Personal bankruptcy in Quebec

Inflation and the rising cost of living in Quebec are putting many people under financial pressure and forcing them to declare bankruptcy. However, bankruptcy is far from being a failure. It’s a legal solution to free you from your debts. Here’s a brief overview to help you better understand.

In short

If your financial situation has become unmanageable, filing for personal bankruptcy allows you to free yourself from debts and start from scratch.

  • Under the law, bankruptcy can only be filed by a Licensed Insolvency Trustee.
  • It has a number of advantages, including protecting you from your creditors.
  • To declare bankruptcy, you must meet certain conditions, including being insolvent, i.e., owing more money than the value of your assets.
  • Declaring bankruptcy is a difficult decision, but it may be the best solution for you.
  • You can consider other options such as a consumer proposal.
  • One of Raymond Chabot’s Licensed Insolvency Trustees will guide you through the process so you can regain financial stability.

What is personal bankruptcy?

Personal bankruptcy is a solution to indebtedness that allows you to clear your debts (credit cards, lines of credit and unpaid taxes, for example) so you can regain control of your finances. Bankruptcy is a procedure governed by the Bankruptcy and Insolvency Act (BIA).

Only a Licensed Insolvency Trustee (LIT) such as those at Raymond Chabot are authorized to file for bankruptcy. Therefore, it’s best to contact them directly. During your first free consultation, all your options will be evaluated. Furthermore, consulting a trustee doesn’t necessarily mean that you’ll declare bankruptcy. Alternative solutions such as a consumer proposal can also be considered (see below).as a proposal to creditors (see below).

What are the steps involved in filing for bankruptcy?

  1. Notifying your creditors

    The LIT will notify your creditors of your action and become their sole contact, which frees you from phone calls and pressure.

  2. Selling some of your property

    The trustee will seize and sell certain assets in order to repay your creditors.

  3. Possible wage deduction

    Based on your income, a portion of your salary may be paid to your creditors.

  4. Discharge from your debts

    You’ll be discharged from your debts between 9 and 21 months from the filing date (if this is a first-time bankruptcy).

Please note that, even when you declare bankruptcy, contrary to several myths and preconceptions, you can keep some of your assets such as your RRSPs and furniture.

What are the conditions for filing for personal bankruptcy?

  • You’re insolvent, i.e., you owe more money than your assets are worth.
  • Your debts exceed $1,000.
  • You reside or own property in Canada.
  • You’re unable to pay your debts on time or you’ve stopped making payments.

The LIT will help determine whether you’re eligible for bankruptcy.

What are the benefits of declaring bankruptcy?

  • You’ll be discharged from your debts.
  • Your financial stress will be reduced.
  • You’ll be protected from your creditors.
  • You’ll regain control of your financial situation.

What are the disadvantages of bankruptcy?

  • You’ll have to sell some of your assets.
  • For six to seven years, your credit file will show that you declared bankruptcy. During this period, you’ll find it harder to secure credit. However, over time and by adopting healthy habits, you can improve your credit.

Declaring bankruptcy is a difficult decision, but it may be the best solution for you.

What are the alternatives to bankruptcy?

Bankruptcy is a last resort solution, but there are other options available.

  • Consumer proposal

    With this agreement, you pay off only a portion of your debts and extend the repayment period over a maximum of five years. You can also keep some of your assets. There are several differences between bankruptcy and a consumer proposal, which can be beneficial in certain situations.

  • Debt consolidation

    You group your debts into one loan at a lower interest rate and make a single monthly payment.

  • Voluntary deposit

    You gradually reduce your debts by making monthly payments to the Court.

Regardless of your situation, rest assured that you’re not alone. One of our LITs will support you with care and find a solution that’s best suited to your needs. Talk to one of our trustees today.

FAQ on personal bankruptcy

Yes, in certain situations, depending on the value of your home and your financial situation.

 

A first bankruptcy remains on your credit report for six years after you’re discharged from your debt while a second bankruptcy remains on record for 14 years.

Your debts owed to Revenu Québec and the Canada Revenue Agency are generally included in your bankruptcy unless they are tax fraud penalties.

Yes, you can travel as long as you respect your obligations towards your LIT and can be easily reached during the process.

You must inform your trustee. A portion of your additional income may be redistributed to your creditors based on the surplus income obligations provided for by law.

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