations, you may not need to file bankruptcy to deal with that debt.[6]
  • The Personal Property Security Act requires creditors to register their interest in any assets that you put up as collateral. Your bankruptcy trustee will search the PPSA database to make sure no creditors have claims to your assets before they can sell them.

What assets are exempt from bankruptcy in Ontario?

When you file for bankruptcy in Ontario, you don’t need to be concerned that you will lose everything. These assets are exempt under federal and provincial law:

  1. Your primary residence, as long as the home’s equity does not $10,000
  2. One vehicle worth less than $6,600
  3. $13,150 of household furnishings and appliances
  4. $11,300 of tools of the trade (any equipment that you use for business)
  5. All necessary clothing for you and your dependents
  6. All necessary medical devices for you and your dependents
  7. Certain types of life insurance
  8. All savings in Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIF) and Savings and Profit Sharing Plan (SPSP) funds, not including contributions from the 12 months prior to your filing

How the Ontario Executions Act can help you save your home

In 2015, the Ontario Executions Act was updated to define how much equity you could have in your home that would qualify for an exemption.[6] If you have $10,000 or less of equity in your home, then you are not at risk of losing your home when you file for bankruptcy.

Equity is defined as the current market value of your home, minus the remaining balance on your mortgage, as well as any tax arrears and liens on the property. Let’s say your home is worth $200,000. Your mortgage balance is $190,000 and you owe $1,000 in tax arrears, then you have $9,000 worth of equity. In this case, you would not be at risk of losing your home.

On the other hand, if your home is worth $200,000 and the remaining balance on your mortgage is $150,000 and you have no tax arrears, then you have $50,000 worth of equity. Your home would then be at risk of being seized and sold by the bankruptcy trustee.

It’s important to consider your home and its equity before you file for bankruptcy. If you have equity in your home, then you may want to explore other options other than bankruptcy. It’s in your best interest to avoid filing if you’ll lose your home.
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Which types of debt are not subject to the statute of limitations?

Under the Ontario Limitations Act, the statute of limitations on most debts expires after two years from the date the account originally became delinquent. However, some amounts you owe are not subject to the statute of limitations, including:

  • Government-guaranteed student loans
  • Taxes
  • Court-ordered debts, such as child support and fines

It’s important to note that you cannot discharge some of these debts during bankruptcy. For example, court-ordered obligations not typically eligible for discharge. You can discharge tax debt unless the Canada Revenue Agency (CRA) placed a lien on your property. Finally, you can only discharge student loans if more than seven years have passed since you were a student.

How to file bankruptcy in Ontario

You are eligible to declare bankruptcy in Ontario if you live, do business or own property in the province. You must owe more than $1,000 in unsecured debt. If you meet these criteria, then you follow this bankruptcy process:

  1. First, you must find a Licensed Insolvency Trustee (LIT) near where you live; there are LITs located throughout Ontario:
    1. The Office of the Superintendent of Bankruptcy offers a free search based on your location.
  2. You must meet the LIT in person for a free consultation.
  3. The trustee will review your assets, liabilities, and budget to see if you are insolvent. You are insolvent if:
    1. You are not able to meet the monthly obligations for your debts.
    2. Your total liabilities (debts) exceed the full value of your assets.
  4. Once they consider you insolvent, the trustee prepares the paperwork to file your personal bankruptcy with the Office of Superintendent of Bankruptcy.
    1. You sign the paperwork before it gets sent off.
    2. Within five days, the trustee also sends the paperwork to your creditors, so that they can make claims.

Learn more about what happens after you declare bankruptcy »

The benefits of an automatic stay of proceedings

As soon as the trustee files your paperwork, the Bankruptcy and Insolvency Act guarantees your right to an automatic stay of proceedings.[7] This means that all collection actions and attempts to force repayment are suspended immediately while you go through the legal process of bankruptcy. This includes:

  • Collection calls
  • Wage garnishment
  • Repossession
  • Foreclosure

No new enforcement actions can be started, and even current enforcement actions must cease. For example, if you owe back taxes to the Canada Revenue Agency (CRA) and they are garnishing your wages, the garnishment will stop once you file.

This can give you some welcome breathing room if your wages are being garnished or if you’re dealing with threatening calls from collectors.

Is bankruptcy right for you?

Before you start looking for Licensed Insolvency Trustees in Ontario, it’s a good idea to make sure that bankruptcy is your best option. Bankruptcy will have a significant negative impact on your credit. It will also become public record.

Understand the pros and cons of bankruptcy »

If you can avoid bankruptcy, then it’s in your best interest to do so. Every debt solution has its benefits and drawbacks, so the right option depends on your financial situation.

Make sure to consider all the below alternatives to bankruptcy before you contact a trustee:

It can be helpful to talk to a trained professional who can assess your situation and offer an unbiased opinion on your best option to start your debt-free journey. Debt.ca can connect you with a trained debt relief specialist for a free initial consultation. Whether you need a credit counselling session or more information on bankruptcy, they can help you evaluate your debts, credit report and score, and budget to determine the optimal solution for your unique financial situation. A fresh start is a phone call away.

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