what are the effects of filing bankruptcy?

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What are the effects of filing bankruptcy in Ontario? Our presentation will explain which debts can be absolved and how the process works.

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Page 1: What Are The Effects of Filing Bankruptcy?

The Effects of Filing

BankruptcyIn Ontario

www.hoyes.com

Page 2: What Are The Effects of Filing Bankruptcy?

Table of ContentsWhat Bankruptcy Does

Seizure of Assets

Your Credit Rating

Required Duties of a Bankrupt

Will Bankruptcy Effect My Spouse

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Page 3: What Are The Effects of Filing Bankruptcy?

Claiming bankruptcy in Ontario gives an individual with overwhelming debts the opportunity for a fresh financial start.

It does this by absolving them of their debts, stopping collection calls and ending wage garnishment orders against them.

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What Bankruptcy Does

Page 4: What Are The Effects of Filing Bankruptcy?

Keep in mind that not all debts can be absolved. It is very important to ensure that you know which of your debts will be absolved before deciding to file an Ontario bankruptcy.

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What Bankruptcy Does

Page 5: What Are The Effects of Filing Bankruptcy?

Seizure of Assets

Once you are legally bankrupt you will be required to surrender your assets to a trustee. These assets will then be sold and the money earned will be distributed amongst your creditors.

However, you will never be left with nothing!

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Page 6: What Are The Effects of Filing Bankruptcy?

Seizure of Assets

Under Bankruptcy and Ontario law there is a list of items which are exempt from seizure, when claiming an Ontario bankruptcy.

Some bankruptcy exemptions include:

• Maximum of $5,650 in personal possessions (clothing, jewelry etc.) • One motor vehicle worth up to $5,650 (cars, trucks, etc.) • Maximum of $11,300 for furnishings • Maximum of $11,300 for any tools of trade (equipment that is used to

earn a living) • Certain types of life insurance and investments. • All RRSP, RRIF and DPSP (Deferred Profit Sharing Plan) except for

contributions made in the last 12 months

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Page 7: What Are The Effects of Filing Bankruptcy?

Seizure of Assets

Your Home

If you don't have significant equity in your home, then claiming bankruptcy should not affect your house.

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However, to get the most accurate answer for your personal situation, be sure to fully discuss the disposition of your home with a licensed trustee.

Page 8: What Are The Effects of Filing Bankruptcy?

Once a person files bankruptcy in Ontario, the Office of the Superintendent of Bankruptcy will notify the credit bureaus and the bankruptcy will be noted on your credit report.

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Your Credit Rating

For a first time bankrupt, this mark will remain on your credit for 6 years after your discharge.

For a second-time bankrupt, it will remain for a period of 14 years.

Page 9: What Are The Effects of Filing Bankruptcy?

This high risk status will make your ability to obtain future credit more difficult and increase the interest rates that you will be charged, for any credit that you are able to obtain.

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Your Credit Rating

Having a bankruptcy noted on your credit report flags you to lenders as being high risk.

Page 10: What Are The Effects of Filing Bankruptcy?

However eliminating your debts gives you a fresh start.There are ways to successfully rebuild your credit after being discharged from your bankruptcy.

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Your Credit Rating

• Pay your bills on time

• Monitor your credit report for

errors

• Build your savings

• Obtain a secured credit card

• Apply for credit sparingly

• Use credit wisely

Page 11: What Are The Effects of Filing Bankruptcy?

This is our number one recommendation. Missed payments, habitually late payments or stopped payments will likely be reported to the credit reporting agencies. This will continue to ruin your credit and prevent you from qualifying for new borrowing.

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Your Credit RatingPay your bills on time

Page 12: What Are The Effects of Filing Bankruptcy?

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Your Credit RatingMonitor your credit report

You should get a copy of your credit report four to six months after your discharge to ensure that all information reported there is accurate and up to date. If there are errors, contact the reporting agency and ask them to fix them. You can get a free copy of your credit report by mail by contacting one of the two Canadian credit reporting agencies: Equifax or Trans Union.

Page 13: What Are The Effects of Filing Bankruptcy?

Having savings itself does not affect your credit score, however having an adequate emergency fund can prevent you from missing payments if an unexpected event happens. You should also save an adequate down payment if you are looking for a new car loan or mortgage.

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Your Credit RatingBuild your savings

Page 14: What Are The Effects of Filing Bankruptcy?

To start, you may need to consider a secured visa card to begin to show lenders that you can establish a good repayment history. It is not the card that gives you good credit, it is the process of using the credit on the card and paying off your balance each month. One such card includes the Home Trust Visa secured credit card. More information can be found on this Home Trust Visa page.

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Your Credit RatingConsider a secured credit card

Page 15: What Are The Effects of Filing Bankruptcy?

It is best to only apply for one secured credit card initially. Multiple loan applications can show up on your credit report and hurt your credit score. Apply for your card only after you have saved for the required deposit. Don’t spend more on the card than the initial deposit limit. Bumping up, or passing your limit can hurt your credit too. In addition, beware of offers to increase your limit. You do not want to get in trouble with debt again.

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Your Credit RatingLimit your credit applications

Page 16: What Are The Effects of Filing Bankruptcy?

No matter what type of credit you use after your bankruptcy, use it sparingly. Be sure you can pay your balance in full as soon as soon as your statement arrives. This will help you avoid both missed payments and the high interest debt trap again.

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Your Credit RatingUse credit wisely

For example, obtain a small line of credit and use it to pay bills only. Then, be sure to immediately pay off the line as you use it. Continue to repeat this process, and over time, it will have a marked improvement in your credit score.

Page 17: What Are The Effects of Filing Bankruptcy?

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Required Duties of a Bankrupt

Once your papers have been filed with the Official Receiver, you are legally bankrupt and this declaration cannot be reversed without an official court order.

During this bankruptcy period, generally nine months for a first time bankrupt, you will be obligated to perform certain duties; outside of surrendering your assets.

Page 18: What Are The Effects of Filing Bankruptcy?

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Required Duties of a Bankrupt

•Attending two mandatory financial

counselling sessions

•Monthly Reporting of all income

and expenses to your Trustee

•Monthly surplus income payments,

depending upon your earning, size

of family and individual

circumstances.

Some duties of a bankrupt will include:

*This is a very general overview of what some of these duties are.

Page 19: What Are The Effects of Filing Bankruptcy?

As long as all of your debts are solely yours, then claiming bankruptcy should have no affect on your spouse or their credit rating.

However, there are some unique circumstances. You need to ensure you are fully aware of all of the details on how claiming bankruptcy affects your spouse, prior to deciding if an Ontario bankruptcy is the correct choice for you.

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Will Bankruptcy Effect My Spouse?

Page 20: What Are The Effects of Filing Bankruptcy?

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