Q1: How long does the process last?
This can vary depending on the terms of the proposal you’ve decided to submit. Payment delay, however, cannot exceed 5 years.
Q2: Are my belongings at risk?
One of the objectives of a consumer proposal is to allow the debtor to conserve all of his belongings. However, the higher the value of these belongings, the more interesting the proposal should appear to your creditors.
Q3: Will my debts be erased?
You will be released from all your debts, except those specified under section 178 of bill C-12, as listed below:
  • Court-ordered fines and penalties, including speeding tickets, parking tickets, and others.
  • Court-awarded compensations for intentional bodily injuries.
  • Alimony-related debts or obligations.
  • Debts or obligations resulting from fraud, embezzlement or breach of trust while you were acting as trustee.
  • Debts resulting from the acquisition of goods or services under false pretences.
  • Student loan debts id you are submitting a proposal or declaring bankruptcy in the seven (7) years following the end of your studies.
  • Any dividend that a creditor may be entitled to if he was not informed of the bankruptcy.
  • Debts pursuant to interests on an amount related to one of the situations described above.
Q4: Can a consumer proposal or a bankruptcy eliminate the possibility of repossession or garnishment?
As soon as your proposal is submitted, you will be legally protected. Repossession or garnishment procedures will be halted, except in the three specific cases outlined below:
  • Guaranteed creditors (i.e. mortgage). However, this right is limited to the repossession of your home or of the personal property that is covered by the guarantee (i.e. instalment sale or mortgage).
  • Alimony-related repossession or garnishment.
  • Creditors who have obtained the court’s permission.
Q5: What happens with my student loan?
Since 2008, one can no longer be released from a student loan in the first seven (7) years following the end of their studies. It is however possible to submit a request after five (5) years. Files are processed on a case-by-case basis, and you must demonstrate that you are unable to make payments. The Ministère de l’éducation must be informed of your request, and will decide if it wishes to dispatch a representative to the hearing.
Q6: If I declare bankruptcy, will I lose my home?
That depends on how much equity is available on your home. If your house has a $100,000 market value and you have a $90,000 mortgage, the $10,000 difference is considered as an asset by your creditors. The bankruptcy trustee will be required to sell your real estate holdings unless you can come up with the difference in order to keep your home. If you co-own the house with your spouse, you will have to pay half the equity, or $5,000.
Q7: Will my consumer proposal or bankruptcy affect my spouse?
That depends on your joint debts. If all your loans are joint loans, then your creditors will turn to your spouse after your consumer proposal or bankruptcy. If you have no joint debts, your situation will not affect your spouse.
Q8: I’ve heard that it is possible to submit a joint consumer proposal or bankruptcy...
This is true when both people involved have joint debts. They can jointly submit a cession or consumer proposal, thus avoiding the double payment of fees.
Q9: Is there a minimum debt level to be able to declare bankruptcy?
To file for bankruptcy, you must have a minimum of $1,000 in debt and be considered insolvent. Prepare a budget to determine the difference between your income and expense. This will allow you to better assess the seriousness of your situation. At AJB Solutions, we do not work on cases involving debts of less than $4,000.
Q10: Is it possible to file for bankruptcy even if I have no job?
Yes. Unfortunately, losing your job is one of the causes of financial difficulties, which can lead to bankruptcy. You will nonetheless be obligated to make monthly payments even if you have no job revenue.
Q11: Can someone prevent me from declaring bankruptcy?
Only a court can prevent you from declaring bankruptcy, at the request of one of your creditors. This type of situation is rare, but nonetheless possible. Creditors have better ammunition if you continued accumulating debt while knowing that you were insolvent.
Q12: What are the effects of bankruptcy on my income tax return?
All current or future federal tax or GST reimbursements will be paid out to your creditors. However, you will be allowed to keep any provincial tax or QST reimbursements. Your income tax returns must be filled out as follows: from January 1st to the eve of your bankruptcy, and from the date of your bankruptcy to December 31 of the same year.
Q13: What about my income tax debts (for consumer proposals or bankruptcies)?
These are not guaranteed debts and as such, when you file for bankruptcy or submit a consumer proposal, you will be exonerated from these debts. However, in the case of a company, you will remain responsible for source deductions and GST/QST reimbursements.
Q14: Will my employer be informed of my decision to file for bankruptcy or submit a consumer proposal?
No. Unless your wages were already garnished before you initiated the process.
Q15: What happens to my RRSPs and my pension fund?
Since 2008, all types of RRSPs are creditor-proof for those who file for bankruptcy or submit a consumer proposal.
Q16: Are any other belongings that cannot be seized?
In accordance with sections 552 and 553 of the Code of Civil Procedure, creditor-proof belongings are as follows:
  1. Inheritances (this must be specified in the will)
  2. Furniture in the main family residence, up to $6,000 (liquidation value)
  3. Personal clothing necessary to perform a professional activity
  4. Workers’ compensation (CSST) and disability insurance benefits (these will be considered as part of your income when calculating your monthly instalments).
Q17: What happens if I’ve recently made credit card purchases and subsequently decide to file for bankruptcy?
Obviously, if you’ve made credit card purchases while the full knowledge that you would not be able to pay for them, you’ve committed an action that is contrary to the law. Creditors could then object to your discharge and ask the court to enforce an additional contribution, or even outright declare that you cannot be discharged from this debt. This means that you would have to reimburse said debt after your bankruptcy, with interest. This type of behaviour in obviously not recommended.
Q18: Will I be able to keep a credit card?
When you file for bankruptcy, you will be required to surrender all your credit cards. In the case of a consumer proposal, you may keep them. However, your creditors have the right to cancel them when they become aware of your difficult financial situation.
Q19: Will I be able to open a bank account?
Even if you are unemployed, if you have no funds to deposit or if you have declared bankruptcy, you are entitled by law to have a personal bank account.
Q20: How are credit ratings attributed?
A note is made to your file every time someone checks your credit in order to obtain a loan or a credit authorization. Your credit score is affected every time you open an account such as a credit card, a credit margin or a personal loan.
Q21: What do the various credit ratings mean?
R0 Too new to rate; approved but not used

R1 Pays (or paid) within 30 days of payment due date or not over one payment past due

R2 Pays (or paid) in more than 30 days from payment due date, but not more than 60 days, or not more than two payments past due

R3 Pays (or paid) in more than 60 days from payment due date, but not more than 90 days, or not more than three payments past due

R4 Pays (or paid) in more than 90 days from payment due date, but not more than 120 days, or four payments past due

R5 Account is at least 120 days overdue, but is not yet rated "9"

R7 Making regular payments through a special arrangement to settle your debts re: Proposal

R8 Repossession (voluntary or involuntary return of merchandise)

R9 Bad debt; placed for collection; moved without giving a new address; bankruptcy
Q22: How can I improve my credit rating?
  • Obtain a copy of your credit report before you submit a credit request, to make sure it does not contain any errors. This way, you can avoid a credit refusal, which in turn has a negative impact on your credit score.
  • Don’t make useless credit requests. Accumulating creditors can diminish your capacity to obtain a loan. Keep your credit for important things.
  • Make sure your debt ratio is below 40% before requesting credit, thus avoiding a possible refusal.
  • Pay your bills before the due date.
  • On your credit card or credit margin, don’t maintain a balance that exceeds 25% of your available credit. A balance that exceeds 50% of your credit can have a negative effect on your credit score.
  • Keep your accounts open. A longstanding relationship with a creditor has a positive influence on your credit score.
  • To reduce your debt ratio, start by paying off your credit cards, as they carry a high interest rate and also show up first on your credit report. It is therefore advantageous to keep a zero balance.