Are there ways to tell if I am in financial trouble in Quebec?
Most people will experience financial distress at some point in their lives. While each case is different, reviewing common ways to tell if you are in financial trouble in Quebec can be helpful.
Financial troubles are not always the result of poor money management. At times, situations are beyond our control, such as job loss, divorce, death of a spouse, health problems or a change in household income. Instances such as these can lead to financial problems.
Here are some common financial danger warning signs that you should watch for:
Your credit cards are always "maxed out"
You’re using advances from one credit card to make bill payments
You’ve missed one or more loan payments
You’ve missed a mortgage payment
Collection agents are calling you at home and at work
Collection agents are threatening you with legal action
If this sounds familiar, you should consider getting some professional help. You can contact a bankruptcy trustee in Quebec for a free initial consultation. Whoever you see may just be able to give you the advice you need to get your finances back on track.
Financial problems usually don’t go away themselves. We outlined several ways to tell if you are in financial trouble in Quebec. The sooner you get assistance, the sooner you will be back on your feet.
What happens to my debts when I go bankrupt in Quebec?
What happens to your debts when you go bankrupt in Quebec is complex. Certain debts are not discharged when you go bankrupt. These include:
Student loans less than 10 years old (click here for the current rules on student loans);
Alimony and child support;
Fines and most court ordered restitution payments;
Debts that arose as a result of fraud;
Certain government overpayments (this is a complicated area, so if you have received overpayments from the government, you should discuss this with your Quebec bankruptcy trustee).
In addition, in some cases you are allowed to keep assets, such as a car or house, when you go bankrupt. If these assets have a loan secured by the asset (such as a mortgage or car loan), you would be required to continue making payments to the secured creditor while bankrupt. Please consult an Quebec bankruptcy trustee for more information on what happens to your debts when you go bankrupt in Quebec.
Can I open a new bank account while I am bankrupt in Quebec?
Yes. As a matter of fact, it is strongly recommended that you open a new bank account before going bankrupt in Quebec. Doing so will ensure that none of your old creditors will attempt to take money out of your account.
A bank cannot refuse to open a bank account for you (unless they feel the account will be used for illegal purposes).
Added information can be found on the Department of Justice Canada’s web site at http://laws.justice.gc.ca/en/B-1.01/SOR-2003-184/17979.html
Even with these rules, some banks may be hesitant to allow you to open a new bank account once you are bankrupt. Therefore, it is a good idea to open a new bank account before you go bankrupt in Quebec, which also gives you ample time to have your payroll deposit and other items transferred to your new account before the bankruptcy starts.
What can I keep if I go bankrupt in Quebec?
Bankruptcy, governed by the Bankruptcy & Insolvency Act, is federal law. What you can keep if you go bankrupt in Quebec (called exemptions); however, is governed by provincial legislation.
In Quebec, you are permitted to keep these items:
1.
Furnishings of the main residence up to the value of $6,000.
2.
Food, linens, fuel, and clothing necessary for living.
3.
Items used for religious worship.
4.
Equipment or objects used for the debtor’s occupation/business.
5.
Family papers, portraits and medals.
6.
Judicially awarded financial support.
7.
Disability benefits.
What will happen when I go bankrupt?
Once you have met with a Quebec bankruptcy trustee and decided to file for bankruptcy, you must provide the trustee with information needed to start the bankruptcy. The trustee will prepare the necessary government forms for you and explain what happens when you go bankrupt in Quebec.
Once you have signed the paperwork, the trustee will file the documents with the Office of the Superintendent of Bankruptcy, a division of Industry Canada that monitors all bankruptcies in Canada. Within five days of filing, your creditors are notified that you have filed bankruptcy, and are directed to the trustee to file their claim for the amount they are owed.
During the bankruptcy period you are required to do the following:
Provide the trustee with your tax information to file your outstanding tax returns;
Submit each month copies of your pay stubs and other income;
Attend two credit counseling sessions to help with budgeting;
Make the required contribution (payment) to your bankruptcy estate;
Surrender any non-exempt assets;
Complete any other duties requested by the trustee.
