To help you navigate post-CERB Canada, here is everything you need to know about what government help is available to you in 2022.
During your bankruptcy proceedings, you may experience problems if you need to travel outside of Canada, whether it’s for a vacation, work, or otherwise. Want to know how bankruptcy can interrupt your travel plans? Check out this article.
What Does It Mean To Be Bankrupt?
It’s important to understand what declaring bankruptcy means and how it can affect your finances.
The Personal Bankruptcy Process
In Canada, you can legally file for bankruptcy when you have at least $1,000 of unsecured consumer debt and are under the supervision of a Licensed Insolvency Trustee. If you can prove that you’re unable to pay off your debts by yourself, those that qualify for the process will be cleared immediately. The same goes for any penalties, extra interest, or wage garnishments you’ve been charged with.
The minimum length of the average bankruptcy is 9 months following the start of the proceedings and the only way to get fully discharged after that point is to complete every duty and mandatory payment the court assigns you.
Court Duties & Payments
Before you get started, consider the fact that every bankruptcy is different and if your total debt is large enough, your finances may be tied up for years. In addition, slightly different bankruptcy rules apply in every province & territory. Nonetheless, here are some of the main duties and payments your local judge might order you to complete:
- An official inspection of your financial profile
- A meeting with your creditors
- A base contribution of at least $1,800
- Two credit counselling sessions
- Surplus income payments (if your income crosses a certain threshold)
- Surrendering your assets as payment (if you owe a substantial debt)
- Monthly meetings with your LIT to report your current financial health
- A discharge hearing
The Potential Aftermath
In the end, the decision to declare personal bankruptcy is up to you and your trustee’s recommendations. However, it is considered a last resort for a reason. Not only can your finances be drained for months due to surplus income payments, but you could also lose your assets, such as any vehicles your own or money saved within an RRSP account.
On top of all that, your credit will retain a record of the event for seven years following your date of discharge and during that time, your credit accounts will be frozen and receive the lowest credit ratings (R9). As a result, you’ll have trouble accessing credit or affordable interest rates, since lenders will consider you too high risk.
Debts That Will And Won’t Qualify For Bankruptcy
In most cases, only unsecured debts can be cleared during a bankruptcy, such as:
- Payday loans
- Unsecured loans & lines of credit
- Credit cards
- Unpaid taxes
- Non-credit bills (utilities, phone, etc.)
On the other hand, debts that are secured by collateral cannot be included, such as:
- Home equity loans or lines of credit
- Vehicle loans
- Government student loans
- Legal fines (lawsuits, alimony, etc.)
What Is An Undischarged Bankruptcy?
As you can imagine, an undischarged bankruptcy is when you haven’t finished all your court duties. Remember, bankruptcy is a serious legal process that’s reserved for people who have no other choice. Because of that, failing to adhere to your assignments, without discussing the situation with your LIT beforehand, can result in further penalties and a delay in your date of discharge.
Can You Leave The Country During A Bankruptcy?
If you’re not fully discharged from your bankruptcy yet, don’t worry too much, because you’re not technically forbidden from leaving Canada. Additionally, being bankrupt should not prevent you from getting or renewing your passport. You won’t be arrested for going on vacation or travelling for work, and a standard Canadian passport application doesn’t feature any bankruptcy-related questions.
Can You Live Outside Of Canada If You Haven’t Been Discharged?
You’re also allowed to live or work in another country if you haven’t been discharged, again as long as you’re periodically travelling back to the area where the bankruptcy was filed and completing your duties on schedule. Depending on how far away you’re moving, however, it’s probably safer to just finish your duties prior to leaving, so you don’t run into any trouble during your return trip.
Exemptions: When You Have To Be In Canada
Before you go hopping on a plane, make sure you’re aware of all the times when you absolutely have to be in the country to finish your bankruptcy duties. Those exemptions include, but aren’t limited to:
The Financial Examination
If your debt situation is bad enough, you may be required (under oath) to attend a meeting where your finances will be inspected by a designated government official. Although this occurrence is rare, the Official Receiver could ask you questions about your income, debts, properties, and other financial matters during the meeting to clarify why you needed to declare bankruptcy and what the possible outcome will be.
Meeting With Your Creditors
After filing for bankruptcy, you may also have to meet with your creditors, wherein your finances and properties will once again be inspected to determine if they are entitled to some form of compensation for your debts. However, like the financial examination, this type of meeting is rarer for personal bankruptcies. Actually, it’s more common for corporate bankruptcies and consumer proposals. Luckily, if this meeting is mandatory, the court should notify you in advance so you can adjust your travel itinerary.
Credit Counselling Sessions
Everyone who declares bankruptcy must attend two credit counselling sessions with their trustee before they can be discharged. During these sessions, you should receive budgeting lessons and other knowledge so you can avoid such events later on. You’ll also have to prepare financial reports for your LIT so they can monitor your progress. Thankfully, you can request that your sessions be scheduled around your travel plans. Under special circumstances, they can also be done over the phone. However, the government may deny your request if you don’t have a good reason for being physically present. Travelling or moving outside of Canada is not a sufficient excuse.
Your Discharge Hearing
If the terms of your bankruptcy aren’t too harsh, you may not have to appear in court and could be eligible for an automatic discharge after 9 months. That said, there are some scenarios where you’ll have to explain yourself to a judge. For instance, if you owe $200,000 or more in taxes and that debt totals 75% or more of what you owe, if it’s your third bankruptcy, or if you haven’t completed all your bankruptcy duties. Missing this hearing because you’re out of the country is once again not a valid excuse and the judge may delay your discharge until you show up to court.
Dealing With A Bankruptcy?
Although it’s not illegal, leaving the country while your bankruptcy is in motion may not be the smartest or safest idea. After all, failure to complete your court-assigned tasks will only drag things out for longer than necessary. In fact, it may be best to stay put until your finances and credit have healed. If you’re interested in being put in touch with bankruptcy experts in your area, Loans Canada can help.
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