Everything You Need to Know About Moving If You Have Debt or are Bankrupt
Moving to another country can pose some challenges if you have a large debt load, you are in bankruptcy or a consumer proposal, or you are facing legal action from creditors in Canada. It’s important to know what will happen to your debt, bankruptcy, or consumer proposal, should you move out of the country.
Does Debt Follow You If You Move Out of the Country?
Having debt in Canada does not prohibit you from moving to another country. However, debt owed in Canada remains outstanding, so you will still need to make the required payments.
You may have heard that moving makes it more difficult for lenders to collect debt from you, but don’t rely on this idea to shrug off the responsibility to pay it back. They are still legally entitled to the money you owe, and your contract with the creditor remains in force
If you do not pay your debts while not living abroad, upon returning to Canada your decision will likely negatively affect your ability to open a new bank account or to obtain new credit. Your creditors may also sue you to collect the debt you owe.
How Moving Will Affect Bankruptcy
Bankruptcy is a legal process in which a person, or business, declares that they cannot repay their outstanding debt. This relieves the bankrupt from paying most, if not all, of their debt. But it has long-term consequences, including making it more challenging to obtain a loan or credit card in the future, along with surrendering possession of certain of your assets to the Licensed Insolvency Trustee (“LIT”) administering your bankruptcy.
You can still move to another country if you have filed for bankruptcy. However, your decision to file before or after moving may affect your experience.
According to the Bankruptcy and Insolvency Act (“BIA”), Canadians must meet the following criteria to file for bankruptcy:
- The debtor is not currently bankrupt.
- The debtor owes at least $1,000, and must be insolvent, as defined in the BIA.
- The debtor either lives in Canada, carries on business in Canada, or has assets in Canada.
- A Licensed Insolvency Trustee (LIT) is prepared to administer the bankruptcy, including how it will be paid.
- The federal bankruptcy department that oversees the bankruptcy process will accept the filing (it pays particular attention to out of country filings).
As long as the debtor meets the above criteria, he or she can file for bankruptcy, before or after moving out of the country. Read below to learn about the difference between these options.
Filing Before You Move
The Bankruptcy and Insolvency Act does not prohibit you from moving after your file for bankruptcy. However, you will still be required to fulfill duties relating to your bankruptcy. The duties include attending meetings (by telephone or on-line when not living in Canada) for financial counselling, or answering questions you or the LIT may have, making payments, and reporting your income and expenses on a set schedule.
Filing in Canada While Living Abroad
This is possible and quite common. You must still satisfy the above eligibility criteria, and fully perform your duties, even though you are not living in Canada. As noted above, telephone and on-line meetings will be held. You will still be required to have a Canadian bank account, and report to the LIT just as you would if you still lived in Canada.
How Moving Will Affect Consumer Proposal
A consumer proposal is an alternative to bankruptcy. If a consumer proposal is approved by a debtor’s creditors, the debtor pays a reduced, agreed upon, portion of their debts over an agreed period of time (no longer than 5 years). You can move to another country if you file a consumer proposal but, as with bankruptcy, you will be required to fulfill your statutory duties, as outlined by your LIT.
How Moving Will Affect Creditor Legal Action
If you have moved from Canada and stopped paying your Canadian creditors, and you have not filed bankruptcy or a proposal, your creditors may still take collection actions against you, including suing you and obtaining judgment to collect their debts. If you do not promptly pay the judgment, or make arrangements to pay the debt, it may be entered on your Canadian credit report. This is a very negative, credit score damaging entry on your Canadian credit report. When judgments are obtained for large sums owed to creditors, they may have the judgment recognized by the jurisdiction you are living in abroad. This will enable the creditor to collect on the debt in your current country of residence.
Other Things to Consider When Moving Abroad
Your Canadian Credit Report and Credit Score Will Not Follow You
If you move from Canada, your Canadian credit report and credit score will not follow you. You will be required to build a new credit history in your new country of residence. As you will be back at square one, you may find it challenging and time consuming to obtain credit, just as you did when you began obtaining credit in Canada, and building your Canadian credit score.
Statute of Limitations
Ontario, and other Canadian provinces, have statutes of limitations. The Ontario statute describes the length of time a creditor has to commence a lawsuit to collect its debt. The length of time is determined by the type of debt owed. Many debts, such as income tax debts and student loans, are not subject to the statute of limitations. It should also be noted, that even if a creditor is prohibited from suing to collect its debt due to the passage of time, the debt is still owed, and must be declared, if you file for bankruptcy or file a proposal. As such, moving from Canada in hopes of not having to pay your debts may not absolve you of having to pay them. The application of this statute can be complicated, and should be discussed with your LIT to ensure that you have a full understanding.
READ MORE: How Baker Tilly Can Help with Personal Debt
To conclude, moving to another country does not prohibit you from filing bankruptcy, or filing a proposal, in Canada. You can file for bankruptcy or file a proposal before or after moving, as long as you meet the filing criteria and are prepared to comply with your statutory duties.
If it feels as if your debt is out of control we, Baker Tilly Ottawa Ltd, Consumer Proposal Administrators, Licensed Credit Counsellors and Insolvency Trustees, would be pleased to hear from you. We are a unique firm of debt management and debt elimination professionals. We employ highly trained, very experienced individuals. They are known for their knowledge and caring, compassionate, and strong listening skills. We have many meeting locations in Ottawa and across eastern Ontario. We offer free initial consultations and payments are tailored to your budget. Plus, we do not demand upfront fees to begin to help you!