What Happens When you File for Bankruptcy

If you’re wondering what happens when you declare bankruptcy in Ontario, it all begins with working with a Licensed Insolvency Trustee who guides you through each step of the process.

Here’s how bankruptcy can help you:

• Stop collection calls & legal action — instantly regain peace of mind.
• Eliminate most unsecured debts — say goodbye to credit card debt, payday loans, and more.
• Keep essential assets — protect what matters most, like your home and personal belongings.
• Get expert guidance — Licensed Insolvency Trustees handle everything and guide you every step.
• Access free credit counseling — learn how to rebuild and strengthen your financial future.
• Start fresh and stress-free — focus on your goals with a clean financial slate.

Declaring bankruptcy can be the first step toward a brighter financial future. It’s a legal process designed to help you eliminate debt, reduce stress, and give you a fresh start.

Curious about your options?

Let’s talk. Our experienced trustees are here to help you explore solutions and explain what happens when you declare bankruptcy in Ontario, so you can make the right decision for your financial future.

📞 Call 905-721-7506 for a free consultation today!

If you’re considering bankruptcy a Licensed Insolvency Trustees (LIT)—are the only persons authorized to administer bankruptcies in Canada—the process is straightforward and doesn’t require a bankruptcy lawyer. Here’s a condensed look at how bankruptcy works and who’s involved at each stage.

Initial Consultation – Assessing Your Situation

The process starts with a consultation with a Licensed Insolvency Trustee. They will review your debts, income, and assets and explain how bankruptcy works, its potential impact on your finances, and alternatives like a consumer proposal if it’s a better fit.

Filing for Bankruptcy – Starting the Process

If bankruptcy is the right solution, the trustee will prepare and file the necessary paperwork with the Office of the Superintendent of Bankruptcy. From that moment, collection calls, wage garnishments, and legal actions stop immediately. The trustee will also explain which assets you can keep and which ones may need to be surrendered.

What Happens to Your Property?

In Ontario, certain assets are exempt from seizure during bankruptcy, meaning you can keep them. These typically include:

• Basic household items, furniture, and clothing.
• Tools of your trade (up to a specific value).
• A primary vehicle (up to a set value).
• Most registered retirement savings plans (RRSPs), except recent contributions.
• A portion of the equity in your primary residence (varies by province).

Non-exempt assets—such as luxury items, secondary vehicles, or high-value investments—may need to be surrendered and sold by the trustee to help repay creditors. The trustee will provide a clear breakdown of what’s protected and what’s not based on your situation.

Once your bankruptcy is filed, the court issues a “stay of proceedings“. A stay of proceedings, means that debts are forgiven (gone). Creditors are prohibited from calling or harassing you and all legal actions including wage garnishments are stopped.

Bankruptcy Discharges – Your Fresh Financial Start

After completing the bankruptcy process, you’ll receive a discharge—usually after 9 months (or 21 months if surplus income applies). This officially clears you from unsecured debts in your bankruptcy, giving you a clean slate and the opportunity to rebuild your financial future.

Wage Garnishments: How filing for bankruptcy stops wage garnishments.

Bankruptcy: What are the benefits and disadvantages of bankruptcy

Bankruptcy FAQs: Questions answered about filing for bankruptcy

Bankruptcy law allows for debt relief and financial counseling of a person or business while treating creditors fairly.

★★★★★ It was easier than I initially thought, I gave a list of all my creditors and credit card bills.  They took me through the whole bankruptcy process including updating my taxes.  A huge relief to have this all cleared up.Michael Dumas. Whitby

Many people worry about losing everything in bankruptcy, but the truth is, you keep most of your essential belongings. Bankruptcy laws in Canada are designed to protect the things you need to move forward. Here’s what you can typically keep:

• Personal belongings – All clothing and essential personal items
• Furniture & appliances – Up to $13,000 in value
• Your vehicle – If worth $6,000 or less
• Tools of the trade – Any tools or equipment needed for your work
• Farming equipment – Up to $19,000 in value
• Certain financial assets – Pension plans, life insurance policies, and some RRSPs

Rules and exemptions can change over time, but our Licensed Insolvency Trustees are here to guide you through what applies to your situation.

