When you’re considering becoming someone’s sponsor, being in a debt relief program like bankruptcy can greatly impact the immigration process. Find out how the legal process can affect sponsoring a spouse to immigrate to Canada and what solutions can make your situation easier.
Sponsorship & Bankruptcy
A common way to immigrate to Canada is through sponsorship. As a Canadian citizen or permanent resident, you can sponsor a non-citizen to help them become a permanent resident. A sponsorship will allow them to legally live, study and work in the country.
Sponsorship is often a form of family reunification. It allows citizens who have immigrated to bring over their loved ones. You have the option to sponsor a spouse/partner, child, parent, grandparent and other relatives. It is important to note that there are certain qualifications that you must meet for sponsoring a spouse to Canada. One significant qualifier is that you cannot be in the midst of a personal bankruptcy.
How Does Bankruptcy Affect My Spouse in Canada?
Can you sponsor your spouse to immigrate to Canada if you’re bankrupt? If you’re bankrupt and have yet to be officially discharged, then no. Your application to sponsor a spouse will be rejected when you don’t meet this basic qualification. If you’re planning to file for personal bankruptcy or are currently going through the process, you should be aware of this eligibility issue.
Citizen & Immigration Rules in Canada
There are qualifications you will need to meet to sponsor your spouse. The Canadian government has several eligibility requirements for sponsoring a spouse or relative. Many of these requirements are there to confirm that you are capable of supporting your loved one financially so that they don’t require social assistance from the government. At a high level, they want proof that you can provide for this person’s basic needs.
The reality of the situation is that you may not be able to cover another person’s basic financial needs while bankrupt. This is why most provinces (other than Quebec) list people as ineligible to sponsor a spouse when they’re bankrupt and have yet to be discharged.
Other factors that may make you ineligible include:
- You are in default of child support/alimony
- You received government financial help for reasons besides being disabled
- You did not meet the terms of a past sponsorship agreement
- You did not repay your immigration loan or had missed/late payments
The good news is that this problem is only temporary. Going bankrupt will not stop you from qualifying forever. Visit the Government of Canada website to identify other qualifications for sponsorship and to learn how to sponsor someone to come to Canada.
Your Options with Bankruptcy
How can I sponsor my spouse? You have several options when you’re planning on filing for bankruptcy and applying as a sponsor in the near future.
Notify Your Trustee
If you’re hoping to file for bankruptcy, you should contact a Licensed Insolvency Trustee (LIT) right away and tell them your sponsorship plans. They will go over your finances to help you figure out your best course of action. They will let you know whether you should go through with the personal bankruptcy first, go through with the sponsorship first, or file for a consumer proposal.
Manage Debts First
Consider sponsoring your spouse later. One of your options is to go through your debt recovery through bankruptcy first and then apply for sponsorship when you’re finished. You can be a sponsor once you’ve completed the process and received an official Discharge.
You won’t have to wait too long, either. The typical time for a standard bankruptcy is 9 months. If you have surplus income, that process could be extended up to 21 months.
It’s important to know that the process gets longer every time you file for bankruptcy. If it’s your second time filing, it could take 24 months to complete. If it’s your third, it could be 36 months. The more times that you file, the longer it takes to receive a full discharge.
You need to wait until you have been fully discharged from the bankruptcy before you can fill out the sponsorship application. After that, you have the green light to start.
File for Bankruptcy After the Fact
If you are asking yourself, can I sponsor my spouse before bankruptcy? The short answer is yes, you can sponsor your spouse first. The reality, however, is that this option is a little trickier.
For one, the timeline to complete your sponsorship could take longer than the average personal bankruptcy. According to the Government of Canada, it takes an average of 12 months to process a sponsorship application. You are also considered financially responsible for your spouse for 3 years after your application is approved. Unless you have surplus income, you will likely receive your discharge from bankruptcy after 9 months. You could put the process behind you in under a year.
You might also be wondering “How does bankruptcy affect my spouse in Canada?” When you sponsor someone, you promise the government that you can cover their basic financial needs — along with your own. If you’re bankrupt, this can be difficult to accomplish.
Your Other Options
Sponsorship & Consumer Proposals
A consumer proposal is a legally binding agreement made between a debtor and their creditors. The agreement allows the debtor to pay a portion of their unsecured debts through a set payment plan, which will take a maximum of 5 years to complete. After that, the process will be officially over, and the debts to these creditors will be considered paid in full.
Filing for a consumer proposal is often considered a strong alternative to filing for personal bankruptcy. A consumer proposal allows you to keep your assets, has no rules for surplus income, and it can affect your credit score for a shorter period of time. Most importantly, it will not affect your eligibility to file for an application to sponsor your spouse to immigrate to Canada.
So, can I sponsor my spouse? Yes. Consumer proposals do not interfere with immigration applications, so you could go through the debt recovery process and apply to sponsor your spouse at the same time. But what if you already declared that you’re bankrupt? It’s possible to annul your bankruptcy by filing for a successful consumer proposal. However, you will have to meet certain qualifications in order to file the proposal:
- You must be at least 18 years of age
- You must not owe more than $250,000 (excluding the mortgage on your primary residence)
- You must be unable to reasonably repay these unsecured debts
- You must be financially capable of completing the terms of the proposal
- Your proposal must be accepted by the majority of the creditors involved
If you have more than $250,000 in unsecured debt (excluding the mortgage on your primary residence), you may be able to apply for a Division 1 Proposal. If not, then personal bankruptcy may be the only recovery option for you. Your Licensed Insolvency Trustee will let you know what choices are available.
How Does Spouse Sponsorship Affect a Consumer Proposal?
It’s important to remember that you are expected to financially support your spouse while you are sponsoring them. If you have filed for a consumer proposal, you will have to follow your monthly repayments at the same time. Juggling these responsibilities could be a challenge.
You don’t want to underestimate the financial responsibility of going through a consumer proposal. First of all, a consumer proposal does not affect your secured debt and assets, which means that you will need to continue to deal with essentials like your mortgage and car insurance payments throughout the entire process. Adding on another financial responsibility can be stressful. You will have to be very careful with your budget.
You also can’t risk missing your payments. If you miss 3 payments, the proposal will be automatically annulled. The protections of the proposal will end, and you will have to deal with your original amount of unsecured debt. If you think that you’re going to miss a payment, you should contact your trustee as soon as possible. They might suggest modifying the agreement to make your repayment more manageable.
Sponsoring a spouse could put a strain on your financial situation. They might not have any income or savings to rely on. They will increase your costs of living. You need to consider how the change will affect your budget before you agree to file a consumer proposal. Talk to your trustee about your sponsorship and your payment concerns before signing the dotted line.
Filing for Bankruptcy or a Consumer Proposal in the GTA with David Sklar & Associates
If you are considering filing for personal bankruptcy or a consumer proposal, and you live in the Greater Toronto Area, you should contact David Sklar & Associates for help. Our licensed insolvency trustees have helped countless people address insolvency and put their financial issues behind them. Call us at 416-498-9200 to book a confidential and free consultation. We can help you figure out your next steps.
Applying to sponsor your spouse for immigration will already be a tough process. You don’t want your financial issues to make it even tougher. Now you know how you can manage your financial recovery without sabotaging your sponsorship plans.