Personal Bankruptcy in Ontario
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Bankruptcy can free you from debt and reset your financial future
Bankruptcy in Ontario is a safe, legal way to erase unmanageable debt and find relief from financial and emotional stress. Once debt-free, you can start fresh and build a better future for yourself and your family.
Only a Licensed Insolvency Trustee (LIT) can administer bankruptcy in Canada. At David Sklar and Associates, our caring, knowledgeable LITs will review your situation and help determine if bankruptcy is right for you.
We’re here to help you overcome debt
Bankruptcy explained: simple, straight answers
You don’t need to be a legal or financial expert to understand bankruptcy. We’ve broken it down into easy guides that answer the questions our clients ask most often in plain language.
What is personal bankruptcy?
Bankruptcy is a legal process that allows you to eliminate unsecured debts that you cannot afford to repay. It’s one of two federal debt relief programs available in Canada, the other being a consumer proposal.
If you’re experiencing financial hardship, you have the right to seek forgiveness of your debts under the Bankruptcy and Insolvency Act (BIA). The BIA governs the entire bankruptcy process in Canada, outlining rules and requirements for all parties involved.
Why File for Personal Bankruptcy
There are many reasons, but they all come down to being unable to keep up with debt payments. Bankruptcy is usually a last resort after other solutions have been tried.
Falling into debt can happen to anyone. High-interest loans, combined with unexpected life events like illness, divorce, or job loss, can quickly overwhelm even the most responsible person. In these situations, relying on credit to cover living expenses can spiral out of control.
Filing for bankruptcy can bring relief, but it’s not a decision to take lightly. It’s important to carefully weigh the pros and cons, as there may be alternative solutions that provide financial reset you need.
Personal Bankruptcy will NOT eliminate the following debts:
- Mortgage
- Car Loan
- Child and Spousal Support Payments
- Court Fines
- Student Loans
*Less Than Seven Years Old - Debts Resulting From Fraud
What to expect if you file for bankruptcy
If you decide to file bankruptcy in Ontario, we’ll work with you as your trusted guide and advisor every step of the way. We’ll handle everything from the paperwork to communication with your creditors, ensuring you get through the process as smoothly as possible.
Below is an overview of the steps involved in personal bankruptcy
The 5-Step Personal Bankruptcy Process
Finding Hope - A Real Client Story
A single mother’s journey to debt freedom
In this heartfelt testimonial, Roxanne a single mother, shares her emotional journey from overwhelming stress and fear of financial failure to finding relief and support through David Sklar & Associates. Struggling with mounting debts from payday loans, credit cards, and personal loans.
Protection from creditors and a fresh start
When you file for bankruptcy, the Court issues a stay of proceedings, which immediately stops creditor actions such as lawsuits, wage garnishments, and collection calls. Only bankruptcy (or a consumer proposal) provides this legal protection.
Beyond the immediate relief, bankruptcy clears unsecured debts so you can focus on housing, savings, and building a stronger financial future. Free from overwhelming debt, you’ll finally have room to breathe.
How long will it last ?
The length of your bankruptcy depends on whether it’s your first time and your income. First-time bankruptcies can take as little as nine months, or up to 21 months if surplus income applies. A second bankruptcy typically lasts 24 months, or 36 months with surplus income.
Learn more about what assets you can keep after filing for bankruptcy in Ontario.
What will I need to do?
Under Section 158 of the BIA, your duties in bankruptcy include:
- Surrendering non-exempt assets
- Cancelling credit cards
- Providing financial documents to your trustee
- Submitting a monthly budget
- Making required payments
- Completing two credit counselling sessions
- Attending any creditor or court meetings
Will I qualify?
To file for bankruptcy in Ontario, you must:
- Be at least 18 years old
- Owe $1,000 or more
- Be a Canadian resident, own property, or do business in Canada
- Your total debts that exceed the sale value of your total assets, OR
- Have debts that exceed your assets or be unable to repay debts as they come due
Alternatives to bankruptcy?
At David Sklar & Associates, we don’t assume bankruptcy is the only solution. During your consultation, you may explore:
- Consumer proposal: Keep high-value assets and repay part of your debts.
- Debt management plans (DMPs): Reduce interest and restructure credit card payments.
- Debt consolidation loans: Combine debts under a low-interest loan for easier management and lower payments.
Is Bankruptcy the Right Option for You
If unsecured debts are overwhelming, bankruptcy can eliminate them—but it’s important to know the pros and cons first.
Our Licensed Insolvency Trustees (LITs) will review your finances, explain all debt relief options, and answer your questions so you can make an informed choice.
Whatever you choose we’ll guide you through the process from start to finish
Frequently Asked Questions About Personal Bankruptcy
The decision to file for bankruptcy should never be made before speaking with an experienced Licensed insolvency trustee.
Will I lose everything?
The good news is that you won’t lose everything you own if you declare bankruptcy. Ontario bankruptcy laws allow you to keep most of your possessions. These include all your clothing and household furniture, tools, and equipment up to a specific dollar value. You can also keep most pension plans and life insurance policies too.
Learn more about what assets you can keep after filing for bankruptcy in Ontario.
Can I keep my car?
Under Ontario bankruptcy law, you can keep one vehicle worth up to $7,117. But what if its value exceeds this amount? In that case, you’ll have to pay out the non-exempt portion (the total amount above the $7,117 limit) to your Licensed Insolvency Trustee for the benefit of your creditors.
Do I lose my house?
The answer to this question depends on how much equity is in it. In Ontario, you’re entitled to equity on your principal residence up to $10,783. If your home’s equity doesn’t exceed this limit, you can keep your home.
But what if the equity exceeds $10,783? Then, to keep your home, you’ll need to pay out the non-exempt portion to your creditors. If you have a large amount of home equity and are concerned about losing your home under bankruptcy, speak with your Licensed Insolvency Trustee about alternative debt relief solutions.
Can I keep a credit card?
No. When you file for bankruptcy, you must surrender your credit cards to your Licensed Insolvency Trustee. You can obtain a credit card only after you’ve been discharged from bankruptcy. However, you can apply for a secured credit card during your bankruptcy, which requires putting down a deposit before using it.
Will it affect my credit score?
Filing bankruptcy will result in an R9 rating on your credit score, the lowest you can get in Canada. As a result, your credit score will decline, making it harder for you to qualify for loans.
However, your credit score has likely suffered extensive damage if you’re heavily in debt, routinely make late payments, and have had accounts sent to collections. So, claiming bankruptcy won’t have a significant impact at that point. But it will clear your debts, providing you with a clean slate to rebuild your credit.
Does it stay on credit report?
A first-time bankruptcy stays on your credit report for six to seven years after you’ve received your discharge. Subsequent bankruptcies on your credit report will last 14 years before being removed.
Does filing affect my spouse?
Filing for personal bankruptcy will not affect your spouse’s credit score or appear on their credit report. They are not required to give up their assets and will continue to be responsible for paying any loans they’ve entered into by themselves.
However, if you have co-signed any loans with your spouse, they will become 100% liable for the debt once you’ve declared bankruptcy. It’s also possible that assets you hold joint ownership with your spouse may be affected.
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