Personal bankruptcy: frequently asked questions

No, there are several alternatives to bankruptcy.

• Consumer proposal
  This is an agreement with your creditors that allows you to repay your debts based on your financial situation without resorting to bankruptcy. A consumer proposal must be filed by a Licensed Insolvency Trustee like those at Raymond Chabot, who can guide you throughout the process.
• Debt consolidation
  This allows you to group all of your debts into one loan, which simplifies your payments and financial management.
• Voluntary deposit
  An agreement with the court allows you to reimburse your creditors with one monthly payment, which puts an end to harassment by creditors.

We created several online tools that can help you to determine whether bankruptcy is the best solution for your situation.

• Make a budget. This tool can help you to clearly see whether your finances are balanced or in a deficit.
• Calculate your debt ratio. This will allow you to assess your repayment capacity.
• Watch out for signs of overindebtedness. Identify whether your financial issues should be cause for concern.

No, rest assured, some of your assets are protected and cannot be seized by your creditors. For example, this includes your furniture, RRSPs and RRIFs (except contributions made in the last 12 months) and work tools needed to carry out your professional activity.

However, your TFSA may be seized if you file for bankruptcy.

Yes, it is often possible to keep your home and car during bankruptcy. However, this depends on your situation (the net value of your home or ability to continue making payments, for example).

Generally speaking, your RRSPs and pension funds are protected during bankruptcy and you can keep the funds you saved for your retirement. Only contributions made in the 12 months prior to filing for bankruptcy can be seized. However, your children’s RESPs may be seized.

No, in the event of bankruptcy, your wages are protected by law. This means that your creditors cannot seize your salary to repay your debts and you can continue to meet your needs and your family’s needs during the process.

Bankruptcy allows you to settle most of your debts. However, you will still have certain obligations such as making support payments and paying fines and debts related to fraud.

In order to be discharged from your debts, you must follow all the steps of the bankruptcy process.

Yes, debts owed to Revenu Québec and the Canada Revenue Agency are generally included in a bankruptcy, except where related to fraud.

The main stages of a bankruptcy are:

• Assessing your financial situation
• Recommending the best solution for you
• Signing documents and filing for bankruptcy
• Two progress meetings with your LIT to support you during the process
• Discharge from your debts

For more information, read our article entitled How to File for Bankruptcy.

No, the entire bankruptcy process is handled by the Licensed Insolvency Trustee and you don’t have to appear in court. Filing for bankruptcy also prevents your creditors from taking any further action against you.

The duration of a bankruptcy process depends on your situation. Generally speaking, a first bankruptcy takes 9 months, but it could take as long as 21 months if your income exceeds a certain threshold.

No, once you have filed for bankruptcy, your creditors will no longer be able to take action against you (sue you or seize your assets, for example).

Yes, filing for bankruptcy means you are covered by the law. Most of your creditors must cease their collection proceedings and ongoing asset seizures. However, there are certain exceptions such as:

• secured creditors (mortgage on your home, for example);
• unpaid support payments.

Once your obligations have been met, your bankruptcy process will end and you will receive a certificate of discharge. This document confirms that you are legally released from your debts, except in certain cases provided for by law.

Your credit score will be affected after bankruptcy. Generally speaking, a first bankruptcy will remain on your credit report for six years after you’re discharged from your debts. However, you can gradually improve your credit score by adopting the right strategies. For more information, read our article entitled How to Improve your Credit Score.

In most cases, a personal bankruptcy is confidential. Only certain organizations such as your creditors, tax authorities and credit bureaus will be informed. Unless you choose to tell them, those around you will not know. While bankruptcy records are entered in public archives, the files are rarely accessed.

In the event of personal bankruptcy, you must turn over all your credit cards to your Licensed Insolvency Trustee, even if the balances have been paid. However, you can apply for a secured debit or credit card that you can use for daily and even online purchases as long as you have available funds in your bank account.

Bankruptcy does not impact any obligations or rights related to support payments. Individuals who are required to make support payments must continue to do so even after declaring bankruptcy. Those who receive support payments will continue to do so even if their ex-partner declares bankruptcy.

Bankruptcy is a personal process and does not affect your children or spouse unless you incurred joint debts. Repayment obligations for joint debts remain in place. Furthermore, family allowance payments cannot be seized.

To find out more about how bankruptcy can affect a couple, click here.

Yes, bankruptcy doesn’t prevent you from travelling overseas.

Yes, even after declaring bankruptcy, you can take out loans and rebuild your credit by making payments on time and using credit responsibly. Your credit score will improve over time.

For more information, read our article about taking out a loan after declaring bankruptcy.

The cost of a personal bankruptcy is determined by law and can vary based on your situation (income, assets and whether this is your first bankruptcy, for example). During a free initial consultation, your advisor will confirm the exact amount.

During the meeting with your Licensed Insolvency Trustee, you will work together to determine the frequency of payments and ensure they align with your monthly cash inflows.

It’s important that you notify your Licensed Insolvency Trustee of any increase in income. If your income exceeds the standard provided for in the Bankruptcy and Insolvency Act, a portion may be paid to your creditors as surplus income.