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Frequently asked questions

Do you have questions about your overindebtedness? Here are some answers to our most frequently asked questions.

1. How do I know if I have too much debt?

If you’re asking yourself this question, you might have too much debt. But to get to the bottom of things, take our diagnostic quiz. It’ll only take a few minutes and you’ll get a better idea of your situation. If you notice that you’re having trouble paying your bills or that you’re stressed about money, you might be in excessive debt. It might be a good idea to meet with us.

2. What are the warning signs of a debt problem?

There are many warning signs:

  • A financial institution refusing to honor cheques you have written. In this case, you can make an agreement with your creditors and ask that they delay cashing your cheques
  • Trouble paying for everyday expenses such as electricity, phone, cable, rent, etc.
  • Having to use a credit card to pay for necessities
  • Paying the minimum balance on credit cards or using one credit card to pay the balance on another

These warning signs often lead to marital discord. If any of these warning signs describe you, you should take strategic action now. Our trained experts will help you make the right choices for your situation.

3. Is there anything I can do to avoid debt?

Budget planning is the most effective way to prevent debt. Making a budget will help you control your spending and meet your goals.

You should put money aside each month for fixed expenses that are due over the course of the year. That way you will have the funds available when you receive a bill that must be paid in short order (e.g., car registration and repairs, clothing, insurance, etc.).

4. How can I get rid of my debt?

There are four ways to eliminate debt:

5. Can I borrow money from a financial institution to pay off my debts?

Yes, you can but it depends on several factors including your income, job stability, and debt level.

If you cannot reach the debt ratio required by financial institutions, you cannot consolidate your debt. In that case, we recommend you meet with a Licensed Insolvency Trustee.

6. How can I improve my credit score quickly?

Hold a steady job, make a budget and stick to it, pay in cash as soon as possible, and save money to build up your assets. This will help improve your credit score. Taking out new loans from your financial institution and making your payments religiously will also show that you have recovered from your financial troubles.

7. Creditors are threatening to seize my property. What should I do?

Bankruptcy and consumer proposals are two ways of stopping seizure proceedings. Feel free to contact a Licensed Insolvency Trustee for advice.

8. Is there a typical profile of people who declare bankruptcy?

There is no typical profile that applies to all bankruptcy victims. People of any age or social status may face bankruptcy as a result of difficult personal situations such as illness, job loss, or marital problems.

9. Is there a minimum amount of debt required to declare bankruptcy?

According to the Bankruptcy and Insolvency Act, people with $1,000 in debts can declare bankruptcy if they are unable to pay their debts on time. In practice, when someone has less than $5,000 in debts other solutions may be considered.

10. If I declare bankruptcy, will my wages be garnished?

No. In fact, bankruptcy prevents your creditors from garnishing your wages and protects your income to ensure a reasonable standard of living.

11. If my wages were garnished by a creditor before my bankruptcy, will my employer be informed of my bankruptcy?

Your employer was already contacted by your creditors so they could garnish your wages. In order to stop this wage garnishment, we will have no choice but to inform your employer of your bankruptcy. To avoid this, you should consider declaring bankruptcy before one of your creditors garnishes your wages.

12. I have a lot of debt and I don’t want to declare bankruptcy. Is there another way I can get out of debt?

Yes, there are several ways for people to get out of debt including consumer proposal, voluntary deposit, and debt consolidation. Our counsellors will explain your options to help you make the best choice for your situation.

13. How would bankruptcy affect my GST and QST refunds and my tax credits?

Tax refunds for the bankruptcy year may be seized by the Licensed Insolvency Trustee. GST refunds will be sent to the trustee during your bankruptcy. In some cases, they may be returned to you.

QST is not seized by the Licensed Insolvency Trustee. Federal tax credits will be sent directly to the trustee. Provincial tax credits for the year of your bankruptcy will have to be transferred to the trustee.

14. If I declare bankruptcy, will the money I receive for my children from the federal and provincial government be seized?

No, family allowances will never be seized.

15. Can my retirement pension and/or my RRSPs be seized if I declare bankruptcy?

Retirement pensions cannot be seized. RRSPs cannot be seized either, except for contributions made in the 12 months preceding bankruptcy.

16. If I declare bankruptcy, do I have to continue paying off my student loan?

If you finished school more than 7 years ago, you will not have to pay off your student loan because it becomes a dischargeable debt in the event of bankruptcy. Otherwise you will have to continue paying off your loan.