At the end of the bankruptcy period, you will be discharged from bankruptcy, and your debts will be discharged.
Does Filing for Bankruptcy in Quebec Affect My Spouse?
Filing for bankruptcy in Quebec does not directly affect your spouse.
You are responsible for your debts, and your spouse is responsible for theirs. Marriage or common-law does not automatically make a person responsible for their partner’s debts.
However, a bank commonly asks both spouses to co-sign a loan. If your spouse has co-signed your loan, they are responsible for the full amount owing on the loan if you go bankrupt.
If all of your debts are in your name, your bankruptcy will not affect your spouse's credit rating. However, the bankrupt spouse might not qualify as a co-signer in the future due to the bankruptcy. This being the case, one spouse's bankruptcy may have an indirect impact on the other spouse.
You should also be cautious of joint or supplementary credit cards. You may believe the card is only in your name, but if your spouse has a card with their name on it, and if they have used the card, they are probably responsible for the balance owing on the card.
These matters are complicated. It is often difficult to determine if a credit card is a joint card, or just a supplementary card.
How Long Will I Be Bankrupt for in Quebec?
Several factors affect how long you will be bankrupt for in Quebec.
If you are a first time bankrupt, if you complete all of your duties while bankrupt, and if your trustee or your creditors are not opposed to your discharge, you are eligible to be discharged from bankruptcy after nine months.
If you have been bankrupt in the past, you are not eligible for an automatic discharge from bankruptcy in nine months. Your bankruptcy will be prolonged for a period of time that will be determined by the bankruptcy court.
NOTE: At the time of writing, the government of Canada has introduced proposed bankruptcy reforms that will extend the length of the bankruptcy in some cases. More details can be found in our article on bankruptcy reforms: http://www.bankruptcy-ontario.org/bankruptcy-reform.htm
Bankruptcy rules are complex, so we suggest you contact a licensed Quebec bankruptcy trustee who will explain the rules for filing bankruptcy and discuss how long you will be bankrupt for in Quebec. A trustee will help you decide whether or not a bankruptcy is the correct solution for your financial situation.
How can I rebuild my credit after my bankruptcy in Quebec is done?
Several factors will determine how quickly you rebuild credit after your bankruptcy in Quebec is done and, in turn, your ability to borrow money.
To start, if you are presently an undischarged bankrupt, it will next to impossible to get a loan. However, if you have been discharged from bankruptcy, a lender may consider your application. It will be more difficult to borrow if you have been discharged than if you have never been bankrupt at all.
Lenders will also look at how long you have lived at your current address, your work history, your monthly income, and whether you have sufficient security for the loan. They may also request a co-signor.
Below are some suggestions for repairing your credit following bankruptcy.
First, save money! While you were bankrupt you were making a contribution to your bankruptcy estate, by paying the trustee each month. Having since become used to living without that money, start putting that money in a separate bank savings account each month.
Next, when you have built up some cash for emergencies in the bank, you could consider using some of your savings to get a secured credit card. As an example, if you give the credit card company $1,000 as a security deposit, they will probably give you a Visa card with a $1,000 limit. Your credit card works just like a regular credit card, and even shows up on your credit report! This is a vital step to repairing your credit. Further information on secured credit cards can be found here: http://www.moneyproblems.ca/SecuredVisa.htm
Third, as you continue to save money each month, (and pay off your new credit card in full each month), you could invest your next say $700 of savings in an RRSP. With a secured credit card and money already invested in an RRSP, it’s possible that your bank will lend you an additional $500 to invest in your RRSP. You now have $1,200 in your RRSP, and your tax refund may increase by $500 because of your RRSP contribution. You can use your tax refund to repay your RRSP loan!
Now your credit report shows a credit card in good standing, an RRSP loan that you have paid in full, and you have $1,200 in an RRSP. You are well on your way to repairing your credit.
