This FAQ page provides general information on insolvency, bankruptcy, and proposal issues in Ontario.
If you are facing financial difficulties, we recommend that you contact a Licensed Bankruptcy Trustee in your local area to discuss your specific situation. If you are in the Greater Toronto Area, David Sklar & Associates offers a Confidential & Free Initial Consultation, where we will go over your current finances and review your options with you. Call 416-498-9200 to book your Free Consultation.
What is the difference between Personal Bankruptcy and a Consumer Proposal?
In a Consumer Proposal – you will able to keep your assets (as long as you continue to make payments on your secured loans ie mortgages and car loans). Over the life of the Proposal (maximum of five years), you will make payments to your unsecured creditors (through the Trustee) normally at an amount that is less than the actual debt. At the completion of the Proposal – you will be legally released from the unsecured debts covered in your Proposal. In Ontario, a Consumer Proposal will remain on your credit history for three years after it is completed.
In a Personal Bankruptcy – you may be able to keep many of your assets (depending on the nature of the assets). In Ontario, federal laws and the Ontario Execution Act exempt some assets to a certain extent – ie: RRSPs, vehicle, household items, and personal effects. Once the proceeds from the settlement of the non-exempt assets have been distributed to the creditors, and all of the conditions of your Bankruptcy have been met – you will be legally released from your debts owed to your unsecured creditors. If it is your first bankruptcy, and there are no unique issues or surplus income, a Bankruptcy will normally take nine months to complete. A Personal Bankruptcy will remain on your credit history for six to seven years after it is completed.
Each Proposal and Bankruptcy are unique – so be sure to check with your Trustee regarding your particular situation regarding consumer proposal and bankruptcy rules.
Do I qualify for a Consumer Proposal?
That is something that can only be determined by you and a Trustee after reviewing the details of your financial situation.
No, as long as you are an ‘honest but unfortunate’ debtor – who files truthfully, there are no criminal charges associated with filing a Consumer Proposal.
A Consumer Proposal does not normally include the sale or disbursement of assets. If you have a mortgage on your house, you will have to continue making your payments to keep your house – the same goes for your car loans or any secured loans. Secured debts, such as mortgages on homes and car loans, are not covered in Consumer Proposals.
If you have kept your mortgage payments up to date, can prove that you will be able to make mortgage payments in a timely manner in the future, and meet your lending institution’s requirements, you should be able to qualify for a renewal. You will need to discuss this with your lending institution.
At the completion of a Consumer Proposal, you will be released from paying all the unsecured debt covered in your Proposal. Normally, the amount of debt you are required to pay in a Proposal is less than the actual amount of debt owed.
Can I do a consumer proposal before going out of the country to start employment?
You will need to speak to your Trustee regarding your unique situation.
The cost of your Consumer Proposal will be dependent on a number of factors including your monthly budget and the value of your estate. Speak with your Trustee to get specifics on your situation.
A Consumer Proposal can last for up to five years.
If you miss three months of your payments on your Proposal and do not file an Amendment to your Proposal – your Proposal will no longer be a legally binding agreement and your creditors will be free to take legal action against you for the full amount of the debt you owe them. You may have to file for Bankruptcy if you default on your Proposal. Your Trustee will be able to advise you on this.
This would depend on the amount of the debt. If it proves to be nominal, your proposal may continue as offered. However, if the amount of the debt you forgot is material, you may be required to increase your proposal payment. Your Trustee would advise you of any necessary action.
What are the advantages of Personal Bankruptcy?
Will I go to jail if I file for Personal Bankruptcy?
No, as long as you are an ‘honest but unfortunate’ debtor – who files truthfully. There are no criminal charges associated with filing for Personal Bankruptcy.
Who will know about my bankruptcy?
Your bankruptcy will be on public record and all of your creditors (secured and unsecured) will be notified. Your employer will only have to be notified if the Trustee is required to stop a garnishment of your wages.
Will I lose my house if I file bankruptcy?
Not necessarily. Depending on the amount of the equity in your home, you may be able to pay the value of the equity to your Trustee for distribution to your creditors, and as long as you are current with your mortgage payments, you are normally able to maintain the payment to the secured lender and keep your home. You should discuss this further with your mortgage lender and your Trustee.
What if my financial situation changes after filing bankruptcy – can I do a Proposal?
Yes. Your Trustee will provide further information.
How much does a bankruptcy cost?
The cost of your bankruptcy will be dependent on a number of factors including the value of your bankruptcy estate, and your income. Speak with a Licensed Trustee to get further details.
Do I have to sell my house, vehicles, and assets to file a bankruptcy?
