Are you a newcomer to Canada saddled with high-interest debts, such as credit cards, personal loans, and payday loans? If so, you may be thinking about filing bankruptcy or a consumer proposal to regain your financial footing. Both programs are open to Canadian citizens, but it’s important to know how they affect those who are not.
Can you still obtain your Canadian citizenship while going through bankruptcy? Can you keep working and studying during the process? Can you also sponsor your family from abroad? In this article, we’ll answer these questions and explain how these debt relief solutions can affect your immigration status.
Can I file for bankruptcy or a consumer proposal as a permanent or temporary resident?
Yes. In Canada, both permanent residents and temporary residents can claim bankruptcy or file a consumer proposal. Temporary residents include people who hold a work permit, a study permit, or have made a refugee claim.
A bankruptcy or consumer proposal doesn’t affect your residency status. If you’re legally insolvent, you have the same right to discharge or reduce your debt as a Canadian citizen. However, it’s still important to consult with a Licensed Insolvency Trustee to learn about any unique implications based on your residency status.
Does filing for bankruptcy or a consumer proposal impact my citizenship application?
Filing for bankruptcy doesn’t stop you from obtaining Canadian citizenship. As a newcomer, you have the right to apply if you’ve declared bankruptcy in the past or are currently bankrupt. This right also extends to consumer proposals.
In Canada, these debt relief programs don’t affect your ability to become a citizen. You don’t need to be debt-free or financially “solvent” to qualify. Instead, securing citizenship depends on factors like:
- How long you’ve lived in Canada
- Whether you’ve filed Canadian tax returns
- Your English or French language skills
- Your knowledge of Canada, including rights and responsibilities
- Whether you have a criminal record
The Immigration, Refugees and Citizenship Canada (IRCC) department manages citizenship applications under the Citizenship Act. Various situations may prevent you from obtaining your citizenship, but filing for bankruptcy or a proposal isn’t on that list.
Similarly, the Bankruptcy and Insolvency Act (BIA) has its own rules that you must meet to file for bankruptcy or qualify for a consumer proposal. Not being a Canadian citizen doesn’t disqualify you.
However, the laws can change in the future. For that reason, always check the IRCC website for the latest updates and stay in touch with your Licensed Insolvency Trustee to understand your rights and options.
Can I sponsor my spouse in Canada if I file for bankruptcy or a consumer proposal?
If you’re in bankruptcy, you cannot sponsor your spouse or other family member to come to Canada. You’ll need to wait until you receive your bankruptcy discharge. The government requires proof that you’re financially stable enough to support the individuals you’re sponsoring.
How long will it take to get a discharge? That depends on your situation. If it’s your first bankruptcy, and you don’t have surplus income, getting a discharge takes 9 months. If you do have surplus income, getting your discharge may take up to 21 months. Learn more about how long bankruptcy lasts in Canada.
On the other hand, a consumer proposal has no impact on your ability to sponsor your spouse or other family members to Canada. You’re free to submit a sponsorship application while making your proposal payments. This is one of the many benefits of filing a consumer proposal over bankruptcy.
Whether you decide to file bankruptcy or a consumer proposal, you’ll still need to prove to immigration officials that you can financially support the person you’re sponsoring. As part of the process, you must complete a financial evaluation form and submit it to the IRCC for approval.
What if I filed for bankruptcy in another country in the past?
You can still immigrate to Canada if you went bankrupt in your home country. As long as you can support yourself financially, your past debt problems won’t hold you back. The IRCC doesn’t review your foreign credit report, inquire about your past bankruptcies, or ask about how you settled your debt. They’re more concerned whether you can live in Canada without relying on the government’s assistance.
If you’re entering Canada through Express Entry, you’ll need to show that you have sufficient funds to support yourself and your family. Learn more about the minimum income requirements for settling in Canada.
Is it better to file for bankruptcy or a consumer proposal if you’re planning to become a Canadian citizen?
Generally, filing a consumer proposal is a better choice than bankruptcy if you plan to apply for Canadian citizenship.
First, a proposal doesn’t restrict your ability to sponsor someone from abroad. If you’re hoping to bring loved ones to Canada, a proposal allows you to do so without restrictions. Bankruptcy keeps the door closed until you get discharged.
Second, a consumer proposal offers numerous advantages over bankruptcy:
- You get to keep all your assets
- You can cut your unsecured debts by up to 80%
- No interest or penalties on your remaining balance
- Payments are spread over five years
- You’re credit score usually recovers faster than after bankruptcy
Bankruptcy is suitable if you need more drastic financial relief. It’s often the solution of last resort, where you can’t repay even a portion of your debts. While bankruptcy comes with some negative consequences, it wipes out 100% of most unsecured debts, giving you a clean slate to rebuild your finances.
The bottom line on bankruptcy, consumer proposals, and immigration in Canada
Understanding how immigration and bankruptcy laws work together is crucial if you’re a newcomer to Canada. The good news is that your immigration status doesn’t prevent you from filing for bankruptcy or a consumer proposal in Canada. Both programs are open to you, whether you’re a permanent or temporary resident. Neither has any bearing on your ability to obtain citizenship, either.
If you’re struggling with debt, numerous debt relief strategies are available to help you break free and start fresh. The best way to understand your options and choose a solution is by speaking with a Licensed Insolvency Trustee.
An LIT is the only professional in Canada who can legally administer a bankruptcy or consumer proposal on your behalf. Be cautious of claims some debt settlement companies or counsellors make, claiming otherwise. They’re not authorized or trained to handle these debt relief processes.
Don’t let crippling debts and sky-high interest charges sabotage your goal of a happy and prosperous life in Canada. Contact David Sklar & Associates today to set up a free consultation with one of our Ontario LITs. We’ll be glad to review your debt situation and walk you through all of your options based on your immigration status.
