Covid-19 — Remote consultation, by phone or videoconference. — Book an appointment.

Bankruptcy Relief

Find out how bankruptcy will put an end to your financial difficulties by quickly unloading the weight of your debts.

What is a personal bankruptcy?

In theory

It is the surrender of realizable assets to your creditors in exchange for the discharge of all debts (some exceptions provided for by law).

In practice

We determine the assets that you will be unable to keep. As a general rule, there are very few that you will not be able to keep. If the consequences of a personal bankruptcy would mean the loss of an asset that you want to keep, the consumer proposal would be an alternative to avoid this end result.

A good option for you if :

  • You cannot afford a debt consolidation or a viable proposal.
  • You have little or no equity in your assets.
  • You want an expeditious fresh start.

3 steps to free yourself by filing for bankruptcy

  1. An initial meeting with your counsellor to discuss your options.
  2. Signing of documents and the start of the protection provided by law.
  3. Once the final payment is made, you are discharged of all your debts (some exceptions prescribed by law)

What assets can I keep?

  • Your home if there is little or no equity (equity = difference between fair market value and your mortgage) and provided you are not in default on your mortgage.
  • Your car if there is little or no equity and provided you are not in default on your car loan. If your car is entirely paid, it could be exempt from seizure. If not, we can make arrangements for you to keep it.
  • Your provincial income tax refund.
  • Furniture from the man residence for household use valued up to $ 7,000 (liquidation value).
  • Work tools necessary for the personal use for a professional activity.
  • Clothing.

Your questions

The discharge from bankruptcy will erase all debts, except those listed in Section 178 of the Act which reads as follows:

  • Any fine or penalty imposed by a court in respect of an offence, or any debt arising out a recognizance or bail;
  • Any award of damages by a court in respect of bodily harm intentionally inflicted, or sexual assault, or wrongful death resulting therefrom;
  • Any debt or liability for alimony;
  • Any debt or liability under an order for the maintenance and support of a spouse or child living apart from the bankrupt
  • Any debt or liability arising out of fraud, embezzlement, misappropriation while acting in a fiduciary capacity;
  • Any debt or liability for obtaining property by false pretences or fraudulent misrepresentation;
  • Any liability for the dividend that a creditor would have been entitled to receive on any provable claim not disclosed to the trustee;
  • Any debt or obligation in respect of a student loan guaranteed by the government where the date of bankruptcy occurred before the date on which the bankrupt ceased to be a student or within 7 years after the date on which the bankrupt ceased to be student;
  • Any debt for interest owed on any of the above noted non-dischargeable debts.

Under the Act, you have the right to have or open a personal bank account even if:

  • You are unemployed;
  • You do not have money to deposit in it immediately;
  • You have declared bankruptcy.

However, the Bank is entitled to refuse to open an account if:

  • It believes that you will use the account in an illegal or fraudulent manner;
  • You have ever engaged in illegal or fraudulent activity at a bank over the past seven years;
  • You have provided it with misleading information;
  • You do not agree that it verify the information described above;
  • You are unable to present proper identification.

If you are dissatisfied with any decision or action taken by a financial institution, you can complain to the Ombudsman for the bank. His role is to analyze the situation objectively and make corrections when necessary. Here’s how to reach them:

CIBC Bank : 1-800-308-6859
Bank of Montreal : 1-800-371-2541
Laurentian Bank : 1-800-479-1244
National Bank : 1-888-300-9004
Royal Bank : 1-800-769-2542
Scotia Bank : 1-800-785-8772
TD Bank : 1-888-361-0319
Desjardins Group : 514-281-7434
Ombudsman of the Canadian Bankers Association : 1-888-451-4519
Financial Consumer Agency of Canada (FCAC) : 1-866-461-2232 

No. If you declare bankruptcy, you do so for all of your debts. However, if for any reason, moral or otherwise, you wish to repay a debt to a family member or close friend, although your are not obliged to do so, you may repay such a debt after your discharge from bankruptcy.

Yes. Often times, people with financial problems are out of work, and nothing can prevent them from declaring bankruptcy. Nevertheless, you will have to make monthly payments, to the Trustee, during the nine month period of the bankruptcy. (Please refer to the question “What is the duration of a bankruptcy?”

If you declare bankruptcy, you are required to turn in all of your credit cards, whether or not amounts are owed.

