What are the consequences of a bankruptcy or a consumer proposal on your credit rating?

Most of the time, when your level of debts is so high that you have to consider bankruptcy or consumer proposal, your credit rating is already low.

People who declare bankruptcy receive the lowest credit rating. A consumer proposal has a similar result. The informations affecting your credit rating are deleted after a while. The period during which this information will stay in your credit rating depends on the type of information and where you live (Equifax or Trans-Union Credit).

Your ability to obtain and use credit after release depends on your ability to convince creditors of your personal financial maturity or your ability to repay debt. But there are no guarantees – no one is bound to give you credit.


Does bankruptcy make all my debts go away?

Under the Bankruptcy and Insolvency Act, bankruptcy does not free you from all your debts :

  • payments of alimony to a former spouse or children;
  • student loans, if you completed your part-time or full-time studies less than 7 years ago;
  • fines or financial penalties imposed by the court;
  • debts arising from fraud.

Furthermore, bankruptcy does not affect the rights of secured creditors. If a creditor has a security interest in property that belongs to you (eg. car or house), ask a licensed insolvancy trustee for advice. If you can make monthly payments, you can make a payment arrangement with a secured creditor.


Will all my assets be transfered to the licensed insolvancy trustee?

The only assets that are not transfered to the licensed insolvancy trustee when dividing money among your creditors are those exempted by federal or provincial legislation.

Make sure all your assets are disclosed and evaluated properly. This includes all your current assets as well as those acquired prior to your release.

Once you have filed for bankruptcy, you can not dispose of the assets transfered to the licensed insolvancy trustee.


How will my bakruptcy affect my spouse?

Your debts are entirely yours. However, if you and your spouse incurred the debt together, the creditor concerned can sue your spouse to obtain a refund. In addition, whoever cautioned or guaranteed a loan for you remains responsible to make the payments after you filed for bankruptcy.

Only assets belonging to the bankrupt are included in the bankruptcy. If the assets are jointly owned by your spouse, you will probably have to sell the part belonging to you, which will then be divided among the creditors. It is important to disclose which properties are a common property so that the licensed insolvancy trustee can review them and evaluate the situation.


What happens to my salary during a bankruptcy?

The salary is not affected by bankruptcy. However, you will be required to complete certain forms stating your income and expenses. If your income exceeds a standard established by the Office of the Superintendent of Bankruptcy, you will have to pay part of your surplus income to the licensed insolvancy trustee.


I have big student loans. Can I eliminate this debt by declaring bakruptcy?

A bankruptcy discharge does not release you from the obligation to repay your student loans if you declare bankruptcy at least seven years after quitting your part-time or full-time studies. However, a court may discharge you from the obligation to repay a student loan when five years have passed, if you can prove that the loan will continue to be the source of major financial difficulties and if you made efforts to repay your loan.


A creditor harasses me daily. What can I do?

Altough regulation differ slightly from region to region across Canada, creditors or collections agencies must respect certain limits regarding actions they can do. For example, a collection agency representative should not make phone calls of a certain nature or at a frequency which could be considered harassement towards you or your family. In addition, there are certain hours when a representative is not allowed to call you (these hours vary from a province to another).

If you have the feeling you are being harassed, contact either a licensed insolvancy trustee or a member of the Credit Conselling Canada. One or the other can assist by acting as intermediary between you and the creditor.


Hog long does a bankruptcy last?

You have to know that the duration of your bankruptcy depends on your net monthly income and the number of person in the family unit.

The lenght of your bankruptcy will also be different if it’s the second or third time you have filed for bankruptcy.

Finally, the duration will also be different if your tax debts are high, i.e. $ 200 000 representing 75% of all your debts.


In conclusion :

  • 1st bankruptcy : 9 or 21 months
  • 2nd bankruptcy : 24 or 36 months
  • 3rd bankruptcy : hearing at the Court after 12 months, the Tribunal will then possibly extend your bankruptcy to at least 36 months.
  • Bankruptcy with tax debts : hearing at the Court. Release conditions will be determined by the Court.
Your situation

Your situation

Take a picture of your situation. Make a list of your assets, your debts and write your personal information as requested.

Our evaluation

Our evaluation

If you want you can complete the information and send them to us before your free consultation

The solutions

The solutions

Several solutions are possible to solve your financial problems and avoid bankruptcy.