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Immigrating to a new country often means learning a new language, adapting to a different culture, and navigating a challenging financial system. Determining where to save your money, how to get a loan, and what to do if you go into debt can feel overwhelming.
If you’re struggling with debt and don’t know what to do, we can help. We can explain the different types of debt relief for Canadian immigrants and provide tips that you can use to build your credit history in Canada.
Types of Debt Relief for Canada Immigrants
Whether you’re a permanent resident, hold a temporary visa, or have refugee status, there are debt solutions for immigrants in Canada. This includes formal debt relief programs, like a Consumer Proposal or Bankruptcy.
Learn how to get out of debt as a new immigrant with different types of debt relief in Canada:
Debt consolidation
Debt consolidation is the process of rolling up multiple debts into one.
Instead of paying multiple debts every month, you only need to make a single payment. This can help simplify the debt repayment process, making it easier to manage your debt.
The goal is to qualify for a personal loan or balance transfer credit card that offers a lower interest rate than your current debts. Whether you qualify for a loan or credit card with a lower interest rate depends on factors like your credit history and income.
Debt settlement
Debt settlement for newcomers is another option. With this method, you make an informal agreement with your creditors to pay less than the amount you owe. If your offer is accepted, you’ll make a lump sum payment, and your creditor will write off the remaining balance.
You can do this by contacting your creditor directly, or you can work with a debt settlement company that can negotiate on your behalf. Understand that you will have to pay to work with a debt settlement company, and there’s no guarantee your creditors will agree to negotiate with them. Worst-case scenario, your creditors refuse to negotiate, and you still owe your original debt plus the fee for the debt settlement company.
Credit counselling
If you’re struggling with debt, a credit counselling agency can provide advice and tools on topics such as making a budget or managing credit. Immigrant credit counselling is available through a not-for-profit credit counselling agency, or if you require the services of a Licensed Insolvency Trustee (LIT) , they provide credit counselling as part of their insolvency programs.
Before selecting a credit counsellor, research the company to determine if the counsellor is qualified and trustworthy. You can find a counsellor through Credit Counselling Canada or the Canadian Association for Financial Empowerment.
Consumer Proposal
In a Consumer Proposal, you work with a Licensed Insolvency Trustee to create an offer to repay your creditors a percentage of what you owe, extend the time you have to pay, or both. If your proposal is accepted, you have up to five years to repay your debt. Filing a Consumer Proposal will not affect your immigration status or prevent you from becoming a citizen.
If you’re a temporary resident and unsure whether you’ll be working in the country in five years, your LIT can help you structure a plan that fits your situation.
Personal Bankruptcy
If your debt is out of control and you can no longer pay your bills on time, your LIT might recommend filing for Bankruptcy.
When you declare Bankruptcy, you receive immediate protection from your creditors. Any wage garnishment or lawsuits against you will stop immediately.
Your LIT will sell some of your assets to raise money for your creditors, but you won’t lose everything, as there are provincial and federal exemptions for what can be sold.
During the Bankruptcy process, you will have to attend two financial counselling sessions. The purpose is to help you understand the root cause of your debt issues so you can avoid making the same mistakes in the future.
When discharged from bankruptcy, most of your unsecured debts are eliminated, including credit cards, bank loans, payday loans, lines of credit, and old utility bills.
Can I File for Bankruptcy in Canada
Yes, immigrants of all statuses can file for Bankruptcy in Canada.
How to file for Bankruptcy in Canada
To be eligible for Bankruptcy, you need to meet the following criteria:
- You have at least $1,000 in total debt
- You’re insolvent, meaning you can’t pay your bills when they’re due
- You reside or carry on business in Canada
To file for Bankruptcy, your first step is to meet with a Licensed Insolvency Trustee. A LIT is the only professional in Canada who can administer federal debt relief solutions, including Bankruptcies and Consumer Proposals.
Consumer Proposal vs Bankruptcy for immigrants
A LIT can help you determine which debt relief solution is right for you. If you have enough income to continue paying some of your bills, you might choose a Consumer Proposal, which will avoid losing assets. If you’re insolvent (you can no longer pay your bills on time), Bankruptcy might be the right choice.
Building Credit in Canada as an Immigrant
If you have a history of missed payments or you’ve filed a Consumer Proposal or Bankruptcy, you’ll need to rebuild your credit score. If you’re new to Canada, you may not even have a credit score in the country.
To start building, or rebuilding, focus on paying your bills on time. Create a monthly budget to understand where your money is going and to prevent overspending. Working with a LIT or credit counsellor can help you learn how to manage your credit wisely.
Debt Help for Newcomers to Canada
Canadian immigrant debt help programs are available to newcomers, regardless of immigrant status. Formal debt relief programs, including Consumer Proposals and Bankruptcies, are available to immigrants, and applying won’t affect your status.
A LIT can help you navigate everything from Bankruptcy help for new Canadians to credit counselling. For a free, no-obligation consultation, call Allan Marshall & Associates at 1-888-371-8900, or complete our online contact form.
