Sponsorship is a popular way for someone to immigrate to Canada. As a Canadian citizen or permanent resident, you can sponsor a non-citizen, such as your spouse, to help them become a permanent resident. This process allows them to live, study, and work in the country legally.
However, let’s say you’re grappling with severe debt problems and contemplating bankruptcy to solve them. Or maybe you’ve already filed for bankruptcy and working through the process. In either case, sponsorship becomes more complicated. Essentially, you cannot sponsor your spouse if you’ve filed for bankruptcy and have not yet been discharged.
In this article, we’ll explain how filing for bankruptcy in Canada impacts your ability to bring your spouse from overseas through sponsorship. We’ll also outline your options for making the immigration process smoother while resolving your debts, including a solution that allows you to avoid bankruptcy entirely.
How bankruptcy impacts sponsoring your spouse in Canada
You must meet specific qualifications before you can sponsor your spouse, most of which relate to your finances. The Canadian government requires proof showing you’re capable of supporting your spouse financially for three years. This requirement ensures that they don’t become dependent on social assistance.
By declaring bankruptcy, you’re admitting that you cannot pay your debts on time, which isn’t a good marker of financial stability. As a result, your sponsorship application will most likely face rejection. Most provinces (other than Quebec) disallow anyone in the midst of bankruptcy from acting as a sponsor.
The good news is that going bankrupt won’t prevent you from sponsoring your spouse forever. Once you’re discharged from bankruptcy, you’re free to apply as a sponsor. Being discharged means you’ve fulfilled all your duties under bankruptcy law and are no longer required to repay any debts in your filing.
There are other factors may disqualify you from becoming a sponsor besides bankruptcy. These include:
- Being in default on child support or alimony payments
- Receiving government financial assistance for reasons other than a disability
- Failing to meet the terms of a past sponsorship agreement
- Failing to repay your immigration loan
Visit the Government of Canada website to learn more about the qualifications for sponsorship.
Practical options for filing bankruptcy when sponsoring your spouse
Let’s say that you’re planning to sponsor your spouse but also want to declare bankruptcy to eliminate your unsecured debts. You can take two approaches to accomplish these goals: (1) file for bankruptcy before becoming a sponsor or (2) file for bankruptcy after becoming a sponsor.
Speaking with a Licensed Insolvency Trustee (LIT) can help you choose the best option. A LIT can also present alternative debt relief solutions that may work more effectively, depending on your circumstances.
File for bankruptcy before applying to sponsor your spouse
If you’re in a dire situation due to your debts, consider sponsoring your spouse after completing a bankruptcy. Once you receive your discharge, you can apply for sponsorship—getting approved will be much easier.
The key factor to consider is how long your bankruptcy will last. If it’s your first filing for bankruptcy, it might take only nine months to complete the process. However, if you have surplus income, the timeline could extend up to 21 months.
Given the potential impact of surplus income, avoid filing bankruptcy ahead of your sponsorship plans in haste. Check the Office of the Superintendent of Bankruptcy to determine if you’ll need to make surplus income payments. Your LIT can also inform you whether you’ll need to make these payments and for how long.
It’s also important to understand that going through bankruptcy takes longer if you’ve filed in the past. With a second bankruptcy filing, the process can take up to 24 months to complete, or 36 months with surplus income. Depending on your situation, a third bankruptcy can last 36 months or more. You may not want to wait that long to reunite with your spouse.
Regardless of how long it takes to finish bankruptcy, you must wait until you receive your discharge before starting your sponsorship application. Provided you fulfill all your bankruptcy duties, you should face no obstacles in getting discharged.
File for bankruptcy after applying to sponsor your spouse
Can you sponsor your spouse before declaring bankruptcy? The short answer is yes. However, this option has some pitfalls, potentially making it harder to execute.
Completing your sponsorship may take longer than the average time for a bankruptcy. It could take up to 12 months for the Government of Canada to approve your application. During this time, you could face intense pressure from collectors to pay your debts, including legal actions like wage garnishment.
In addition, you’re financially responsible for your spouse for three years after they emigrate to Canada. This obligation could prove challenging once you enter bankruptcy, which requires you to surrender certain assets and potentially make surplus income payments to your creditors.
However, unless you have surplus income, you’ll be eligible for an automatic discharge from bankruptcy after only nine months, which isn’t a very long time. After that, this obstacle will no longer hamper your sponsorship efforts.
Learn the steps for sponsoring your spouse in Canada by visiting the Government of Canada website.
Alternative solution: File a consumer proposal and apply for sponsorship at the same time
As you can see, being a sponsor for your spouse while dealing with bankruptcy requires a fair amount of planning and prudent timing. However, you can avoid this messy situation by enrolling in another debt relief program called a consumer proposal.
A consumer proposal is a legally binding agreement between yourself and your unsecured creditors. Under this agreement, you pay only a portion of what you owe through a fixed monthly payment over five years—the rest of your debts are forgiven.
Filing for a consumer proposal offers numerous benefits over personal bankruptcy. It allows you to keep all your assets, requires zero surplus income payments, and affects your credit score for a shorter time. In addition, a consumer proposal does not impact your eligibility for spousal sponsorship. That means you can freely apply to be a sponsor while completing your proposal.
Since consumer proposals don’t interfere with immigration applications, pursuing this form of debt relief over bankruptcy might be worthwhile. You could lower your debt payments while helping your spouse move to Canada at the same time. All you need to do is meet the qualification requirements for a consumer proposal.
But what if you’ve already declared bankruptcy? Luckily, it’s possible to convert your bankruptcy into a proposal. This option is viable if your creditors agree with your decision and you satisfy all the eligibility requirements.
How does a consumer proposal affect your spousal sponsorship?
Filing a consumer proposal won’t disqualify your sponsorship application. However, you must assess whether you can handle both responsibilities before signing the dotted line. If not, you may run into financial trouble. The Government of Canada recognizes this possibility, which is why they may still deny your sponsorship application if you’ve filed a consumer proposal.
During the sponsorship period, you’re expected to support your spouse financially. In a consumer proposal, you must make fixed monthly payments to your creditors. Managing both commitments can be challenging, especially if your spouse has no income or savings to supplement your own.
You’ll need to be careful with your budget, especially regarding your proposal payments. If you miss three payments, your proposal is cancelled automatically. That means your original debts return in full, and creditors can resume their collection efforts. If you anticipate missing a payment, contact your trustee immediately. They might suggest modifying the agreement to make your payment plan more manageable.
The bottom line on sponsoring your spouse while in bankruptcy
Sponsoring your spouse for immigration is demanding enough. But it gets even more so when adding bankruptcy into the mix, which is why thoughtful planning is essential. The right approach can help you manage your financial recovery without sabotaging your sponsorship plans.
Depending on your needs and preferences, you could file for bankruptcy before or after getting approved as a sponsor. Or, you can opt for a consumer proposal instead.
If you’re considering bankruptcy or a consumer proposal while sponsoring your spouse, contact David Sklar & Associates today to book a free consultation. One of our Licensed Insolvency Trustees will review your finances and help you determine the best course of action. We’ve helped countless people put their debt issues behind them and start fresh—we can help you, too!
