Although residents of Ontario have traditionally been less willing to take on consumer debt than residents of the United States, that does not mean that they have avoided consumer debt entirely. Many people, of course, use credit cards, car loans, installment loans, and other forms of consumer credit to make large purchases now instead of saving up and paying off their purchases all at once.
Default rates on such consumer debt remain low throughout Ontario and the rest of Canada. However, not everyone who is carrying a load of consumer debt sleeps easy at night even when they are not in immediate danger of default. A study at the beginning of 2013 indicated that one in twenty Canadians feared getting into a situation where they would be unable to pay their consumer debts. In other words, 5 percent of Canadians believe they are not all that far away from being unable to make their minimum monthly payments on their debt.
If you are a resident of Ontario and part of this 5 percent, you should know about the different debt assistance options you have to choose from if you find yourself unable to pay your minimum debt payments. These options include debt settlement, debt consolidation, credit counselling, the consumer proposal, and bankruptcy. Ontario residents who are so far in debt that they will never be able to pay off what they owe through normal means traditionally opt for the bankruptcy process.
What is an Ontario Bankruptcy?
Bankruptcy in Ontario offers residents the ability to start over financially. Anyone who owes at least $1,000 in debt that is not secured by an asset, such as a house, can file for bankruptcy. At the end of the bankruptcy process, most unsecured debts are erased, which means that you are no longer liable for them.
Filing for bankruptcy, however, does not mean that you will keep all of your assets. Your creditors have a legal claim to what you owe them, and if your assets are great enough, your creditors will receive something from you. In bankruptcy, a licensed bankruptcy trustee administers your property in the form of a trust. You hand over your possessions, minus certain exemptions, and the trustee distributes to your creditors proceeds gained from selling these possessions. Thus, creditors do not lose all of what they loaned you when your bankruptcy is finally discharged.
Bankruptcy in Ontario erases most—but not all—of your debts. Debts that cannot be erased under bankruptcy include alimony, student loans when bankruptcy is filed within seven years of completing your degree, court fines, and legal damages for assault.
Ontario Bankruptcy Exemptions
As noted, there are exemptions when you file for bankruptcy in Ontario that allow you to keep at least some of what you own. That way, your new start to your financial life does not force you to get going again from a position of having a total net worth of $0. When you file for bankruptcy in Ontario, you are allowed to keep:
• $5,650 worth of clothing
• $5,650 equity in your vehicles
• $11,300 each of household furniture/appliances and trade tools
Is Bankruptcy Right for Me?
The answer to this question depends entirely on your personal financial situation. When you have exhausted all other debt solutions, the only help you have for your finances is bankruptcy. Ontario residents who must finally file for bankruptcy, however, do have some advantages. If you file for bankruptcy, you will receive mandatory financial counselling to help you avoid bankruptcy in the future. Being released from debts also frees up disposable income that you can use for other purposes.
On the other hand, residents should know that there are some significant disadvantages to bankruptcy. Your credit will be all but for seven years, and you may also be prevented from serving on the boards of certain organizations while your bankruptcy is in process.
For More Help
Filing for bankruptcy should not be done spontaneously and it pays to know about the other debt solutions available to Canadians. Fill out the debt relief form for more information on other forms of debt assistance
get your free savings Estimate