Bankruptcy and Insolvency Act: A Practical Guide for Quebecers
This article explains the Bankruptcy and Insolvency Act (BIA), which is administered by the Office of the Superintendent of Bankruptcy and implemented by Licensed Insolvency Trustees.
What Is the BIA?
The Bankruptcy and Insolvency Act is a federal law that governs personal bankruptcy, consumer proposals, and other debt restructuring mechanisms. It applies across Canada, including Quebec.
Its role is varied:
To provide a framework for bankruptcy and insolvency situations.
To allow consumers to reorganize financially.
To offer a legal alternative to lawsuits and abusive collection practices.
To ensure fair distribution to creditors.
Contrary to popular belief, the BIA is not punitive. It is not used by creditors to demand money in collection, but rather to protect consumers. It recognizes that over-indebtedness can stem from a drop in income, job loss, illness, separation, or the rising cost of living.
In Which Situations Does the BIA Apply?
Over-indebtedness
The BIA applies when a person can no longer realistically meet their financial obligations. In cases of over-indebtedness (cards, loans, various debts), when minimum payments are no longer enough and interest piles up, the BIA allows for the legal reorganization or reduction of debt. For example, a person with $45,000 in credit card debt and personal loans can file a consumer proposal to repay only a portion, interest-free.
Ongoing Lawsuits or Seizures
If creditors have initiated legal proceedings (such as wage garnishment or bank account seizures), the BIA allows for these to be stopped.
Inability to Meet Payments
When monthly payments exceed the actual capacity of the budget, the law offers a structured framework to prevent the situation from worsening.
Protections Offered by the BIA
The BIA protects the debtor against creditor actions as soon as a file is submitted.
Stay of Proceedings
Upon filing for bankruptcy or a proposal:
Lawsuits are suspended.
Seizures stop.
Collection calls end.
Stop of Collection Efforts
Collection agencies no longer have the right to communicate directly with the debtor; all communication must go through the trustee.
Protection of Essential Assets
The law provides for exemptions, notably for:
Assets necessary for daily life.
Certain furniture.
Tools of the trade.
A portion of home equity (depending on the case).
Reduction or Elimination of Debt
Depending on the chosen solution, debts can be:
Partially repaid (proposal).
Entirely cleared upon discharge (bankruptcy).
Solutions Provided by the BIA
The Bankruptcy and Insolvency Act in Quebec offers two main solutions for individuals: the consumer proposal and personal bankruptcy.
The Consumer Proposal
A consumer proposal is a legal agreement with creditors to repay a portion of the debt, interest-free.
| Feature | Details |
| Duration | Up to 5 years |
| Eligible Debt | Up to $250,000 (excluding the primary residence mortgage) |
| Costs | Included in the payments |
| Payments | Fixed, monthly |
| Interest | None |
Advantages of a consumer proposal:
Avoids bankruptcy.
Protects assets.
Payments are tailored to your budget.
High acceptance rate.
Impact on credit score is temporary (R7 rating), with the possibility of progressive recovery.
Personal Bankruptcy
This solution is appropriate when the financial situation is too fragile to support even partial repayment.
Duration:
9 to 21 months for a first bankruptcy (depending on income).
Longer in the case of a second bankruptcy.
Consequences:
Certain debts are eliminated.
Certain non-exempt assets may be surrendered.
Obligation to follow BIA rules.
Final Discharge: At the end of the process, the debtor is legally released from their eligible debts.
Debtor Obligations Under the BIA
Protection under the Bankruptcy and Insolvency Act comes with clear obligations.
Financial Transparency: The debtor must declare all income, assets, and debts.
Document Submission: Bank documents, tax returns, and other financial info must be provided to the trustee.
Counseling Sessions: Two mandatory sessions focus on understanding the causes of debt and learning better budget management for the future.
Required Payments: Depending on the solution, payments may be required (e.g., surplus income or proposal installments).
The Role of the Licensed Insolvency Trustee
The Licensed Insolvency Trustee (LIT) is the only professional legally authorized to apply the BIA. They are neutral officers of the court overseen by the federal government.
The LIT analyzes your global financial situation, communicates with creditors as the official intermediary, proposes BIA solutions, and follows through until debt discharge.
FAQ – Bankruptcy and Insolvency Act
Does bankruptcy clear all debt? No. Certain debts like alimony, child support, or specific fines cannot be cleared.
What is the difference between bankruptcy and a consumer proposal? A proposal involves partial repayment, whereas bankruptcy eliminates debt when repayment is impossible. (See our article on the subject)
Can I keep my house or car? Yes, in many cases, depending on equity (net value) and the chosen solution.
What is the impact on my credit score? It is temporary. Recovery is possible as soon as the process ends.
How long does a bankruptcy or proposal last? A proposal can last up to 5 years. A first bankruptcy generally lasts less than 2 years.
Regain Control with the BIA
The Bankruptcy and Insolvency Act is a powerful legal tool designed to help people in debt regain financial stability. It offers concrete protections and a structured path out of a financial impasse.
Meeting a Licensed Insolvency Trustee, such as Gobeil Syndic, for free will allow you to understand exactly which solutions provided by the BIA apply to your situation.
Contact Us to Get Out of Debt
The Bankruptcy and Insolvency Act protects you, and several solutions exist to regain control of your debts, including the consumer proposal.
Gobeil Syndic offers a free, confidential, and judgment-free consultation to analyze your situation and stop calls quickly. Book your appointment for a free consultation by phone, video call, or in person. Our advisors serve all cities in Quebec.
