Bankruptcy law in Ontario is governed by four primary pieces of legislation:
- The Canadian Bankruptcy and Insolvency Act (BIA);
- Ontario Execution Act: bankruptcy exemptions that define what you keep when you claim bankruptcy in Ontario;
- Limitations Act: how the statute of limitations affects old debt; and
- the Personal Property Security Act of Ontario: how secured creditors are treated in a personal bankruptcy.
Taken together these laws deal with all aspects of your bankruptcy. They define your rights and the rights of your creditors.
The Bankruptcy And Insolvency Act
The Bankruptcy and Insolvency Act (BIA) is federal legislation that provides a legal framework for someone struggling financially to get relief. The act allows for the “poor and unfortunate debtor” to find a way out and obtain “rehabilitation” from crippling debts.
The BIA guides all parties through the bankruptcy and proposal process by defining the rules of the game for personal bankruptcies and more particularly the duties and responsibilities for:
- Licensed Insolvency Trustees;
- yourself as the debtor or bankrupt;
- the bankruptcy court; and
- the Office of the Superintendent of Bankruptcy.
The Act defines our roles and tells us how we all fit into the process and what procedures need to be done if you’re filing a consumer proposal or claiming personal bankruptcy. It covers:
- The types of insolvency proceedings that you can file. In addition to filing personal bankruptcy, an individual can obtain debt relief by filing a consumer proposal, or if you owe more than $250,000 in debts (not including the mortgage on your principal residence) through a Division I proposal.
- Procedural matters such as what paperwork needs to be filed, who gets notified, and if and when any meetings are required.
- How property is handled. Most exempt assets are defined by provincial legislation although there are some basic exemption rules included in the Bankruptcy and Insolvency Act.
- How funds are distributed to your creditors.
- And lastly, it also defines the consequences of not following the rules and procedures required in the BIA.
In addition to the Bankruptcy & Insolvency Act itself, the Canadian government regularly publishes Directives about how to handle certain specific matters. Your Ontario bankruptcy trustee must stay current on all new rules and requirements so that your bankruptcy, or proposal, goes smoothly.
Ontario Executions Act
Under the BIA you can keep property that you
- hold in trust for someone else (since it’s not really your asset),
- HST credits (in certain circumstances),
- RRSPs (except what you have contributed in the last year)
- items you own that are “exempt from execution or seizure under any laws applicable in the province within which the property is situated and within which the bankrupt resides”.
Exempt property in Ontario is listed in the Ontario Execution Act. The amount and types of exemptions change so it is always advisable to talk to a trustee about your particular circumstances.
Find out What Assets Are Exempt in Ontario.
The section of the Ontario Limitations Act pertaining to bankruptcy relates to the statute of limitations surrounding debt collection.
Read more about the Ontario Limitations Act and how it affects your debt.
Personal Property Security Act
The Personal Property Security Act (PPSA) affects your bankruptcy by requiring your secured creditors to register their interest in any assets you put up for collateral for a loan or any liens against your property. Secured assets are not included assets in a bankruptcy so it is important that your trustee conduct a search of the PPSA system before selling any assets or allowing a creditor to take possession of an asset themselves.
Learn more about Secured versus Unsecured Debt and the PPSA.
As you can see, there is a lot to know, yet under all the details, claiming bankruptcy is a rather simple process. If you need help understanding how the law applies in your particular situation, contact an Ontario bankruptcy trustee today.