With the well-documented problems occurring now in many areas of the world, an increasing number of Canadians are considering sponsoring a relative or other person to immigrate to Canada. But is it possible to be a sponsor if you have debt?
The answer is yes, but there are limitations.
First, a caveat: I am a bankruptcy trustee, not an immigration lawyer, so I will confine my comments to the area of debt. Before embarking on a legal process, such as the immigration process, you should always consult a knowledgeable legal professional.
Government Restrictions on Sponsorship
With that caveat in mind, the basic requirements to sponsor a relative can be found on the Government of Canada website. There are a number of debt-related problems that may disqualify you from being able to sponsor a relative, including:
- being behind in alimony or child support payments. Simple arrears, such as being a week behind in your payments may not be enough to disqualify you, but if you are in default, it is likely that you will not be able to be a sponsor based on the assumption that if you are unable to meet your existing Canadian family support obligations, you will likely be unable to support an eligible relative.
- you did not repay a previous immigration loan, made late payments, or missed payments.
- you have declared bankruptcy and are not yet discharged.
As this list indicates, simply having debt does not automatically disqualify you from having the opportunity to sponsor a relative. Most Canadians have debt, whether it be a mortgage or a car loan, and being behind on your debt payments may not disqualify you.
However, if you are currently bankrupt, you will not be able to sponsor a relative until you are discharged from your bankruptcy. Whether you are discharged or not from your bankruptcy is a key point, so a further explanation is in order.
Discharged vs Undischarged Bankrupt
The specific question you will be asked to answer on Form IMM 1344, last updated August 2014, is question #8: “Are you an undischarged bankrupt under the Bankruptcy and Insolvency Act?”
If you were bankrupt in the past, but are now discharged, your answer would be “no”; so you would not be disqualified. … simply having debt does not automatically disqualify you from having the opportunity to sponsor a relative. Most Canadians have debt, whether it be a mortgage or a car loan, and being behind on your debt payments may not disqualify you.
To be “undischarged” means that you are currently in the state of bankruptcy. In Canada, if you are bankrupt for the first time, you are bankrupt for a minimum of nine months (or 21 months if you have income over the limits set by the government). A second bankruptcy will last between 24 and 36 months before you are discharged; so during this period you will probably be disqualified from the sponsorship process.
The term discharged means that your debts are cleared: in other words, you are released from those debts covered in your bankruptcy. This is likely why this question is asked on the immigration sponsorship form. The government wants to know that, if you had debt problems in the past that led to bankruptcy, your debts are now officially eliminated due to your discharge from bankruptcy.
If you went bankrupt, why would you not be discharged? It could be as simple as the pre-determined time period has not yet elapsed or it could be because you did not complete all of your required duties during your bankruptcy. If that’s the case, you must complete your duties before starting the sponsorship process.
What are the Practical Options for Someone with Debt?
If you have debt and are contemplating bankruptcy, but want to sponsor a relative, what are your options?
The first option would be to file for bankruptcy and complete the process as quickly as possible. You should consult with a licensed bankruptcy trustee to determine how long your bankruptcy process would last. If you would likely be bankrupt for nine months and you are contemplating a sponsorship application a year from now, this may be a viable option. The government wants to know that, if you had debt problems in the past that led to bankruptcy, your debts are now officially eliminated due to your discharge from bankruptcy.
The second option would be to find an alternative other than bankruptcy to deal with your debts. If you have access to family money, paying off your debts before starting the application process is a prudent option.
But what if you don’t have access to family money and it’s likely that the immigration process will start before you can complete a bankruptcy?
One alternative option is a consumer proposal.
A consumer proposal is a legally binding settlement where you agree to pay your creditors a portion of the full amount of the debt. If your creditors agree, you make payments over a period of no longer than five years and your debts are discharged.
As with a bankruptcy, a consumer proposal is governed by the Bankruptcy & Insolvency Act and deals with all of the same debts that are dealt with in a bankruptcy.
So what’s the difference?
A consumer proposal is not bankruptcy.
Question 8 says “Are you an undischarged bankrupt?” It does not say “Are you currently in a consumer proposal?”
I am not saying that if you file a consumer proposal you can sponsor a relative. It is possible that the government will take a negative view of a consumer proposal and not allow you to be a sponsor.
However, a consumer proposal is not an automatic “no”, because it is not a question that is asked on the application to sponsor form.
Again, proper legal advice should be obtained before you embark on the sponsorship process, but if bankruptcy is looming and you are looking to sponsor someone to Canada, a consumer proposal may be a better option.