Not necessarily. When you have assets that need to be sold or distributed, the Bankruptcy Trustee will handle their disposal. Where you have assets that you do not have equity in (that is you owe more on secured loans for these assets than the assets are worth) and your Trustee agrees, you may be able to negotiate with the holders of the secured loans to keep those assets. Speak with your Trustee for details on your situation.
Are all my debts covered by a bankruptcy?
Personal Bankruptcy only covers your unsecured debts. However, there are certain unsecured debts that are not covered by a bankruptcy, such as child support, alimony, fines and penalties imposed by the Court, and debts that are found to be fraudulent. Student loans may be covered by bankruptcy if the individual ceased to be a student more than 7 years ago, and meets other requirements. Secured debts such as mortgages and car loans, are also not covered in bankruptcies unless you relinquish ownership of these assets.
It is always advisable to speak with your Trustee for details on your specific situation.
What would the effect be of my not getting discharged?
If you do not receive a discharge, once the Trustee has been discharged and completes the administration of your estate, you will remain responsible for your debts and your creditors may once again commence collection action against you.
Can I claim bankruptcy before going out of the country to start employment?
You will need to speak to your Licensed Bankruptcy Trustee regarding your unique situation.
How long is a bankruptcy?
Normally, a bankruptcy from filing to discharge takes nine months, however there are a number of factors that can change the length of a bankruptcy. For example: if there is ‘surplus income’, if this is not your first bankruptcy, if there are disputes from your creditors regarding your bankruptcy, or you fail to comply with your duties as a Bankrupt, etc. Speak with your Trustee for details on your specific situation.
What happens if I hear from a creditor that I forgot to include in the bankruptcy, after I am discharged?
In most cases, as long as the debt was incurred before you filed your bankruptcy and it is a provable debt, the Trustee will send notice to the creditor and it should be cleared. Speak with your Trustee for further information.
How do I rebuild my credit after Bankruptcy or filing a Consumer Proposal?
It will take time to re-build your credit rating – but it can be done. Your Trustee will help you identify those things you can do to re-establish your credit rating. Our Credit Rating information page has some tips and suggestions.
Will I ever get credit again?
Yes, you should be able to get credit again, but it will take time to rebuild your credit rating (see above question).
How long will a Consumer Proposal or Bankruptcy stay on my credit record?
In Ontario, a Consumer Proposal stays on your credit record for three years after it is completed, and a Bankruptcy (if it is your first Bankruptcy) stays on your credit record for up to seven years after it is completed.
What is my credit rating when I file a Bankruptcy or Consumer Proposal?
Presently a bankruptcy is rated as an R9 (bad debt) and a Proposal is rated as an R7 (making regular payments through a special arrangement to settle your debts).
Can I keep my cell phone, internet, etc. if I am in Bankruptcy or in a Consumer Proposal?
Yes, as long as you are current and up to date with your payments.
How does a Bankruptcy or filing a Consumer Proposal affect the sponsorship of my family?
Your sponsorship application does ask if you are bankrupt, as you are stating that you will be financially responsible for your family. Filing a Proposal will help you in this regard.
Can I rent an apartment if I am in Bankruptcy or a Consumer Proposal?
Will filing Bankruptcy or Consumer Proposal affect my future application for a job?
On some job applications, you might have to answer the question ‘Have you ever filed for Bankruptcy?‘. Potential employers do not usually ask if you have filed a Consumer Proposal. For some professions, filing a Bankruptcy could mean a restricted professional license.
Can I include my Student Loans in my Bankruptcy?
There is specific legislation surrounding the ability to include Student Loans in a bankruptcy. Our Student Loans information page contains some information and references on this, but for details on your situation, please speak to a Trustee.
I have questions about applying for OSAP – Ontario Student Assistance Program – what should I do?
Visit the OSAP website – and contact them directly about your situation.
If you are contemplating filing Bankruptcy or a Proposal, contact the Professionals at David Sklar and Associates. We offer a Free Consultation where a Certified Insolvency Professional will review your financial situation, and discuss your options with you. With six offices in the Greater Toronto Area – we are here to help. Call 416-498-9200 or get started with our Quick Assessment Form to book your Free Consultation with the experts at David Sklar & Associates.
If your debt problems seem insurmountable – we can help. At David Sklar & Associates, our Licensed Debt ProfessionalsTM have the experience and knowledge to help you get out of debt. During your consultation, we will help you understand what your current financial situation is, how best to fix it, and how to move on to a better life. With six offices in the Greater Toronto Area – we are here to help.
Call Us Today For a Confidential & Free Initial Consultation Call 416-498-9200