How to File for Bankruptcy in Ontario

What Is Personal Bankruptcy in Ontario?

Personal bankruptcy in Ontario is governed by the federal Bankruptcy and Insolvency Act (BIA) and administered by Licensed Insolvency Trustees (LITs). Filing for bankruptcy provides immediate legal protection from most creditors and, upon discharge, eliminates most unsecured debts.

Step 1: Consult a Licensed Insolvency Trustee (LIT)

You must work with a Licensed Insolvency Trustee — licensed professionals who are required to explain all your debt relief options before proceeding. Initial consultations are free.

Step 2: File a Statement of Affairs

You will complete a Statement of Affairs — a comprehensive document listing all your assets, liabilities, income, expenses, and creditors. This is filed with the Official Receiver, triggering an automatic "stay of proceedings" that immediately stops most collection actions, lawsuits, and wage garnishments by unsecured creditors.

Step 3: Surrender Non-Exempt Assets

You must surrender all non-exempt assets to the LIT for distribution to creditors. Ontario exemptions include RRSP contributions made more than 12 months before bankruptcy, certain household goods and tools of the trade, a vehicle up to approximately $6,600, and equity in your home up to approximately $10,000.

Step 4: Perform Required Duties

During bankruptcy, you must: attend two credit counselling sessions, provide monthly income and expense statements, and pay surplus income. Surplus income is calculated as 50% of your net income above a federally-set threshold. Significant surplus income extends your bankruptcy from 9 to 21 months.

Step 5: Discharge

Upon discharge, most unsecured debts are eliminated. Debts that survive bankruptcy include: alimony and child support, court-ordered fines, student loans (if you left school less than 7 years before filing), and debts obtained by fraud.

Impact on Credit

A first bankruptcy remains on your credit report for 6 years after discharge, significantly limiting your ability to obtain credit during that period.