Finally, continue saving. Once you have another $1,000 or $1,500 you can likely use that money as the down payment on a car.
You can’t repair your credit right away, but if you continue to save money, and follow the steps listed above, you can gradually rebuild your credit after your bankruptcy in Quebec in done.
The Personal Bankruptcy Process
What are the major steps in personal bankruptcy?
The major steps in making an assignment in bankruptcy are:
meet with a licensed Trustee for an initial assessment
file an assignment in bankruptcy with the Official Receiver
attend an examination by an Official Receiver, if required
attend a meeting or meetings of creditors
attend first and second counselling sessions
in some cases, apply to the Court for a Discharge from Bankruptcy
Each of these steps is discussed in more detail in the following questions.
Who is a Trustee in Bankruptcy?
A Trustee is an individual or a corporation licensed by the government to conduct the bankruptcy process. A Trustee is not a lawyer. You can ask for advice about certain bankruptcy matters but you are not a "client" of the Trustee.
A Trustee is paid by the bankrupt and from the assets of the estate. If there are no available assets, the Trustee looks to the bankrupt for payment of fees and costs. An estimate of fees and costs can be given only after reviewing your file. The Bankruptcy and Insolvency Act sets out the Trustee's fees for both a summary administration and a consumer proposal. A Trustee cannot be discharged without approval from the Court or the Official Receiver, who reviews the statement of receipts and disbursements, including the Trustee's fees and costs.
Who does the Trustee work for?
The Trustee is chosen by the bankrupt. However, the Trustee remains an officer of the Court, with an obligation to look after the creditors' rights and to investigate the affairs of the bankrupt as required. The Trustee also ensures that the rights of the bankrupt, as defined by the Bankruptcy and Insolvency Act, are not abused. The Trustee's primary duties are:
review your situation and counsel you on the alternatives available
administer the proposal, or liquidate your non-exempt assets and turn them into cash for distribution to creditors
administer the bankrupt estate or proposal from beginning to end according to the Bankruptcy and Insolvency Act
Do I have certain duties as a bankrupt?
The bankrupt's duties are listed in Section 158 of the Bankruptcy and Insolvency Act. Read the section carefully and comply with its requirements. You must confirm in writing that you clearly understand your duties as a bankrupt.
The bankrupt's primary duties are:
disclose all of your assets and liabilities to the Trustee
advise the Trustee of any property disposed of in the past year
surrender all credit cards to the Trustee
attend an examination before the Official Receiver, if required
attend the first meeting of creditors (if a meeting is requested by the creditors)
advise the Trustee in writing of any address changes
generally assist the Trustee in administering the estate
What happens to my wages during bankruptcy?
Wage assignments and garnishments are stopped once bankruptcy is declared.
The Trustee reviews the amount of your wages and your living expenses. Your income is then compared to guidelines set out annually by the Superintendent of Bankruptcy. These guidelines take into account the amount of household income and the number of dependents. A copy of the guidelines is available from the Trustee. The Trustee will also supply a monthly income and expense statement form for you to fill out and submit. If you have surplus household income, a portion may have to be paid to your creditors through the Trustee.
Will all of my assets be assigned to the Trustee?
The only assets not assigned to the Trustee for distribution to your creditors are those exempted by provincial law. Discuss this matter with the Trustee. Be sure that all of your assets declared under oath to the Trustee are fully disclosed and properly valued.
Your assets include all existing assets as well as those that may be acquired prior to your discharge. Once you have filed an assignment you cannot dispose of any assets assigned to the Trustee.
A list of provincial exemptions is included in the section Bankruptcy Rules by Province.
What about my secured creditors?
In most cases, bankruptcies and consumer proposals do not affect the rights of secured creditors. If a creditor has a valid security against your property (i.e., car or house), consult with the Trustee about surrendering the asset and obtaining a receipt. If you can afford monthly payments, financial arrangements may be made with the secured creditor.
What happens at an examination by the Official Receiver?
