Studying in Canada is a dream for many international students. However, along with the excitement comes the challenge of managing finances in a new country. Some students find themselves in debt that feels unmanageable, especially since they don’t qualify for traditional post-secondary funding options.
Bankruptcy is probably the most well-known form of debt relief in Canada. Bankruptcy is a legal process governed by the Office of the Superintendent of Bankruptcy which can discharge you from all debts. As an international student and non-citizen, you may be wondering if you can file for bankruptcy. We answer that in this article. Let’s look at what bankruptcy means in Canada, and explore other options for debt relief.
Can I File for Bankruptcy as an International Student in Canada?
Yes, bankruptcy is available for international students, it’s not exclusively available for Canadian citizens. To file for bankruptcy, you need to be financially insolvent, which means you cannot pay your debts as they come due.
Keep in mind that just because you can file for bankruptcy doesn’t mean it’s the best option for debt relief. Bankruptcy is meant to be a last resort.
How Bankruptcy Can Help You
Here’s a breakdown of what it means to be bankrupt in Canada:
- Legal Protection: When you declare bankruptcy, you receive legal protection from your creditors. This means your creditors cannot contact you to demand payment or pursue legal action against you.
- Debt Elimination or Reduction: Bankruptcy can help you eliminate or reduce many types of unsecured debts, including unpaid bills, personal loans, and credit card debt.
What It Really Costs to Go Bankrupt
But going bankrupt does not come without its consequences. Here are some of the ways bankruptcy can impact your life, even after you’ve been discharged from your debts.
- You are not able to file for bankruptcy for free. You will likely need to pay credit counselling fees, as well as fees for your trustee. You cannot file for bankruptcy without hiring a licensed insolvency trustee or going through credit counselling.
- You have responsibilities once you go bankrupt. It includes reporting your income on a monthly basis, providing tax information, making payments, and going through credit counselling. If you fail to do any of the above, you will not be discharged from your debts.
- Bankruptcy will stay on your credit report long after you’ve been discharged. It leaves a R9 rating on your credit report, which is the lowest rating you can receive. It will stay on your report for up to 6 years. If you ever need to file for bankruptcy again, it will stay on your report even longer.
- You’ll be agreeing to surrender any non-exempt assets. Surrendering assets is a key part of declaring bankruptcy. Non-exempt assets can include RESP/RRSP contributions, investments, tax refunds, and inheritances. Since you are required to regularly report your income, any large sums of money you receive while bankrupt will usually be taken from you and given to your creditors.
It’s important to understand that filing for bankruptcy makes you subject to all of the above — no exceptions.
Other Options for International Student Debt Relief
As we said, bankruptcy is meant to be a last resort. There are other options you should consider for repaying your debts before going into bankruptcy. Other eligible debt relief options include:
- Informal settlement
- Credit counselling
- Debt consolidation loans
- Consumer proposals
To learn more about each of these options, please reach out to a debt relief specialist at 4 Pillars.
Our no-obligation consultations are completely free and confidential. During this consultation, we’ll discuss your debt situation and explain how the above options can apply to you.
Ultimately, you are the one who will be making the decision on what debt relief option you choose. We do not make this decision for you. Our only goal is to help you understand how each option works.
