It’s common for Quebecers to have a certain amount of debt; after all, taking out loans makes it possible to make large purchases, such as furniture, vehicles, and homes. But while having a small amount of debt is manageable, having too much debt relative to income can make life difficult
Too much debt – especially the type that comes with very high interest – can be nearly impossible to pay off unless there is a significant increase in income. Otherwise, measures may need to be taken in order to settle the debt.
For more information about consumer debt and how it can affect your finances, click here.
In Quebec, the average amount of consumer debt among the province’s residents is $18,617. While that may be slightly under the national average of $22,125, that’s still quite a load to carry. A higher debt amount is directly related to a higher level of defaults and delinquencies, placing Quebecers at an increased risk of being severely penalized for their missed payments.
There are different ways to tackle debt problems in Quebec, such as credit counselling and debt settlement. But when these options are not enough, there is always bankruptcy to resort to.
What is Bankruptcy?
Personal bankruptcy in QC is governed by the federal Bankruptcy and Insolvency Act as well as provincial laws. Essentially, bankruptcy in Quebec involves surrendering your assets (with some exceptions) in exchange for being discharged from your debts.
Bankruptcy is filed with the help of a Licensed Insolvency Trustee who will oversee the process on your behalf and make sure that both you and your creditors are treated fairly.
There are differences between bankruptcy in Quebec versus bankruptcy in other provinces, particularly when it comes to the exemptions in assets that would have to be surrendered. In the province of Quebec, the following exemptions exist:
- Furniture valued no more than $6,000
- Necessary food for the next 12 months
- One vehicle with a value of no more than $5,000
- Tools and equipment needed for business valued at no more than $10,000
- Home equity up to a value of $10,000
It’s important to understand exactly what would have to be given up before filing for bankruptcy in Quebec.
When Would Bankruptcy Be Necessary?
If you’re not able to comfortably pay your bills, and other options to settle your debt are not possible, filing for bankruptcy in Quebec might be a viable option for you. Certain situations might make bankruptcy an option to consider when debt is becoming increasingly difficult to handle:
- Unemployment and loss of income
- Large medical expenses
- Credit that is significantly overextended
- Divorce
- Death in the family
- Credit cards are used to purchase daily necessities
- Interest rates have increased as a result of missed payments
- Retirement savings are being used to pay debts
If you’re finding it impossible to manage your finances and are drowning in debt, bankruptcy might be the way to go if all other options have been considered and stress is getting the better of you.
Read this to learn how you can rebuild your credit after bankruptcy.
How is Bankruptcy in Quebec Different From a Consumer Proposal?
Bankruptcy and consumer proposals are the two more common insolvency options in Quebec. While they are both meant to resolve your debt and legally protect you from creditors, they are different in some ways.
A consumer proposal is an alternative to bankruptcy and is an arrangement made with your creditors with the help of a consumer proposal administrator. It’s a legally binding contract that is designed to provide you with immediate protection from any of your creditors or debt collectors and arranges to have part or all of your unsecured debt resolved.
Essentially, you agree to repay your creditors a portion of what you owe them with a consumer proposal and your creditors agree to alleviate you of the balance owed. Basically, a consumer proposal simply means that you offer your creditors less than what you owe in order to settle your debt.
Here are some key differences between bankruptcy and consumer proposals in Canada:
| Bankruptcy | Consumer Proposal |
| Consumer must owe more than $1,000 in debt. | Consumer’s total debt cannot exceed $250,000. |
| Consumer must be insolvent. | Consumer must still be able to afford their debt payments. |
| Payments vary based on income. The more money earned, the more money will need to be paid (known as ‘surplus income’). | Costs are based on the negotiations between the consumer and creditors. Monthly payments will be fixed until the proposal is complete. |
| First-time bankruptcies can be completed in as little as 9 months. | Consumer proposal payments may be spread out over a period of up to 60 months. |
| Certain assets will need to be surrendered, with some assets exempted up to a certain dollar value. | No assets need to be surrendered. |
Final Thoughts
Filing for bankruptcy in Quebec is a major financial decision. That said, if you’ve been left in a pile of debt as a result of a slew of financial problems, bankruptcy might be the appropriate step to take to alleviate you of your debt. However, if you choose bankruptcy for the wrong reasons, you could be left in a worse financial position than if you opted for other alternatives to settle your debt. That’s why it’s so important to speak with a professional first.