Shortly after filing for bankruptcy, you may be examined under oath by an Official Receiver, who is a Deputy of the Superintendent of Bankruptcy. The purpose of this examination is to determine the causes of your bankruptcy, the disposition of any past assets and the status of present assets. Your conduct is also reviewed.
What happens at the first meeting of creditors?
A meeting of creditors may be called if requested by your creditors.
The purpose of this meeting is to:
confirm the appointment of the Trustee
appoint up to five inspectors who supervise the administration of the bankrupt estate, including approval of the Trustee's statement of receipts and disbursements
allow creditors to obtain information about the bankruptcy
allow creditors to give directions to the Trustee
The quorum for the creditors' meeting is one creditor with a proven claim. If there is no quorum, the Trustee is automatically confirmed. The bankrupt is expected to attend the first and any subsequent meetings of creditors. If the bankrupt is unable to attend, written notice must be sent to the Trustee. Failure to attend the creditors' meeting without a reasonable excuse could be considered an offense under the Bankruptcy and Insolvency Act.
Who prepares my tax returns?
You must supply the Trustee with documents to complete two income tax returns during the year in which a bankruptcy occurs. A pre-bankruptcy income tax return must be filed for the period from January 1 to the date of bankruptcy. A post-bankruptcy income tax return must be filed for the period from the date of bankruptcy to December 31.
Income tax refunds from prior years are an asset of the bankrupt estate and must be sent to the Trustee. The Trustee may request that refunds from the post-bankruptcy return be paid to the creditors. Income taxes owing prior to the bankruptcy are discharged. Any amount owing on the post-bankruptcy tax return must be paid by the bankrupt.
When will I get my Discharge from Bankruptcy?
A first-time bankrupt is automatically granted a discharge nine months after filing bankruptcy unless a creditor, the Trustee, or the Official Receiver objects. If you are granted an automatic discharge, there is no court hearing and the Trustee sends you a copy of the discharge.
If this is not your first bankruptcy or if your discharge is opposed, the Trustee sends a discharge application to the Court. You will be advised by the Trustee if you are required to appear in Court for the discharge hearing. At the hearing, the Trustee's report informs the Court of the circumstances surrounding your bankruptcy. The Court will choose one of the following discharge alternatives:
Absolute Discharge: You are no longer responsible for unsecured debts incurred prior to bankruptcy except for those in Section 178 of the Bankruptcy and Insolvency Act.
Conditional Discharge: You may be required to pay a certain amount of money to your creditors through the Trustee for a specified period (e.g., $100 per month for 24 months). Your discharge is subject to fulfilling the terms and conditions of the order. An absolute discharge will be granted when the specified conditions are fulfilled.
Suspended Discharge: This could be an absolute discharge but there is a delay before it comes into effect or is reviewed again by the Court.
Discharge Refused: The Court has the right to refuse a discharge in unusual circumstances. A discharge application may be refused if any of the following are reported to the Court:
your assets are less than 50% of the amount owed to unsecured creditors
you continued to obtain credit while unable to pay all of your existing creditors
you failed to account for any disposal of assets
you contributed to bankruptcy by rash speculation, extravagant living or gambling
you gave preferential treatment to any creditor within three months preceding the date of bankruptcy
you failed to perform any duty imposed by the Bankruptcy and Insolvency Act
Any of your creditors may object to the application for discharge. If the discharge is opposed, the hearing date will be adjourned automatically. At the next hearing, evidence will be given by both the bankrupt and the opposing creditor. The court then grants one of the discharge orders listed above.
Which of my debts are not discharged by bankruptcy?
Debts that are not discharged by bankruptcy are outlined in Section 178 of the Bankruptcy and Insolvency Act. These include:
student loans, if it is less than two years since your schooling finished
fine or penalty imposed by the Court
alimony
liability for dividend to an undisclosed creditor
debt obtained by fraud
liability for support or maintenance of spouse or child under an agreement or Court Order
Also, if you wish to retain an asset that is pledged to a creditor, you must pay the creditor the amount owing, in most cases.