Still have questions? Call us today to find out exactly what you can keep and how bankruptcy can give you a fresh start.

When you file for bankruptcy, certain assets may need to be surrendered to the Licensed Insolvency Trustee. These are called non-exempt assets and typically include:

• Homes with equity – If your home has value beyond your mortgage, it may need to be sold.
• Vehicles worth over $6,000 – You may need to surrender or buy back the difference.
• Savings & Investments – This includes TFSA accounts, RESP savings, and cash in bank accounts.
• Valuable personal items – Any possessions that can be sold for cash, excluding essential items.

Considering Alternatives?

If you own assets, have income, and are working, a consumer proposal may be a better option—allowing you to settle your debts without losing any property.

No Assets? No Problem

If you don’t own significant assets, there’s nothing to surrender, making bankruptcy a straightforward solution.

Not sure what applies to you? Give us a call—we’ll help you understand your options and find the best path forward.

Filing for bankruptcy immediately stops collection efforts and gives you relief from overwhelming debt. When you declare bankruptcy, the court issues a Stay of Proceedings, which means:

• All loans and debts are cancelled
• Unpaid credit card balances are erased
• Wage garnishments stop
• Creditors must stop contacting you

The Bankruptcy and Insolvency Act is designed to give people who can’t reasonably repay their debts a second chance.

When you file for bankruptcy, our Licensed Insolvency Trustees (LIT) will guide you through the process, ensuring all necessary forms and paperwork are properly filed.

The trustee’s responsibilities include:

• Assisting you throughout the bankruptcy process
• Liquidating any non-exempt assets
• Distributing funds to creditors from liquidated assets
• Negotiating settlements and communicating with creditors
• Providing credit counseling and exploring alternatives like consumer proposals

Once your bankruptcy is filed, your creditors are notified within five days. From that point, the trustee handles all communication, so you don’t have to deal with collection calls or demands.

In some cases, creditors may file a claim to recover losses from the assets you surrender, but the trustee manages this process on your behalf.

Considering bankruptcy? Call us today to learn how we can help you move forward with confidence.

★★★★★ Bankruptcy was the last thing we wanted to do, but the trustee made the process very smooth, they did all the paperwork and dealt with our creditors.  The garnishee was stopped and we can sleep at night, we now have a fresh start. Many thanks, David Newman, Ajax

Filing for bankruptcy affects the way in which tax returns are filed. There are 4 types of income tax returns that must be filed.

• previous year’s tax returns (if it was not filed),
• pre-bankruptcy return,
  • for the beginning of the tax year to the day before filing
  • from the 1st of January to the day before your filing date.
• in-bankruptcy return,
  • reporting any income you received from the liquidation of your assets, which comes into the estate and is disbursed to creditors as per the Bankruptcy and Insolvency Act.
• a post-bankruptcy return
  • for your income reporting,
  • from the date of bankruptcy to the end of the tax year, Dec. 31st.

The trustee will assist with dealing with the CRA . The returns are filed up to the date of bankruptcy.

Any funds received from filing back taxes become property of the estate and are for the benefit of the creditors.

The bankrupt is responsible to surrender all credit cards, non-exempt property and:

• attend any creditor meetings
• provide any tax information, e.g T4 slips
• each month report all income, living expenses and any material budgetary charges
• where you have surplus income, make payments where required
• attend credit counselling sessions
• where you borrow more than 500 dollars, advise the lender that you are a bankrupt
• you may not be a director of a company

Where this is the first time filing and you have no surplus income then you are eligible to be discharged in nine (9) months.

The discharge means that all your debts are canceled.

Bankruptcy doesn’t mean the end of your financial future—it’s a fresh start. While a record of your bankruptcy will remain on your credit report for at least six years after discharge, there are ways to move forward.

Here’s what to keep in mind:

• You may still qualify for credit sooner than you expect.
• Taking steps to gradually rebuild your credit can improve your financial standing.
• Responsible financial habits can help you put this chapter behind you and move forward with confidence.

Ready to take the next step? Call us today, and let’s discuss how you can rebuild and regain financial stability.

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