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What You Should Know About Bankruptcy and the 2018 Ontario Provincial Election

Posted on 7 June 2018

Our 25th Premier, Kathleen Wynne has now served in office since 2013. By the end of the day our political landscape may look very different. If you’ve been considering, or have recently filed personal bankruptcy in Ontario – you may be wondering if a change to “the guard” in Toronto will have an impact on you.

Bankruptcy Changes are Federal Changes

The Bankruptcy and Insolvency Act of Canada (BIA) is federal legislation. However, Canadian provinces do create laws and rules that can have an impact on very specific aspects of the process. Overall, major changes to how bankruptcy works is always made at the Federal level. The outcome of today’s election will not result in major reforms to bankruptcy law.

Presently, and by extension, it is Prime Minister Trudeau and the Liberal party that always has the final word on proposed changes to the BIA. Here is a brief history of the BIA in Canada:

  • The BIA came into force on July 1, 1920
  • The first round of big changes to the BIA came in 1992, 1997, and 2005
  • Major reforms 2007-2009

The most recent BIA changes took a long time to be fully integrated. Knowing how slow changes to bankruptcy laws can be, even if our Premier could make changes at the provincial level, it is clear that the 2018 election campaign did not make any mention of reform to the BIA.

How Provinces Can Impact Bankruptcy

Canadian provinces may not be able to change the BIA itself, but sometimes our provinces take a different approach to interpreting and enacting the rules and guidelines set out by the federal government.

Assets are a good example. In Alberta the first $40,000 of equity in a bankrupt person’s principal residence is exempt from seizure in bankruptcy. Ontario’s exemption amount is $10,000 and subject to specific conditions. Tools of the trade exemptions also vary from province to province. Prince Edward Island exempts tools used in your business or trade up to a maximum of $2,000. Ontario’s maximum is set at $11,300.

While provincial asset exemptions may vary, the fundamental principles of how bankruptcy works in Canada does not.

Bankruptcy Law is Paramount

Regardless of any changes our current election may or may not bring to Ontario, bankruptcy law is always paramount. The BIA is the authority on bankruptcy, regardless of what happens at any other level of government. The law dictates that legal activity against the bankrupt must stop.

A great example is when a couple separates in Ontario and writes an agreement to “assume” joint debt. In this example bankruptcy law overtakes family law. The joint debt will go away for the bankrupt but the other joint party will still be legally responsible regardless.

Should we expect a push for change in Ontario?

Candidates in the 2018 election have not addressed bankruptcy reform, and have presented more pressing issues while campaigning. If you are recently bankrupt or considering bankruptcy give us a call at 310-4321. We will review your circumstances and offer the path that leads to debt freedom.

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