17. Do I have to pay my tax debt if I declare bankruptcy?

Taxes owed before the date of bankruptcy are almost always dischargeable. You therefore will not have to pay them.

18. What property can I keep if I declare bankruptcy?

Property that cannot be seized in the event of bankruptcy includes the following:

  • Essential household goods (furniture, clothing, dishes, etc.) whose market value is $6,000 or less
  • Items needed to do your job
  • Most employer-sponsored pension funds
  • RRSPs (except for contributions made during the previous 12 months in some cases)

Despite declaring bankruptcy, you may also keep your car and home in most cases.

Meeting with one of our experts will help you better understand what effect bankruptcy will have on your property.

19. Will my share of an inheritance be seizable in the event of bankruptcy?

Your share of an inheritance may be seized in the event of bankruptcy, but there are some exceptions.

20. What steps are involved in bankruptcy? When should they be taken?

The steps to bankruptcy are as follows: assessing the situation, signing the documents, filing for bankruptcy, the two follow-up meetings, and discharge.

In terms of time, expect it to take about 9 months for a first bankruptcy so long as you do not have any income exceeding a reasonable standard of living. Otherwise it will take 21 months.

The process is longer for second bankruptcy, however. Expect it to take 24 months if you do not have income exceeding a reasonable standard of living. Otherwise it will take 36 months.

21. How much does bankruptcy cost?

Our fees are determined by law and by our internal code of ethics.

The cost of bankruptcy varies by case according to income, seizable assets, and whether it is a first bankruptcy. The cost will be determined during your first meeting with your Raymond Chabot counsellor.

22. How long will it take for me to get a bankruptcy discharge?

For a first bankruptcy, you are eligible for an automatic discharge after 9 months or 21 months if you have income exceeding a reasonable standard of living. For a second bankruptcy, it may take 24 to 36 months. In any case, if you are an individual with tax debt of over $200,000 that totals more than 75% of your total debt, you cannot receive an automatic discharge. The Licensed Insolvency Trustee will have to file an application with the court. Company debt obligations are not included in the $200,000 calculation for directors.

23. After a bankruptcy, how long will my credit score be affected?

It varies by credit agency. In general, your credit score will be affected for 6 years for a first bankruptcy and for 14 years for a second bankruptcy. You may be able to rebuild your credit earlier, though. Our experts can show you how to fix your credit.

However, if you make a consumer proposal your credit score will be affected for 3 years after you have paid the full amount promised to your creditors in your proposal.

24. How many times can I declare bankruptcy?

The law sets no limit. However, if you have declared bankruptcy repeatedly (3 or more times) the application for discharge must be filed with the court. The bankruptcy court may then issue a discharge judgment extending the bankruptcy period or a conditional discharge judgment ordering the payment of an additional amount.

25. Can I annul my bankruptcy by paying back my creditors?

To annul your bankruptcy, you have to pay your creditors back in full and file a petition with the court.

26. Can I start my own business if I have declared bankruptcy?

When you are in bankruptcy, you cannot be the director of an incorporated company.

You may continue to be self-employed, however.

During your bankruptcy, you may also run an unincorporated sole proprietorship.

27. Can I continue to manage my company if I have declared personal bankruptcy?

A person who has declared bankruptcy cannot be the director of an incorporated company.

However, if the company is not incorporated, the bankrupt person may continue to manage it.

If the bankrupt person is self-employed, he or she may continue to run the business.

28. How will bankruptcy affect my spouse? Will my spouse have to declare bankruptcy?

As long as there is no joint debt, your spouse will not be affected. Otherwise your spouse will be responsible for all joint debt.

29. Will bankruptcy relieve me of my child or spousal support obligations?

Bankruptcy does not relieve the bankrupt of any support obligations.

30. A member of my family died, leaving behind a lot of debt. As heir, do I have to pay the debt? If so, how can I get rid of it?

To avoid paying this debt, you just have to relinquish your inheritance. The deceased’s estate will then be placed under curatorship or it will go bankrupt.

On the other hand, if you take the inheritance you will be responsible for the debt. You must first determine how much the assets are worth and whether they are worth more than the debts. If they are, some assets will be liquidated to pay the debts.

If you have any other questions, make an appointment with one of our experienced counsellors. Consultations are completely confidential.