On the other hand, although you are not required to turn in your credit cards if you file a proposal, the issuer will likely cancel said card if there is an amount owed or if the issuer is otherwise informed of your proposal.

No, only the court can annul a bankruptcy at the request of a creditor. This procedure is exceptional rare and hardly ever seen.

However, in certain circumstances, creditors may oppose your discharge from bankruptcy for the following reasons: if the creditors can prove that, prior to your bankruptcy, you acted irresponsibly to their detriment, that you sold, disposed of, or hid some of your assets, or if you continued to increase your debts knowing that you would be declaring bankruptcy. In such cases, the court can suspend your discharge from bankruptcy and / or demand that additional amounts be paid to the bankruptcy as a condition of your discharge. These oppositions by the creditors are rare but still possible.

There are many types of RRSP’s available to the consumer, and to answer the question, the individual contracts must be closely analyzed by the trustee. One must be aware, however, that the majority of RRSP’s can be seized with the exception of those mentioned below:

For all cases filed from July 7, 2008, all types of RRSPs are non-seizable. Only the contributions made during the 12 months prior to your bankruptcy may be seized, and only if they were made in RRSP plans that would have been seizable in the absence of a bankruptcy or proposal.

For any more accurate assessment, we would have to review all documentation related to your RRSP.

The fact that your spouse declares bankruptcy does not necessarily mean that you must also declare bankruptcy. Should the question arise, the trustee will verify whether or not you are jointly responsible for any of your spouse’s debts or obligations. In the event that you are jointly responsible for an unpaid debt or obligation, the creditors may demand, from you, full payment of the debt or obligation, unless you also file a proposal or bankrucpty.

The time limits under the new Act that are applicable to bankruptcies filed after September 18, 2009 are as follows:

1) 1st bankruptcy (automatic discharge in the absence of opposition)

    •    No surplus income* = 9 months

    •    With surplus income* = 21 months

2) 2nd bankruptcy (automatic discharge in the absence of opposition)

    •    No surplus income* = 24 months

    •    With surplus income* = 36 months

3) 3rd bankruptcy or more, 12 months after the date of bankruptcy

    •    Mandatory Court hearing in the 12th month

    •    It is possible that the Court extends the bankruptcy

4) Bankruptcies with significant tax debts ($ 200,000 or more representing at least 75% of total debt)

    •    Mandatory Court hearing

    •    Varying Conditions of release shall be imposed by the Court according to the circumstances in each case.

The new Act provides that if you have surplus income at any time during your bankruptcy, the duration of your bankruptcy will be extended by the number of months mentioned above. For example, it may be that at the time when you go into bankruptcy, the expected duration may be 9 months (for a first bankruptcy without surplus income) or 24 months for a second bankruptcy, but that during your bankruptcy, following an increase in salary, a bonus or a change in your family situation, the average of your income becomes surplus income. In this event, your bankruptcy would then be extended for the time mentioned above, or for a further twelve months for a total of 21 months.

Conversely, if you started your bankruptcy with surplus income and then your income diminished during the first 6 months, or the first 21 months for a second bankruptcy, so that you no longer have surplus income, the duration of your bankruptcy will be reduced from 21 months to 9 months (for a first) and from 36 months to 24 months (for a second).

Finally, note that the trustee has the obligation to require that you show proof of your income once at the beginning of your application and again two months before your release.

English version coming soon.

If your former spouse declares bankruptcy, it does not release you in any way from continuing to pay alimony, child support, or any arrears. As well, if you owe your former spouse alimony, or child support payments, you could have your wages garnished notwithstanding the bankruptcy. Alimony, child support and arrears are very well protected and these debts will live on after the bankruptcy.

The minimum amount of debt required by the Act before you can declare bankruptcy is $1,000. On the other hand, it stands to reason that with a debt of only $1,000, you should not consider bankruptcy as an immediate solution. Moreover, according to the Act, your must also be insolvent, in other words, you cannot honour your financial obligations as they generally become due.

If your former spouse declares bankruptcy, it does not release you in any way from continuing to pay alimony, child support, or any arrears. As well, if you owe your former spouse alimony, or child support payments, you could have your wages garnished notwithstanding the bankruptcy. Alimony, child support and arrears are very well protected and these debts will live on after the bankruptcy.

