Across the country, filing for bankruptcy is a common method for those struggling to get out of debt. While the bankruptcy rules and regulations are similar in most places, bankruptcy in Quebec varies a bit.
Quebec is somewhat different than the rest of Canada in most regards. The same goes for their bankruptcy rules. While most of Canada falls under the Common Law, Quebec works within the Civil Law tradition. As a result, the majority of bankruptcy issues are dealt with by Quebec and not the country of Canada.
How Is Filing For Bankruptcy Different In Quebec?
In Quebec, your personal property isn’t counted as an asset during bankruptcy, until it reaches a sellable value of at least $6,500. Unfortunately, in Quebec, there is no automatic lawful protection for cars or home equity, nor for other inclusions that are common in other provinces. For anything to be exempted from being an asset during bankruptcy, you need to acquire approval from the courts.
To understand what can and can’t normally be included during a bankruptcy, click here.
The Licensed Insolvency Trustee you hire can value the assets in the bankruptcy, but cannot declare any assets as exempt. Another major difference is that Quebec exempts the cash value or loans available against an RRSP or life insurance policy held with an insurance company. That is, as long as the beneficiary is a parent, child or spouse of the bankrupt party.
Will you lose your RRSPs if you go bankrupt? Find out here.
- Another difference is related to your taxes. When you file your income tax, your tax refunds for the years before (and the year of) the bankruptcy may be considered as an asset. However, in Quebec, your provincial tax refund is not considered an asset of bankruptcy.
What Happens To My Debt When I Go Bankrupt In Quebec?
This is fairly complex, as there are some debts that are not discharged when you file for bankruptcy. These are:
- Student loans less than 10 years old
- Child support
- Fines and other court-ordered payments
- Debts that came as a result of fraudulent activity
If you are allowed to keep assets such as your car or home, you will be required to continue to make your car loan and/or mortgage payments.
What Can I Keep if I Go Bankrupt in Quebec?
What you can keep in bankruptcy is governed by provincial legislation. The things you are allowed to keep include:
- Furnishings in your main residence up to $6,000
- Food, fuel, and clothing that is necessary for you to live
- Religious items
- Equipment or objects that are used for your work or business
- Financial support as awarded by a judge
- Any benefits that you get as a result of a disability
There are other, more complex exemptions available to those who live in Quebec, so be sure to consult an expert. They will be able to work with you and see exactly what else you are able to keep in the case of bankruptcy.
Will My Bankruptcy Affect My Spouse?
When filing for bankruptcy, many people are concerned about whether the filing will affect their family or spouse at all. Well, the good news is that no, filing for bankruptcy in Quebec doesn’t affect your spouse at all. You are responsible for your debts and your spouse is responsible for theirs, even if you are married or in a common-law relationship.
Read this to learn if filing for bankruptcy affects your spouse in other parts of Canada.
However, if your significant other has co-signed your loan, they are just as responsible as you for the loan after you declare bankruptcy. In addition, the bankrupt individual might not qualify as a co-signer in the future, which could indirectly affect the other spouse.
How Much Will It Cost To Go Bankrupt In Quebec?
A basic bankruptcy will cost $200 a month for 9 months, plus any filing fees, court fees, and other administrative costs. However, there are some extra costs that may apply to you as well. If you have a “surplus income”, you will be required to pay a portion of that as well.
For more information about surplus income payments, look here.
If you or your family make more than a certain amount each month, you will lose some of the earnings above that threshold. The calculation is quite complex and will need to be gone through with your trustee.
You will also lose any unexpected earnings you make during bankruptcy (lotteries, etc.), as well as any GST credits and tax refunds. Of course, in addition to the monetary costs, you will also lose all of your non-exempt assets.
How Long Will My Bankruptcy Show Up On My Credit Report?
This will depend on which credit bureau you’re with, but generally, the bankruptcy will stay on your credit report for about six years. Equifax keeps the first bankruptcy on file for at least 6 years and the second bankruptcy for a whopping 14 years. TransUnion is the same for the second bankruptcy, but a first bankruptcy might be kept up to 7 years.
Click here to learn more about how long information stays on your credit report.
This doesn’t mean that you cannot borrow money for that period of time, just that it might be a little bit more difficult and expensive.
Trying to rebuild your credit after a bankruptcy? Try reading this.
What Are My Alternatives To A Bankruptcy In Quebec?
While bankruptcies are common, there are other alternatives that can help you alleviate your debt. If you are having trouble paying your bills and are thinking that you may need to apply for bankruptcy, here are some other things to consider:
- Work on a budget that might free up enough money to pay off your debts
- Consider debt consolidation
- Attend credit counselling classes to become more financially literate and learn some noteworthy solutions
- Consider a consumer proposal
Yes, filing for bankruptcy is a little bit different in Quebec than in the other provinces. Hopefully, this article has helped you understand the ins and outs of filing for bankruptcy in Quebec. If you still have questions or are considering filing for bankruptcy and want to know if it’s right for your financial situation, we can help.