If you decide to file for bankruptcy, you will work with the LIT to complete the necessary paperwork. Following that, the LIT will file this paperwork with the OSB (Office of the Superintendent of Bankruptcy), and you will be declared bankrupt. The LIT will then deal directly with your creditors on your behalf from that point on. You will cease making payments directly to your unsecured creditors, wage garnishments will stop and any legal actions brought by your creditors against you will be halted.

Asset Sale
Once you’ve been declared bankrupt, the LIT will sell your assets, including any acquired during your bankruptcy. This sale excludes assets that are exempted by Ontario and federal laws. Ontario exemptions are discussed more in depth later on this page. The money obtained by the sale will be held in trust by the LIT for distribution to your creditors.

Creditor Notification
The LIT will inform all of your creditors about your bankruptcy after you file for bankruptcy. A creditors’ meeting is sometimes needed or requested. This conference will provide creditors with information regarding the bankruptcy, ratify the appointment of the LIT, appoint up to five inspectors to oversee the administration of your estate, and allow creditors to give instructions to the LIT. You will be obligated to attend a meeting if one is called.

OSB Examination
A representative of the OSB may question you under oath after you apply for bankruptcy. The objective of the interview is to ask you questions about your behaviour, the reasons for your bankruptcy, and the disposition of your assets.

Counselling Sessions
You will be expected to attend two financial counselling sessions as part of your bankruptcy. The goal of these sessions is to help you understand why you filed for bankruptcy and how you can better manage your finances in the future.

Surplus Income Payments
Additional payments to your LIT for distribution to your creditors may be necessary. You must submit a copy of your pay stubs and proof of additional income to the LIT every month during the bankruptcy process. Your surplus revenue is then calculated by the LIT. Surplus income is the portion of your earnings that exceeds the amount of money a family requires to live comfortably. The OSB determines this sum each year. The more dependents you have, the more you are permitted to keep, the more money you earn, the more you must contribute.

Bankruptcy Discharge
A discharge relieves you of your legal obligation to repay the debts you had as of the day you filed for bankruptcy. Except for certain types of obligations that are specifically prohibited by law such as Alimony and child support payments, college loans from within 7 years, court-ordered fines or penalties, and debts incurred as a result of fraud.
A first-time bankruptcy filer without any surplus payments is eligible for discharge in 9 months. How long your discharge takes is a factor of how many times you have filed for bankruptcy and if you have surplus payments. Your LIT will provide you of all necessary discharge information. If you are not eligible for an automatic discharge, the LIT will request that the court hear your discharge application. After that, the court will set a date for the discharge hearing.