What happens to my judgment if the debtor files for bankruptcy while I am trying to collect in Ontario?

When a debtor files for bankruptcy in Canada under the Bankruptcy and Insolvency Act, an automatic stay of proceedings takes effect immediately. This stay prevents you — and virtually all other creditors — from continuing or starting any collection or enforcement action against the bankrupt debtor personally. Wage garnishments in progress must stop. Writs can no longer be actively enforced against the bankrupt's personal assets.

The debtor's assets (with certain exemptions under provincial law) vest in a Licensed Insolvency Trustee (LIT), whose job is to administer the estate, sell non-exempt assets, and distribute the proceeds proportionally among proven creditors. As an unsecured judgment creditor, you must file a "proof of claim" with the LIT within the required time to participate in any distribution.

In a bankruptcy, unsecured creditors — including most judgment creditors — are generally paid last, after secured creditors and preferred claims such as certain wages and government source deductions. In many personal bankruptcies, there are few or no assets left for unsecured creditors after the priorities are satisfied, meaning you may receive little or nothing.

The bankrupt debtor typically receives an automatic discharge from their debts (including the judgment against them) after a period that depends on their income and whether it is a first bankruptcy. Once discharged, you can no longer pursue them personally for the pre-bankruptcy debt.

If you receive notice that the debtor has filed for bankruptcy, contact the LIT promptly to file your proof of claim before the claims deadline.