The costs vary from case to case. At the start of a file, a budget is prepared with the help of a qualified administrator for monthly payments to be made during the period of the bankruptcy (normally nine (9) payments in the case of a first bankruptcy) are established based on your financial capacity. Our office does not require any initial deposit or fees to open a file for a (first and second time) bankruptcy and we have a policy of monthly deposits at $160 per month and $125 per month for 24 months for a second bankruptcy (if no surplus income or asset purchase).

It goes without saying that if, just prior to your declaring bankruptcy, you used your credit cards and made purchases knowing full well that the charges would not be paid back, such actions are not acceptable under the Act. In such cases, the Act provides that the creditors may oppose your discharge, or they may ask the court to have you pay additional amounts to the trustee or to have the debt declared non-dischargeable. This last recourse would mean that the debt would have to be paid back after your discharge from your bankruptcy, with interest. This type of behaviour is not recommended.

It goes without saying that if, just prior to your declaring bankruptcy, you used your credit cards and made purchases knowing full well that the charges would not be paid back, such actions are not acceptable under the Act. In such cases, the Act provides that the creditors may oppose your discharge, or they may ask the court to have you pay additional amounts to the trustee or to have the debt declared non-dischargeable. This last recourse would mean that the debt would have to be paid back after your discharge from your bankruptcy, with interest. This type of behaviour is not recommended.

Since June 18th 1998, student loans are no longer discharged if the bankruptcy or consumer proposal proceedings are initiated less than 7 years following the end of your studies. The end of your studies is considered by the ministry as the date at which the teaching establishment declares that you have stopped studying. If you choose to, or have no choice but, to file a bankruptcy or a Consumer Proposal within seven (7) after the end of your studies, you may, after five (5) years, submit an application to the Court, asking to be discharged from the debt. Based on certain criteria, the Court may, at its sole discretion, discharge you. Should you satisfy the criteria and the court sees fit your application, a judgement may be rendered and your debt may be discharged.

The new Bankruptcy and Insolvency Act makes an important distinction between an individual in financial difficulty who has little or no income, and one who has a medium size or higher income. As such, the duration of the bankruptcy will be longer if you are in the second category (see “Duration of Bankruptcy” for more information). The objective of the new law is to encourage the Consumer Proposal, should the income of the individual permit such a choice. To determine if you have surplus income, the calculation will depend on your personal circumstances and is therefore difficult to explain in detail herein. This will be discussed with the administrator that you will meet at your first information session. In fact, this step is extremely important because the having or not having of surplus income will affect the duration of your bankruptcy and the monthly payments that you may have to make. The criteria that are taken into account include : the number of dependents, future taxes to be paid, day care expenses, alimony or child support, expenses related to a medical condition, and work related expenses.

Property that you may keep and that cannot be seized are provided for in articles 694 to 701 of the New Code of civil procedure and, in general, include primarily the following items, which is not all inclusive:

  • The moveable property which furnishes the main residence, used by and necessary for the life of the household, up to a market value of $7,000.
  • The food and clothing.
  • The tools and instruments needed for the personal exercise of a professional activity (ex. Mechanic’s tools).
  • The personal documents and family portraits.
  • The alimony and child support paid to you.
  • The equipment necessary for a handicapped person to get around. All goods received in an inheritance (provide that the last will contains the appropriate covenant).
  • CSST and invalidity indemnities.

Provincial: The Provincial income tax refunds are not seizable by the Trustee, which means that you may keep the refunds despite the fact that you filed a Bankruptcy.

However, you should be aware that if there is an amount owing to the Agence du revenu du Québec (the “ARQ”) for a period prior to the date of the Bankruptcy, the ARQ may apply your income tax refunds against any amount owing for a period prior to the Bankruptcy, but not for any period subsequent to the Bankruptcy.

Federal: The Federal income tax refunds for the periods prior to the Bankruptcy, as well as for the calendar year of the Bankruptcy, will be seized for the benefit of your creditors. The Federal income tax refunds for the years subsequent to the Bankruptcy may not be seized by the Trustee.

The filing of your income tax returns:

In the event that you file a Bankruptcy, you may consider this a fresh start, and you will be entitled to include any income tax debt owing up to the date of the Bankruptcy. As such, there will be two (2) income tax returns to be filed, the first for the period from the 1 st of January to the day prior to the date of the Bankruptcy, and the second, for the period from the date of the Bankruptcy to December 31. The Trustee will prepare the income tax returns, free of charge, (exceptions may apply).