Bankruptcy is a legal procedure that you undertake when you are in financial difficulty and cannot repay your debt to your creditors.
In Quebec, the minimum period the entire procedure can take is 9 months.
After 9 months in bankruptcy, depending on your circumstances, you will be discharged from debt.
Bankruptcy in Quebec is regulated by the Bankruptcy and Insolvency Act.
Individuals and businesses filing for bankruptcy must obtain the assistance of a trustee who will act as a referee between the debtor and the creditor.
If you need to file for bankruptcy, there are five main steps that you must follow.
Steps in the Bankruptcy Process
Find a Licensed Insolvency Trustee
The first step is to find a trustee for an initial consultation.
During the consultation, the trustee will assess your situation, explain to you what to expect when you file for bankruptcy, and ask you whether you prefer to choose an alternative solution.
At this stage, you are not obligated to file for bankruptcy with the same trustee you’ve had the initial consultation.
You can take your time and think about what was discussed and your options.
Complete the bankruptcy forms
If you decide that there is no other alternative for you, but to file for bankruptcy, your trustee will provide you with three forms that needs to be completed.
The first is form DC905, Bankruptcy Identification Form.
It formally identifies you as bankrupt.
You will also have to complete a Statement of Affairs Form.
This form list all your assets that are seized and have to be sold to help repay the creditors.
The last form that you will complete is an Assignment Form.
It indicates that the assets listed in the Statement of Affair are confiscated to serve as collateral for the bankruptcy.
Filing the bankruptcy documents
The trustee will file the bankruptcy for their client.
Along with the usual forms, they will also file income tax forms covering the previous tax year until the date of the bankruptcy.
He/she will also notify your creditors that you have filed for bankruptcy.
There are different types of bankruptcy, Personal Bankruptcy, Small Business Bankruptcy, and Corporate Bankruptcy.
All these require the mediation of a trustee and in most cases the process for Personal and Small Business Bankruptcy are similar when the business is organized as a sole proprietorship.
Complete your responsibilities
Once your bankruptcy has started, the only thing that remains is for you to complete your responsibilities.
Obtain a Certificate of Discharge
If you have undertaken your responsibility correctly, you will receive after at least 9 months a Certificate of Discharge indicating that you are no longer bankrupt and do not owe anything more to your creditors.
The minimum period can be extended if you have not met your responsibilities or if the court or your creditors oppose your discharge.
What to expect when you’ve declared bankruptcy?
If your bankruptcy claim is accepted, the initial result will be a complete stop of harassment by your creditors.
The trustee sends copies of your bankruptcy within 5 days of your bankruptcy starting.
You are also going to be expected to attend consultations with your trustee at intervals to assess your situation.
The entire procedure will last at least 9 months after which a court will decide whether to grant you the Certificate of Discharge.
If you obtain the certificate, your debt will be cancelled.
However, your bankruptcy will continue to appear on your credit report for another 6 years.